Archived Business News

Survey: 90% of companies cutting costs
Birmingham Business Journal - by Atlanta Business Chronicle
Tuesday, January 27, 2009, 11:23am CST

Nine out of 10 companies have put cost-cutting strategies in place — from hiring freezes to furloughs — in hopes of weathering the recession gripping the U.S. economy. That’s according to a survey released Monday from Chicago-based job placement consultancy Challenger, Gray & Christmas Inc. Meanwhile, companies say that because of creative tactics to save money they have been able to avoid making layoffs. Cost-cutting measures included cancelations of holiday parties, salary freezes, cuts in workers’ hours, reductions in or the elimination of year-end bonuses and cutbacks in various perks. The most often-used cost-cutting initiative was reducing travel expenses, cited by 67 percent of survey respondents. It was followed by hiring freezes and reductions, which are used by 58 percent of companies surveyed. Permanent work force reductions were made by 56 percent of the companies surveyed. Only two percent of companies said permanent layoffs was a sole cost-cutting technique. Nearly 30 percent of companies in the Challenger survey started a salary freeze or reduction because of the downturn.

Thursday, January 29, 2009, 11:10am CST
Wells Fargo hiring in Birmingham
Birmingham Business Journal - by Crystal Jarvis Staff

A Wells Fargo & Co. spokesman has confirmed the company has hired a third party in the Birmingham area to help hire temporary workers and sources familiar with the situation say the jobs could add up to 1,000.

Wells Fargo, which acquired Wachovia Corp. last year, plans to house the new employees in the bank’s data center behind the Wildwood Shopping Centre on Lakeshore Parkway, according to sources speaking on condition of anonymity.

Wells Fargo spokesman Kevin Waetke confirmed the company is looking to increase staff in the Birmingham area, but did not disclose details.

"The current mortgage rate environment has increased Wells Fargo Home Mortgage's application volumes across the country,” Waetke said in a written statement. “To better meet this demand and the needs of our customers, we are currently increasing our staffing levels with a number of temporary workers to process these applications in various locations around the country, including Birmingham. We are committed to staffing our operations at levels that allow us to meet the needs of our customers."

A number of staffing agencies have recently advertised the need for workers to fill mortgage-related jobs, including loan document specialists, telesales, quality assurance and management positions.

Amid massive layoffs across the nation – and several in the Birmingham-Hoover market – additional jobs will help boost the local economy, experts say.

Since the work is temporary and likely needed among the work force, a majority of the workers’ paychecks will be poured back into the local economy, said Regions Financial Corp. Chief Economist Bob Allsbrook.

“A greater portion of that dollar is going to be spent rather than somebody with a permanent payroll,” he said.

While the nation is in a major housing slump, the mortgage industry is booming right now because of low interest rates, Allsbrook said.

“Mortgage applications were up sharply in December because interest rates were lower,” he said. “That’s encouraged a lot of people to look at buying homes who wouldn’t have otherwise.”

More than 1,000 jobs will be a great asset to Birmingham-Hoover, but it is unknown if the additional jobs will be enough to put a dent in the rising unemployment rate here, said Larry Harper, the director of graduate programs at Samford University’s Brock School of Business.

Stephen Yoder, assistant professor at the University of Alabama at Birmingham School of Business, said Birmingham is the perfect market since it has plenty of skilled financial workers. The area is known as one of the largest financial centers across the nation, especially a few years ago when it was once home to four large banking giants. It’s now only home to two: Regions Financial Corp. and BBVA Compass.

“I think that Wells Fargo is smart to think of Birmingham as a place to add jobs,” Yoder said.

Thursday, January 29, 2009, 11:14am EST
National Credit Union Administration aims to restructure system
Washington Business Journal - by Bryant Ruiz Switzky Staff Reporter

The National Credit Union Administration released a plan Wednesday that aims to restore liquidity to the credit union industry.
The plan targets the 28 corporate credit unions, which do not serve individuals or corporations. Rather, they provide financing and services to the 7,900 retail credit unions.

As the value of some of the investments held by corporate credit unions fell and the secondary markets for the securities dried up, the institutions have run short of cash and are struggling to meet loan demand from retail credit unions.
The National Credit Union Administration’s program will inject $1 billion in capital into Lenexa, Kan.-based U.S. Central Corporate Federal Credit Union, which acts as a wholesale financial center for corporate credit unions. The capital will give U.S. Central reserves against anticipated losses on its mortgage-and asset-backed securities.

The National Credit Union Administration (NCUA) also will guarantee uninsured shares at all corporate credit unions through February and establish a voluntary guarantee program for uninsured shares of all corporate credit unions through 2010.

The NCUA also is seeking comment on a plan to restructure the corporate credit union system.

It is considering revising standards for corporate credit unions on capital, permissible investments, management of credit risk and liquidity, and corporate governance.

“Possible approaches the agency is considering include eliminating the second or wholesale tier from the corporate system, modifying the level of required capital, isolating payment services from the risks associated with other lines of business, determining which product and service offerings are appropriate for corporate s, requiring a restructure of corporate boards, and tightening or eliminating the expanded investment authority that is currently available to corporate” credit unions, according to the advance notice of proposed rulemaking released by the NCUA.

“The corporate credit union system is an integral part of the credit union industry for over three decades, and has and enabled credit unions to better provide services to almost 90 million consumers,” said NCUA Chairman Michael Fryzel in a statement. “I call upon the credit union industry to work with NCUA in this important cooperative effort, and remain confident of our ultimate success in creating a more viable and stable corporate network.”

This latest round of NCUA efforts to restore liquidity to corporate credit unions comes after the December release of the Credit Union System Investment Program, under which retail credit unions get money from the NCUA that they must then invest in corporate credit unions.

The NCUA, as well as credit union trade groups, also have called for inclusion in the $700 billion Troubled Asset Relief Program administered by the Treasury Department.

Credit unions have thus far not been included in the rescue, despite mounting credit problems. Some 29 percent of Washington-area credit unions were in the red during the third quarter of 2008, the most recent quarter for which data are available.

WASHINGTON, Jan. 29 /PRNewswire-USNewswire/ -- United States Senate Committee on Small Business and Entrepreneurship Chair Mary Landrieu, D-La., today chaired a committee roundtable entitled "Investing in Small Business: Jumpstarting the Engines of our Economy," focused on steps the Federal Government can take to strengthen small businesses, create new jobs and encourage entrepreneurship. The roundtable is available online at

C-Span Video-Senate Hearing on Small Business Growth

"Any economic recovery plan must make growing and strengthening small businesses a top priority," Sen. Landrieu said. "Today's roundtable is the first of many steps toward making the Federal Government a better partner to small businesses as they look to expand and create jobs. There is no better way to assess the current economic crisis for small businesses than hearing from them firsthand."

Small businesses comprise more than 99 percent of the nation's firms and employ more than half of the workforce. In the past eight years, funding for the Small Business Administration (SBA) has been cut by 26 percent, or nearly $500 million -- the largest cut of any Federal agency. Sen. Landrieu focused today's roundtable on what reforms can be made to improve SBA programs, how the Federal Government can provide tax relief to small firms, how the Troubled Assets Relief Program (TARP) can be changed to address the small business credit crisis more effectively and what provisions should be included in a stimulus package aimed at assisting entrepreneurs.

"From today's conversation, I hope to work with Ranking Member Snowe and other committee members to devise and implement innovative solutions to ensure that Federal Government programs serve as stepping stones for small businesses, not stumbling blocks," Sen. Landrieu said. "We will work to restore SBA funding to its appropriate level, make small business lending more affordable and accessible, and implement other initiatives to help jumpstart the engines of our economy to create new jobs. We will fight to ensure that small businesses lead the nation out of our current economic troubles."

"Our Committee has a bold and ambitious agenda to get Federal policies on the side of small businesses, so that our nation's entrepreneurs can be at the forefront of the economic recovery our country so urgently requires," said Sen. Olympia J. Snowe, R-Maine, Ranking Member of the Senate Committee on Small Business and Entrepreneurship. "Today, we have a prime opportunity to learn from small business owners and their representatives about what they feel should be done to optimize the government's tools that assist them in creating new jobs and accessing capital. From combating the credit crunch that plagues small business lending, to reducing stratospheric health care costs, to bolstering vital funding for the Small Business Administration, I pledge to continue and strengthen my work with Chair Landrieu as legislative advocates for our nation's job generators."

"Small businesses are the engine that powers American economic growth," said Sen. Evan Bayh, D-Ind. "In these challenging times for our country, it is essential that our economic policies focus on growing small businesses, expanding their access to capital, providing them with tax relief and increasing their ability to create good paying jobs. I look forward to working with the Committee to make the priorities of small businesses a central component of our economic recovery plans."

"Small business will be the economic engine that creates jobs and drives this country out of our recession. But they need our help to survive these tough times and thrive when the recession is over," said Sen. Benjamin Cardin, D-Md. "I applaud Chairman Landrieu for holding this Roundtable at such a critical time, just as the Senate is set to consider the details of an economic recovery package. We must ensure that federal money and contracts flow to small, women-owned, and minority businesses."

"To get our economy back on track, we need to create jobs, and one of the best ways to do that is to protect existing small businesses and encourage entrepreneurs to create new ones," said Sen. Jeanne Shaheen, D-N.H. "As a former small business owner, I know firsthand that small businesses are the engine that drives America's economy. This is especially true in New Hampshire, where approximately 85% of businesses have 19 or fewer employees. Small businesses are facing enormous challenges under this recession. I look forward to working with Chairwoman Landrieu and my colleagues on the Committee to give small businesses the support they need as we consider how best to revitalize our nation's economy."

"Small businesses play an integral role in providing innovation and are the backbone of the American economy," said Sen. Johnny Isakson, R-Ga. "As a former small business owner, I know that addressing the issues facing small businesses across this country is a critical part to our economic recovery."

SOURCE U.S. Senate Committee on Small Business & Entrepreneurship

GovGex.com™, the Government Guaranteed Loan Exchange, announced today its first LIBOR based SBA loan was sold on GovGex.com

GovGex, through a growing network of over 20 buyers, provided the selling lender with 13 active bids and passes on the loan. 

Though some suggest the secondary markets are closed, GovGex reports that there are still active buyers.  "Coastal Securities continues to be an active participant in the Secondary Market" said Sylvia Merola of Coastal Securities, which was the winning bidder for the LIBOR based loan on GovGex.  "We continue to bid on loans and remain interested in SBA Prime and LIBOR based paper as well as USDA loans."

"Coastal Securities continues to be one of the leaders in the Secondary Market and we are happy to have them as a GovGex member" said Dan Shoham, CEO of Edgeware Analytics, provider of GovGex.  "We congratulate Coastal, on buying the first LIBOR based loan through GovGex.com".

The SBA issued a rule change effective November 13, 2008 allowing lenders to use a Prime or LIBOR base rate. The rule change, according to the SBA, was in a response to the "extraordinary market conditions limiting credit availability for small businesses."

Wednesday, January 21, 2009
SBA loans slammed by credit crunch
Jacksonville Business Journal - by Rachel Witkowski

Small Business Administration loans have fallen 46 percent to $16.1 million in Northeast Florida since peaking at the end of 2006.

The loan decline mirrors what is happening across the country and has caught the attention of the SBA. The agency recently made several changes to help the ailing secondary market, lenders with a weak stomach for new loans and businesses shying away from financing. One of those changes to the most common government-backed business loan included allowing lenders to look at a new rate index and additional interest rate increases.

“The problem was on so many different levels,” said Ralph Ross, deputy district director for the SBA’s North Florida District Office.

There aren’t as many borrowers; even the solid banks are being more careful with their credit standards; lower volumes meant fewer employees needed; and the secondary market froze up, he said.

Before the freeze, more than 40 percent of the SBA loan dollars that were guaranteed in the nation were sold to the secondary market, according to the SBA. The SBA typically guarantees 75 percent to 85 percent on their most common loan, called a 7(a) loan, Ross said.

As it became harder to sell the loans to the secondary market and lower interest rates made such loans less profitable, the volumes dropped dramatically.

There were a total of $16.1 million in SBA loans written as of Dec. 31, down

40 percent from the end of 2007. Lower volumes also meant there was less of a need for qualified SBA lenders.

In an attempt to reignite the interest and profitability in SBA loans, the agency allowed these lenders to look at the one-month London Interbank offered rate, or Libor, which is the rate of the shorter term loans that banks offer to each other. The lender can also add 3 percentage points to that base rate. In the past, SBA lenders could only look at the prime rate index or the SBA’s optional peg rate to determine the interest rate for 7(a) loans.

The last reported Libor monthly rate in early January was about 0.43 percent. The Prime rate was 3.25 percent.

That means that the base interest rate on a 7(a) loan if a lender is using Libor could be 3.44 percent. The SBA also allows lenders to charge from 2.25 percent up to 2.75 percent after all the base rate indexes, depending on the term of the loan. So an interest rate based on prime could be as high as 6 percent and an interest rate based on Libor could be as high as 6.19.

The bank would earn slightly more on a Libor-based SBA loan.

The borrower may also benefit from a Libor-based interest rate because prime is considered more unstable, said Chip Townsend, president and CEO of First Coast Community Bank based in Fernandina Beach.

As the fed funds rate dropped dramatically for more than a year, the prime rate fell much faster than Libor to where Libor was about 0.08 percentage points higher than prime for a week in October. And the banks that were using prime were earning much less, if any, on those loans.

“Libor is truly reflective of the bank’s cost of funds,” said Nelson Bradshaw, city president of BBVA Compass Bank in Jacksonville. “We’ve got to marginally get some money to fund” the loans.

Many banks have switched to writing new loans with interest rates based on Libor rather than prime across their entire loan portfolio. But most SBA lenders in the area said it was unclear whether the change is helping.

Libor “is our preference, but we’re not going to make loans because of it,” Bradshaw said.

January 27, 2009
Landrieu Comments on Small Business Provisions of Stimulus Bill

Bill reduces small business lending fees to stimulate growth and job creation

WASHINGTON - United States Senator Mary Landrieu, D-La., Chair of the Senate Committee on Small Business and Entrepreneurship, commented on the small business assistance provisions of the American Recovery and Reinvestment Act that was marked up by the Appropriations Committee today.

“The economic stimulus package includes essential provisions that will help jumpstart lending for small businesses nationwide,” Sen. Landrieu said. “By reducing fees on government-backed small business loans, the bill will make new loans more affordable so small businesses can grow and succeed, creating jobs and strengthening the economy.”

The stimulus bill includes $515 million to temporarily eliminate fees associated with 7(a) loans, the most common type of SBA-backed loan. Reducing lender fees will help reverse the downward trend in 7(a) lending, stimulating as much as $15 billion in small business loans. Last fiscal year, 7(a) loans decreased by more than $1.6 billion, or more than 30,000 loans. This fiscal year, 7(a) lending is already down by more than 56 percent.

The package also appropriates $100 million for the temporary waiver of fees on 504 loans, which provide long-term financing to small businesses that are expanding and need to buy equipment, facilities or other fixed assets. 504 loans are down 42 percent this fiscal year compared to this time last year. This funding is estimated to stimulate as much as $5 billion in small business loans.

The bill includes funding for the SBA’s Microloan Program, which provides very small loans to qualifying small businesses. It includes $6 million for the program to handle the increase in demand from micro-businesses that have been crowded out of other financing sources as a result of the credit crisis. This funding will leverage an additional $51 million in microloans, creating or retaining an estimated 10,000 jobs. The bill also provides $24 million for complementary counseling.
To provide accountability, the package contains $10 million for the SBA Inspector General’s oversight of SBA stimulus funds and $15 million for increased lender oversight.

“The small business provisions in the stimulus package are certainly steps in the right direction, but there is still much work left to be done,” Sen. Landrieu said. “I am looking forward to the Small Business Committee roundtable on Thursday where we will focus on what is necessary to further stimulate growth and job creation among the nation’s small businesses, the engines of our economy.”

Monday, January 26th 2009
Stimulus bill aims to boost SBA lending
Kent Hoover Washington Bureau Chief

The initial House version of the economic stimulus bill would give the Small Business Administration $430 million to revive its ailing loan programs.

The bill would increase the government guarantee on the SBA's 7(a) loans, and empower the agency to make loans directly to small businesses, a function that now is performed by private-sector lenders.

Many of those lenders, however, are no longer making SBA loans. Through Jan. 9, the number of 7(a) loans is down 56 percent this fiscal year, which began Oct. 1, compared with the same period a year earlier. Total dollar volume was down 40 percent, to $2 billion.

Use of the SBA's 504 loans, which finance real estate and other fixed assets, also dropped sharply. The number of 504 loans was down 40 percent, and the dollar volume was down 43 percent.

The legislation would encourage lenders to start making 7(a) loans by temporarily increasing the amount guaranteed by the government from the current maximum of 85 percent to 95 percent. This would make the loans less risky for lenders and free up capital for additional loans, according to the House Small Business Committee.

The bill also would allow a small business to apply directly to the SBA for a loan. The agency would first forward the application to lenders within with 100 miles of the applicant's location. If none of these lenders decide to make the loan, the SBA would send the application to participants in the agency's Preferred Lenders program. If these lenders pass, the SBA itself could then originate, underwrite, close and service the loan.

SBA loans also could be used to refinance existing loans of up to $10 million, under the legislation. The lender, however, would have to accept less than 100 percent of the loan's balance and principal.

The legislation also aims to restore the secondary market for SBA loans, which has been dormant in recent months. The inability of lenders to sell their existing SBA loans on the secondary market has prevented many from making new SBA loans. The stimulus bill would enable the SBA to make loans to broker-dealers who operate the secondary market. The SBA could also guarantee pools of first-lien 504 loans sold to third-party investors.

President Barack Obama has called for the SBA to make direct loans and increase its loan guarantees. He also advocates lowering fees on SBA loans.

High fees and other program costs have driven many lenders away from the program, said Paul Merski, chief economist for the Independent Community Bankers of America. The number of lenders that made at least one 7(a) loan has dropped from 5,288 in 2001 to fewer than 2,700 today, he said. A few large banks dominated SBA lending in recent years.

"This gross imbalance in SBA lending was a recipe for disaster," Merski said. "Many of the largest financial players have tripped up on toxic investments and subprime lending, and have been forced to pull in their lending across the board -- including small business and SBA lending."

SBA officials cite several reasons for the decline in SBA loans, including reduced demand due to the weak economy. Borrowers have tightened lending standards, and many small businesses are less creditworthy than they were when the economy was healthier.

In order to make SBA lending more profitable, the SBA now allows lenders to charge higher interest rates on the loans. It also gave assemblers of SBA loan pools more flexibility on interest rates. Meanwhile, the Federal Reserve Board announced plans for a lending facility designed to provide more liquidity to issuers of SBA-backed securities. These recent steps eventually will boost SBA lending, according to agency officials.

For more information, see www.sba.gov

Monday, January 26th 2009
Small businesses nominate 38 regulations for reform
Kent Hoover Washington Bureau Chief

Small businesses came up with a list of 38 federal regulations that should be changed in response to a solicitation by the Small Business Administration's Office of Advocacy.

This was the second year the office sought nominations through its Regulatory Review and Reform initiative. Last year, the office received 82 nominations and forwarded the top 10 to federal agencies. Two of the proposed rule changes were acted on: The Environmental Protection Agency redefined solid waste to encourage more recycling, and the Federal Aviation Administration narrowed its airspace restrictions in the Washington, D.C. area.

"We are pleased with the small business community's strong response to our second call for nominations," said Shawne McGibbon, the office's acting chief counsel. "The nominations show that small business owners have thought seriously about the burdens they face and have considered ways to improve the situation."

The nominations range from simplifying the Internal Revenue Service's instructions for 1099 tax forms to reforming the Medicare enrollment process.

The Office of Advocacy, which represents the interests of small businesses in the regulatory process, will review the nominations and submit a new top 10 list, including the eight holdovers from last year, to federal agencies.

For more information, see www.sba.gov/advo

Monday, January 26th 2009
Longtime lead lobbyist to become head of NFIB
Kent Hoover Washington Bureau Chief

The National Federation of Independent Business is changing leaders: Dan Danner, a 15-year veteran of the small business organization, will become president and CEO Feb. 1, replacing Todd Stottlemyer.

Stottlemyer is leaving NFIB after three years at the helm to return to the private sector. He previously was CEO of Apogen Technologies, a McLean, Va.-based government contractor, and worked as a top executive at other Northern Virginia technology companies.

NFIB Chairman Tim Clayton said Stottlemyer brought "a unique blend of business, policy and political acumen" to NFIB.

"Under his direction, NFIB became the leading business voice for health care, urging lawmakers to deliver meaningful health care reform for small business," Clayton said.

NFIB, which had been known for its conservative stances on most issues, raised some eyebrows in 2007 when it joined AARP, the Business Roundtable and labor union SEIU in the Divided We Fail coalition. The group is pushing bipartisan approaches to expanding health insurance coverage and ensuring the long-term viability of Social Security.

Danner, an executive vice president who heads NFIB's lobbying team, "fully understands the challenges facing small business today and will be the kind of leader we need as we face uncertain economic times," Clayton said.

"I'm humbled by this opportunity to represent our nation's job creators in an even more meaningful way," Danner said. "I've spent time with our members across the country, getting to know them personally and hearing first-hand their challenges and concerns.

"I plan to do everything I can to make their jobs a little easier," he said.

For more information, see www.nfib.com