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Archive for May, 2009

Tax Saving Opportunities for Small Businesses from the American Recovery and Reinvestment Act

Posted by HH on May 27, 2009

From the IRS e-news for Small Businesses

The American Recovery and Reinvestment Act (ARRA), enacted in February, created, extended or expanded a variety of business tax deductions and credits. Because some of these changes—the bonus depreciation and increased section 179 deduction, for example—are only available this year, eligible businesses only have a few months to take action and save on their taxes. Here is a quick rundown of some of the key provisions.

Faster Write-Offs for Certain Capital Expenditures

Many small businesses that invest in new property and equipment will be able to write off most or all of these purchases on their 2009 returns. The new law extends through 2009 the special 50 percent depreciation allowance, also known as bonus depreciation, and increased limits on the section 179 deduction, named for the relevant section of the Internal Revenue Code. Normally, businesses recover these capital investments through annual depreciation deductions spread over several years. Both of these provisions encourage these investments by enabling businesses to write them off more quickly.

The bonus depreciation provision generally enables businesses to deduct half the cost of qualifying property in the year it is placed in service.

The section 179 deduction enables small businesses to deduct up to $250,000 of the cost of machinery, equipment, vehicles, furniture and other qualifying property placed in service during 2009. Without the new law, the limit would have dropped to $133,000. The existing $25,000 limit still applies to sport utility vehicles. A special phase-out provision effectively targets the section 179 deduction to small businesses and generally eliminates it for most larger businesses.

Bonus depreciation and the section 179 deduction are claimed on Form 4562. Further details are in the instructions for this form.

Expanded Net Operating Loss Carryback

Many small businesses that had expenses exceeding their incomes for 2008 can choose to carry those losses back for up to five years, instead of the usual two. For small businesses that were profitable in the past but lost money in 2008, this could mean a special tax refund. The option is available for a small business that has no more than an average of $15 million in gross receipts over a three-year period.

This option is still available for most eligible taxpayers, but only for a limited time. A corporation that operates on a calendar-year basis, for example, must file a claim by Sept. 15, 2009. For eligible individuals, the deadline is Oct. 15, 2009.

Eligible individuals should file a claim using Form 1045, and corporations should use Form 1139. Details can be found in the instructions for each of these forms, and answers to frequently-asked questions are posted on

Exclusion of Gain on the Sale of Certain Small Business Stock

The new law provides an extra incentive for individuals who invest in small businesses. Investors in qualified small business stock can exclude 75 percent of the gain upon sale of the stock. This increased exclusion applies only if the qualified small business stock is acquired after Feb. 17, 2009 and before Jan. 1, 2011, and held for more than five years. For previously-acquired stock, the exclusion rate remains at 50 percent in most cases.

Estimated Tax Requirement Modified

Many individual small business taxpayers may be able to defer, until the end of the year, paying a larger part of their 2009 tax obligations. For 2009, eligible individuals can make quarterly estimated tax payments equal to 90 percent of their 2009 tax or 90 percent of their 2008 tax, whichever is less. Individuals qualify if they received more than half of their gross income from their small businesses in 2008 and meet other requirements. For details, see Publication 505.

COBRA Credit

Employers that provide the 65 percent COBRA premium subsidy under ARRA to eligible former employees claim credit for this subsidy on their quarterly or annual employment tax returns. To help avoid imposing an unnecessary cash-flow burden, affected employers can reduce their employment tax deposits by the amount of the credit. For details, see Form 941. Answers to frequently-asked questions are posted on

Other ARRA business provisions relate to discharges of certain business indebtedness, the holding period for S corporation built-in gains and acceleration of certain business credits for corporations. Also see Fact Sheet FS-2009-11.

Posted in small business, Uncategorized | Tagged: , , | Leave a Comment »

Tips for Surviving Job Loss

Posted by HH on May 25, 2009

From the National Foundation for Credit Counseling

  1. Allow yourself to be upset or even afraid.  These are natural reactions.  However, should they become intense, be willing to seek professional help.  Talking things through and hearing another person’s perspective can bring relief and restore your positive outlook.
  2. Resist an outburst in front of your boss.  Remember, you may need him or her as a reference for a future job.
  3. Take advantage of any assistance your workplace offers.  Many companies provide placement assistance, job retraining and severance packages.  Make sure you are aware of all benefits offered.
  4. Apply for any applicable government benefits.  Your HR representative at work should be a good resource.  Stay up-to-date on benefits changes for which you may be eligible.
  5. Update your resume.  If you’ve been at your current job for a while, you may need professional help bringing your resume current.  Today resumes are often reviewed by computers and scanned for key words, so you’ll want to be certain to reflect your skills in the way that benefits you most.
  6. Make finding a job your new fulltime job.  Get up every day, get dressed appropriate for the job you seek, and from 9:00 until 5:00 look for a new job.  This search may be online or networking or actually calling on prospective employers, but the important thing is that you put yourself at the front of the line.
  7. Resist the urge to solve your problems by spending recklessly.  It may feel good for the moment, but the high of spending won’t equal the low of dealing with additional debt when there is no income.  Further, new credit is hard to come by, so use your existing credit lines wisely.
  8. Don’t be tempted to live off of your credit cards.  Someone with a good line of credit could actually support the family at the current standard of living by using credit, but there’s no guarantee a new position will materialize any time soon.  One rule of thumb job counselors use is to expect one month of job search for each $10,000 of annual income you hope to replace.  In other words, if you seek a $50,000 salary, it may take you five months to land that job.
  9. Take a personal inventory.  Consider all assets, income and expenses.  Hopefully, you will not have to liquidate any assets to survive, but it is good to know what you have to fall back on.
  10. Drastic times call for drastic measures.  Nothing is off-limits.  If necessary, consider selling the second car, or any recreational vehicles, real estate holdings, rental properties or jewelry.
  11. After reviewing income versus debt obligations, if there is not enough money to make ends meet, calculate how much is needed to meet the basic household living expenses.  Your goal is to pay everyone, but if you must make a choice, keep your home-life stable by paying your rent or mortgage, utilities, childcare, insurance premiums, health care, food and keeping gas in the car. 
  12. Have a family meeting that includes the children.  You don’t want people pulling in different directions, and a joint effort yields a greater result.  Make cutbacks wherever possible, knowing that this austere lifestyle will only be temporary.  Resolve to stop all non-essential spending immediately.
  13. Tracking your spending is always a good idea, but when money is tight, it’s essential.  Write down every cent you spend.  At the end of 30 days, review where the money went and make conscious decisions on where to cut back.  You’ll be amazed by how much you can save and not even feel the pinch.
  14. Contact your creditors to arrange lower payments.  Most major credit card issuers have in-house help programs.  Explain your situation and what you’re doing to resolve it.  The creditor may be able to temporarily lower your monthly payment and reduce interest.
  15. Call your mortgage lender or servicer and inform them of your situation.  Be prepared to provide them with documentation of the setback, and have a resolution plan in mind.  Since the average consumer doesn’t know all of the loan modifications available, it is smart to first sit down with a certified housing counselor and map out a plan.  This way, you’ll know that you’ve selected the option that is best suited to your situation.

Posted in Economy | Tagged: , , , | 1 Comment »

Needed for America: A New Commitment to National Financial Literacy

Posted by HH on May 24, 2009

Enclosed is an excerpt from testimony given on May 13, 2009 by Susan Keating, president and CEO of the National Foundation for Credit Counseling to the U.S. House of Representatives Committee on Financial Services Subcommittee on Housing and Community Opportunity calling for increased congressional support of financial literacy.

…Today, we are focused largely on damage control. But looking beyond the current crisis, the NFCC feels strongly that we need to do a better job of preventing personal financial problems through financial literacy programs that provide consumers with basic money management skills and the financial know-how to take charge of their personal finances and use credit responsibly. While good money management cannot offset the impact of external events such as losing a job or a costly health problem, it can help consumers to better weather economic ups and downs and enable them to avoid the types of financial mistakes that lead to mortgage defaults, bankruptcy, and general problems with credit. Better outcomes for individuals and families will collectively add strength to our national economy. 

Susan Keating

Susan Keating

A recent Wall Street Journal article speculated that people tend to think they understand money because they’ve been handling it since grade school. “More likely,” the Journal added, “they have a basic understanding of spending, which is why so many households are in such dire straits these days.”

 Whatever the reason, it is clear to us, from both our counseling experience and the NFCC’s Financial Literacy Survey, that too many Americans lack the financial skills they need and too few are stepping forward to get help. 

For example, our recent Financial Literacy Survey found that 41 percent of Americans grade themselves as a C, D, or F on personal financial knowledge; only 42 percent keep close track of their spending; and more than quarter say they do not pay their bills on time. As noted earlier, 28 percent of mortgage holders admit that their mortgages have turned out to be different than expected when they took out the loan. Numbers like these scream of the need for better financial education.

Toward that end, the NFCC believes that basic finance and money management should become a mandatory part of the standard school curricula in every state. Surveys show that financially literate consumers are more likely to make their loan payments on time and less likely to default. That should be a powerful incentive to everyone, especially creditors, to promote financial education. At a time when lenders are trying to reduce their risk, it is a good time for them to promote proven risk-reduction strategies such as financial education by offering incentives such as better credit terms to consumers who have completed such programs. Consumers, too, would certainly avoid problems if they took part in financial education before their finances deteriorated.

A number of organizations, including the NFCC, have been working on financial literacy for some time. Collectively, we’ve developed effective and relevant course materials and other education tools. What we don’t have is a true national strategy or a national delivery system. If we are serious about financial education, we need to provide consumers as well as lenders and other third-parties involved with incentives to attend classes, secure funding to support education services, and also find a way to measure results so we know what works and what doesn’t.

We are further convinced that the federal government can and must provide leadership in this area. Both Congress and the President support legislation to extend consumer protection by requiring new disclosure requirements for credit cards and restricting some practices that have made it easier for consumers to accumulate excessive debt and harder to pay it back. But no legislation can do more for consumers than they are willing to do for themselves. That is why we feel so strongly about financial education. Ultimately, financial education IS consumer protection, and it must be a priority.

To read the entire tesimony click here.

Posted in Credit, Housing | Tagged: , , , , , | Leave a Comment »

EVERYBODY GETS A CAR! Profiting from The Power of Surprise

Posted by HH on May 23, 2009

To listen to the interview click here: Andy Nulman Interview

“Everybody gets a car!” No dear reader, I’m not Oprah, but it did grab your attention, or at least it did when Oprah did it. The quote is one of the many examples of the “power of surpise” provided by Andy Nulman in his new book, Pow! Right Between the Eyes: Profiting from the Power of Surprise.  Nulman will be the guest on the May 25 edition of Economic Perspectives on KAZI 88.7 FM, 5:30 p.m.-6 p.m.Power of Surprise 

Nulman spent 15 years as the CEO of the Just for Laughs International Festival in Montreal, Canada, the worlds largest comedy festival drawing over 2 million visitors a year.  The main revelation of the book, or as Nulman puts it, “the big statement,” is,

“The element of surpise is the most important aspect of contemporary business,” writes Nulam in plain, unadorned language. Nulman builds on his big statement in the chapter Shock 101, calling on entrepreneurs “to be bombastically fantastic, to howl among a world of whisperers, to be the glowing neon in a palette of flat black and white…”

Andy Nulman has been creating and leading major media projects for over three decades. Currently the President and CMO of Airborne Mobile, which he co-founded in 1999 with Garner Bornstein, he provides the company with the insight and creativity necessary to successfully strengthen brands like Maxim, Family Guy, the NFL and Taco Bell through the creation of innovative mobile content and applications. In 2006, Airborne was honored as North America’s 4th-Fastest Growing Tech Company in Deloitte’s Fast 500 ranking, one year after being sold to Japan’s Cybird Holdings for over $100 million. In 2008, he and Garner repurchased the company and are now the majority shareholders.

Posted in Books, Business, Interview, Radio, small business | Leave a Comment »

U.S. Senator Concerned About Predatory Credit Card Practices Against Small Businesses

Posted by HH on May 21, 2009

From the press office of the U.S. Senate Committee on Small Business and Entrepreneurship

United States Senator Mary Landrieu, D-La., Chair of the Senate Committee on Small Business and Entrepreneurship, commented on the passage of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 by the House of Representatives.

Senator Mary Landrieu

Senator Mary Landrieu

Sen. Landrieu said:

“The Credit CARD Act provides significant protections for consumers who could otherwise fall victim to abusive and deceptive practices by credit card companies. Specifically, the legislation requires credit card companies to provide adequate notice of significant changes to a credit card agreement, including an interest rate increase. It also places limits on credit card solicitation to individuals under the age of 21, prohibits issuers from raising rates during the first year after opening an account and requires that promotional rates last at least six months.

“Unfortunately however, the Credit CARD Act does not apply protections to small business owners who have fallen victim to predatory credit card practices. I am disappointed that the Senate did not accept my bipartisan amendment cosponsored by Senator Snowe that would have applied the bill’s protections to small businesses with 50 or fewer employees. While 59 percent of small businesses recently reported that they use credit cards to finance their businesses, 63 percent report that their interest rates have increased in the last year and 41 percent reported cuts to their credit limits. I will continue to work with my colleagues on the Small Business & Entrepreneurship Committee to pass legislation that will protect America’s Main Street businesses from usurious credit card practices.”

Posted in Credit, small business | Tagged: , , | Leave a Comment »

Credit Cardholder Bill of Rights Passes House, Awaits President Obama’s Signature

Posted by HH on May 20, 2009

From the press office of the U.S. House Committee on Financial Services

The House of Representatives passed historic legislation that will protect consumers from deceptive credit card practices and equip them with the information and rights they need to responsibly manage their credit. The Credit Cardholders’ Bill of Rights Act passed by a vote of 361-64 and now goes to the President’s desk for his signature.

Rep. Carolyn Maloney

Rep. Carolyn Maloney

The legislation, sponsored by Rep. Carolyn Maloney (D-NY), represents an unprecedented effort to level the playing field between card issuers and consumers. It will ban some of the most abusive industry tactics including double-cycle billing, due-date gimmicks, and retroactive interest rate hikes on existing balances. Credit card companies will also be required to provide 45 days advance notice of any impending rate hike, giving consumers time to pay off their balances and shop for a better deal.

“Today is a victory for all credit cardholders. Let’s be clear about what we’ve done: we have banned practices the Federal Reserve has declared deceptive, unfair and anti-competitive,” said Rep. Maloney. “I commend Senator Dodd for his skill and fortitude on the Senate floor and Senator Levin for his pioneering leadership; and I’m grateful for the steadfast support of Speaker Pelosi and Chairman Frank. This is one ‘bill’ we’re not going to let go past due —  we’re getting this to President Obama’s desk on time, as he has asked.”

Summary of the Credit Cardholders Bill of Rights Act of 2009

Prevents Unfair Increases in Interest Rates and Changes in Terms

  • Prohibits arbitrary interest rate increases and universal default on existing balances;
  • Requires a credit card issuer who increases a cardholder’s interest rate to periodically review and decrease the rate if indicated by the review;
  • Prohibits credit card issuers from increasing rates on a cardholder in the first year after a credit card account is opened;
  • Requires promotional rates to last at least 6 months.

Prohibits Exorbitant and Unnecessary Fees

  • Prohibits issuers from charging a fee to pay a credit card debt, whether by mail, telephone, or electronic transfer, except for live services to make expedited payments;
  • Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions, and also limits over-limit fees on electing cardholders;
  • Requires penalty fees to be reasonable and proportional to the omission or violation;
  • Enhances protections against excessive fees on low-credit, high-fee credit cards.

Requires Fairness in Application and Timing of Card Payments

  • Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
  • Prohibits issuers from setting early morning deadlines for credit card payments;
  • Requires credit card statements to be mailed 21 days before the bill is due rather than the current 14.

Protects the Rights of Financially Responsible Credit Card Users

  • Prohibits interest charges on debt paid on time (double-cycle billing ban);
  • Prohibits late fees if the card issuer delayed crediting the payment;
  • Requires that payment at local branches be credited same-day;
  • Requires credit card companies to consider a consumer’s ability to pay when issuing credit cards or increasing credit limits.

Provides Enhanced Disclosures of Card Terms and Conditions

  • Requires cardholders to be given 45 days notice of interest rate, fee and finance charge increases;
  • Requires issuers to provide disclosures to consumers upon card renewal when the card terms have changed;
  • Requires issuers to provide individual consumer account information and to disclose the period of time and total interest it will take to pay off the card balance if only minimum monthly payments are made;
  • Requires full disclosure in billing statements of payment due dates and applicable late payment penalties.

Strengthens Oversight of Credit Card Industry Practices

  • Requires each credit card issuer to post its credit card agreements on the Internet, and provide those agreements to the Federal Reserve Board to post on its website;
  • Requires the Federal Reserve Board to review the consumer credit card market, including the terms of credit card agreements and the practices of credit card issuers and the cost and availability of credit to consumers;
  • Requires Federal Trade Commission rulemaking to prevent deceptive marketing of free credit reports.

Ensures Adequate Safeguards for Young People

  • Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;
  • Limits prescreened offers of credit to young consumers;
  • Prohibits increases in the credit limit on accounts where a parent, legal guardian, spouse or other individual is jointly liable unless the individual who is jointly liable approves the increase;
  • Increases protections for students against aggressive credit card marketing, and increases transparency of affinity arrangements between credit card companies and universities.

Enhanced Penalties

  • Increases existing penalties for companies that violate the Truth in Lending Act for credit card customers.

Gift Card Protections

  • Protects recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not used within a reasonable period of time.

Encourages Transparency in Credit Card Pricing

  • Requires the GAO to study the impact of interchange fees on consumers and merchants, specifically their disclosure, pricing, fee and cost structure.

Protects Small Businesses

  • Requires the Federal Reserve to study the use of credit cards by small businesses and make recommendations for administrative and legislative proposals;
    Establishes Small Business Information Security Task Force to address the information technology security needs of small businesses and help prevent the loss of credit card data.

Promotes Financial Literacy

  • Requires comprehensive summary of existing financial literacy programs and development of strategic plan to improve financial literacy education.

Posted in Credit | Leave a Comment »

Community Development Financial Institution Fund Director Speech at National Summit on Entrepreneurship

Posted by HH on May 20, 2009

CDFI Fund Director Donna J. Gambrell gave the following keynote address at the Association for Enterprise Opportunity’s National Summit on Entrepreneurship in Washington, DC on May 18, 2009


Thank you for that kind introduction, Connie.  It is an honor to be here today.  Since I was appointed as Director of the Community Development Financial Institutions (CDFI) Fund 18 months ago, I have had the opportunity to address many such gatherings, but this is my first appearance at a national conference sponsored by the Association for Enterprise Opportunity (AEO).  I thank you for the invitation.

Donna Gambrell

Donna Gambrell

The CDFI Fund’s purpose is to promote economic revitalization and community development through investment in and assistance to community development financial institutions – or CDFIs.  We have the critical mission of expanding the capacity of these institutions to provide credit, capital, and financial services to underserved populations and economically distressed communities in the United States.

In Washington, we have seen some significant changes over the last six months, with the election of President Obama and the installation of his new Administration.  AEO has seen change as well, with the appointment of Connie Evans as your new President and CEO.  Connie brings more than 20 years of microenterprise experience to the position, is one of your earliest members, and was appointed by former President Clinton to serve on the very first Advisory Board of the CDFI Fund.

At a time when the microenterprise industry and the CDFI industry as a whole are in a position to play a very real and important part in America’s economic recovery, it is encouraging to know that you have a strong leader at your helm.  Connie, thank you for taking on such an important responsibility.  I look forward to closely working with you and AEO.

This year’s theme of Microenterprise: Restructuring Business as We Know It, resonates with me personally and could not be more timely or appropriate given the financial crisis that our country currently faces.

Since the recession began over a year ago, more than 5 million people have lost their jobs.  In order to revitalize the economic base of this great nation, one of the areas we must focus our attention on is supporting the very institutions that have always been able to create jobs – small businesses, including micro-businesses.

The CDFI Fund’s mission is very similar to that of the microfinance industry.  We both support the entrepreneurial spirit that has always been at the heart of economic prosperity in America.  We both aim to better low-income communities through investment, and I can’t think of a more important time in recent memory to renew ourselves to that shared goal.

To that end, I not only encourage you to utilize our programs, but more importantly, for us to work together and discuss ways the CDFI Fund can better help the microenterprise industry.  Let us commit ourselves today to work on this together, because there is no better time than right now.

State of the CDFI Industry

The new Administration views the CDFI Fund with a renewed sense of responsibility. Let me share a few examples how.

The President has included the CDFI Fund in his strategy to address the current economic crisis.  To that end, the Administration has assisted our mission through several important means.

First, one need look no further than the administration’s newly released 2010 budget to see for themselves.  Entitled A New Era of Responsibility – Renewing America’s Promise, the budget more than doubles the CDFI Fund’s current operating budget of $107 million this year to $243.6 million for 2010 (an increase of 127 percent).  This funding will go a long way in our efforts to assist the microfinance industry, and we appreciate the Administration’s understanding and respect for our mission and for the work that we do.

The budget requests also calls for $113.6 million for the CDFI Program, which represents a 90 percent increase.  It also requests $80 million for the Capital Magnet Fund, a newly authorized program to increase capital investment for the development, preservation, rehabilitation, or the purchase of affordable housing for low-, very low-, and extremely low-income families.

It is also the first Administration budget to specifically include funding ($10 million) for the CDFI Fund’s Native Initiatives, which assist Native Communities (Native American, Alaskan Native and Native Hawaiian communities) to overcome certain barriers to financial services;

This funding will go a long way in helping those communities historically underserved by more traditional financial institutions.  The CDFI Fund is committed to making the FY 2009 and FY 2010 awards as expeditiously as possible.  This is a commitment I first made last year, and since then, the results speak louder than my words.

Just six weeks ago, the CDFI Fund announced 27 awards under the FY 2009 round of the CDFI Program’s Technical Assistance-Only program.  Due to new business process efficiencies that have recently been implemented, these awards were made five months earlier than the same award announcement in FY 2008.

Since the announcement on March 26, 21 of the awards have been fully disbursed for more than $1.8 million.  This is an astonishing 77 percent of the total TA awards of $2.3 million.  Clearly, we are on the right track and the staff at the CDFI Fund is hard at work.

The CDFI Fund also received resources through the American Recovery and Reinvestment Act of 2009 (the Recovery Act).  It provides us with an additional $3 billion of New Markets Tax Credit allocation authority, which will be awarded equally between fiscal year 2008 and fiscal year 2009.

In addition to the CDFI Fund’s annual appropriation for fiscal year 2009, the Recovery Act also appropriates an additional $100 million.  $90 million of this total will be applied to the CDFI Program, $8 million will be used to fund Native Initiatives, and the final $2 million will be used to cover administrative expenses.

The CDFI Fund is moving expeditiously to award and disburse these Recovery Act resources.  Later this month, we will announce $1.5 billion in allocation authority through our New Markets Tax Credit Program.  In June, we will have announced the entire $98 million of Financial Assistance awards made available through the CDFI Program and Native American CDFI Assistance (NACA) Program.

In addition, the CDFI Fund has recently opened supplemental rounds for our grant programs in response to the growing demand and additional funding made available.  I would encourage all certified CDFIs to take advantage of this while there is still time left for you to apply.

This is certainly a new day for the CDFI industry.  Let us not waste this opportunity.  Let us work together to demonstrate to all the vital role we play in providing responsible and affordable financial options for the low-income communities and residents we serve.

Data on Microenterprise Development

I would now like to focus on the area of microenterprise development and highlight some of our data which demonstrate just how active CDFIs are in the microenterprise field.  Of all business loans made by CDFIs, over two-thirds (68.1 percent) are micro-loans, and nearly all of these micro-loans are fixed-interest loans (94.6 percent) and are fully amortized (91.1 percent).

  • The average size of micro-loans is $12,463, and the median is $10,000.
  • The average term is 54 months, and the median is 42 months.

These loans have supported businesses owned by both minorities and by women in both urban and rural areas, those who have had trouble acquiring them through more traditional lenders.  Approximately 55 percent of these loans go to minority-owned or controlled businesses.  Additionally, almost 43.7 percent of these loans go to women-owned or controlled businesses. I can also report that nearly half of these (44.4 percent) are to low-income controlled or owned businesses.

As a result of our increased funding, we are now in a much better position to support CDFIs that are committed to supporting microfinance in our nation’s low-income communities.  Together through these efforts, we will create job lending and better practices, which are needed now more than ever as we deal with the financial crisis.

Case Studies

An example of a CDFI using a CDFI Program award to support more microenterprise development is the New Mexico Community Development Loan Fund, a private, tax-exempt organization.  Its mission is to provide loans, training and business consulting to non-profit organizations and entrepreneurs within all areas of the Navajo Nation, throughout the United States.

Since 1989, the Loan Fund has provided services to support the efforts of low-income communities, in order to help them achieve their dreams of financial self-reliance.  It has successfully assisted hundreds of small business owners and non-profit organizations over the past 20 years.

The businesses it partners with have a vested interest in community development.  A prime example is Small World Day Care, which was created in response to the needs of low-income workers who needed a facility to look after their children during working hours.  The center was opened in 1998, but within four years it had proven itself to be so popular that organizers realized more space was required.  The Loan Fund took up their cause and helped them purchase a new building.  Today, Small World cares for more than 40 children.

A relatively new microenterprise development organization supported by the CDFI Fund is the African Development Center (ADC).  Created in Minneapolis in 2005, the ADC is a certified CDFI that provides training to African immigrant and refugee businesses, those that may not be applicable for more traditional sources of financing.

ADC is often seen as an industry of one, as there are very few organizations that provide the same service.  Since their creation, ADC has lent more than $2 million to more than 130 businesses.  Over the next three years, it predicts an annual growth rate of 15 percent.

Minnesota boasts a higher than normal immigration rate from African nations.  According to the most recent U.S. Census statistics (2000), 13 percent of the state’s foreign born residents come from Africa, and this number is expected to increase dramatically by 2010.  Minnesota offers immigrants an established African population, a strong economy, a good quality of life, educational opportunities, and unskilled jobs that don’t require fluency or literacy in English.  These factors more than any other have helped make it an ideal refuge for many who have known nothing but war and poverty for most of their lives.


These are just two examples of the many microenterprise development projects that the CDFI Fund has supported.  They illustrate our commitment to you and your communities, so I want to once again encourage all of you here today to utilize our award programs.

To those of you today who have already been a certified CDFI, as our funding increases, we want to support your work even more and we encourage you to make the most of it.  The CDFI Fund is committed to your success, and we welcome the opportunity to work with you to achieve that.

To those of you who have not sought certification, now is the perfect time to do so, as the new Administration has thrown its support behind the CDFI Fund.  The Recovery Act and the 2010 budget have greatly aided our ability to serve you.


It’s an exciting time for the CDFI Fund.  With a renewed sense of purpose comes a greater ability and responsibility to serve community development organizations and the microenterprise industry.  We have earned political capital, and it is up to all of us to see that it’s spent wisely.  I appreciate AEO and all of its members, without whom we would not have the same impact in improving the lives and economic conditions within America’s neediest communities.  We will do great things together.

Thank you for inviting me here today.  We look forward to fostering new relationships and bringing your economic success stories to fruition.

Posted in Banking, Credit, Finance | Tagged: , , , , | Leave a Comment »

SBA Launches New Loan Program for Struggling Businesses

Posted by HH on May 18, 2009

Provided by the SBA Press Office

Small businesses suffering financial hardship as a result of the slow economy may be eligible to receive temporary relief to keep their doors open and get their cash flow back on track through to a new loan program announced by SBA Administrator Karen G. Mills.

Karen Mills

Karen Mills

Beginning on June 15, SBA will start guaranteeing America’s Recovery Capital (ARC) loans.  ARC loans are deferred-payment loans of up to $35,000 available to established, viable, for-profit small businesses that need short-term help to make their principal and interest payments on existing qualifying debt.  ARC loans are interest-free to the borrower, 100 percent guaranteed by the SBA, and have no SBA fees associated with them.

“These ARC loans can provide the critical capital and support many small businesses need to make it through these tough economic times,” said Administrator Mills.  “Together with other provisions of the Recovery Act, ARC loans will free up capital and put more money in the hands of small business owners when they need it the most. This will help viable small businesses continue to grow and thrive and create new jobs in communities across the country.”

As part of the Recovery Act, the ARC program was created as a no-interest, deferred payment loan to help small businesses that have a history of good performance, but as a result of the tough economy, are struggling to make debt payments.

ARC loans will be disbursed within a period of up to six months and will provide funds to be used for payments of principal and interest for existing, qualifying small business debt including mortgages, term and revolving lines of credit, capital leases, credit card obligations and notes payable to vendors, suppliers and utilities.  Repayment will not begin until 12 months after the final disbursement.  Borrowers don’t have to pay interest on ARC loans.  After the 12-moth deferral period, borrowers will pay back the loan principal over a period of five years.

ARC loans will be made by commercial lenders, not SBA directly.  For more information on ARC loans, visit

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Book Review – Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism

Posted by HH on May 17, 2009

Review By Travis Kent

Kevin Phillips nailed it. During the fall of 2007, Phillips was in the process of writing what would eventually be called bad_money1Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism. The original hardcover edition was released in the Spring of 2008 and his criticism of derivative mortgage products, excessive personal debt as an economic driver and the rise of the financial sector as a major piece of the gross domestic product, would, in less than six months, serve as a haunting premonition of what is now thought of as a global economic crisis. The paperback which was released March 2009 and is the subject of this review, is equipped with a preface that serves as a well deserved, if not subtle, “I told you so.”

Bad Money now serves as an excellent course study in what has led the America and world economy to their current floundering state. Namely, the failures of the Bush and Clinton administrations to hold Wall Street accountable for the products they created and an in depth analysis of how politics has paved the way. Phillips also examines post-9/11 financial policy, the factor of oil in our economy, and makes haunting comparisons between the Internet bubble that burst just after the turn of the millennium and the Housing bubble which has burst right in front of our eyes.

This book can be summed up from its preface as Phillips writes about the rise of the financial sector from roughly 11% of the U.S. gross national product in the 80’s to 20% by 2005. During that same period, manufacturing fell from 25% of GNP to just 12%. Most of all, Bad Money is a history lesson, political expose and staunch warning of things to come all rolled into one. It is not for everyone but its lessons will are sure to enlighten.

Travis Kent is an underwriter in the surety bond industry.

NOTE: Kevin Phillips was interviewed on the April 20 edition of Economic Perspectives. To listen to the interview click here: Kevin Phillips Interview

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8 Helpful Tips for Dealing with Debt Settlement Companies and Significant Credit Card Debt

Posted by HH on May 16, 2009

The following tips were  provided by the Office of the Attorney General (OAG) of New York as part of its campaign against the fraudulent activities of the debt settlement industry.  The OAG’s Bureau of Consumer Frauds and Protection launched a nationwide investigation into the debt settlement industry on May 7:

  1. Be wary of debt settlement companies which falsely promise to obtain substantial lump sum debt reduction settlements. Many advertise “reduce debt now,” and claim as much as 50% to 75% off credit card debt, but rarely obtain advertised reductions.
  2. Never agree to sign a contract with a debt settlement company that requires payment in advance prior to obtaining the promised debt reduction.
  3. Enrollment in debt settlement plans may not stop creditors from bringing collection law suits, or prevent enrolled accounts from growing larger by the addition of late fees, interest, and penalties. Also, credit reports will reflect derogatory information, including assessed late charges and non-payment of debt, and consequently credit scores will be adversely affected.
  4. Creditors are under no legal obligation to accept a settlement offer for less than the outstanding balance owed.
  5. Only a small number of consumers who enroll in debt settlement plans have the financial means to complete them. Usually, they drop out after having paid service fees to the companies with no settlements.
  6. Enrollment in a debt settlement plan premised on stopping payments to creditors will likely lead to more frequent and aggressive creditor collection efforts often resulting in judgments, wage garnishments, and freezing of bank accounts.
  7. Check with the Better Business Bureau to obtain a Reliability Report on a particular debt settlement company and its rating.
  8. A wise first step to help resolve an outstanding account is to speak directly to the credit card issuer. Alternatively, it may be helpful to speak to an attorney or an accredited credit counselor who can help develop a plan of action that best works for each consumer’s unique situation.

For more information on the New York Attorney General’s investigation into debt settlement companies click here.

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