Loans

Citi’s Twitter Team Fails to Perform Due Diligence on Felon Seeking Loan

Remember how a Mexican subsidiary of Citigroup kinda loaned a few hundred million to a shitty oil company? No? Allow us to refresh you: Banking giant Citigroup cut its fourth quarter and full year 2013 estimates on Friday, as its profit was hit by fraudulent activity at a Mexico-based subsidary. The bank said in a […]

#10 Firm CohnReznick Borrowed a Few Bucks From the State of Connecticut

$508 million in revenues and 274 partners couldn't dig deep into their own pockets to find $1.2 million? Seems legit: Accounting firm CohnReznick, which has Glastonbury and Farmington offices, is going to consolidate its area operations in downtown Hartford's Metro Center with help from a $1.2 million state loan, Gov. Dannel P. Malloy said. The […]

Accounting News Roundup: Deloitte Names Van Arsdell as New Chair, CEO of AERS; Maryland Might Be Figuring Out This Fiscal Responsibility Thing; Frank Navigates the Waters | 08.12.10

Stephen C. Van Arsdell Named Chairman and CEO of Deloitte LLP’s Audit and Enterprise Risk Services Subsidiary [PRNewswire]
Thtte vet Steve Van Arsdell replaces Nick Tommasino as the head of Deloitte’s AERS.

As is the wont of these particular announcements, SVA seems pretty flippin’ stoked about the new gig, “I am excited to take the helm of Deloitte & Touche during such dynamic times. We know that to succeed we must always be a leader in quality. This is a shared commitment from all within our organization. The goals we set for ourselves will raise the bar for quality throughout the profession.”

Barry Salzberg got in a few words too, “I am fully confident in Steve’s ability to lead Deloitte & Touche through the myriad challenges and opportunities presented by the economic recovery and regulatory environment changes. His extraordinary talent, experience and leadership style will help further the practice’s primary mission to conduct the highest quality audits. As a continuing and integral member of our senior leadership team, I know his contributions will be considerable. Nick Tommasino has demonstrated a deep sense of partnership and commitment to our organization, and we thank him for his leadership. We’re delighted to bring his client service skills back to the marketplace.”

So, Stevey. Time to get down to brass tacks – everyone’s wondering about those raises.

Microloans Helps Some Small Businesses Survive [WSJ]
“When President Barack Obama signed the American Recovery and Reinvestment Act into law in February 2009 to create jobs and promote spending, the law included $56.1 million for microloans for small businesses, to be doled out through the Small Business Administration through September.

While some critics complain about the government’s economic stimulus efforts, some lenders and borrowers say the stimulus spending that focused on helping small businesses is working.

Targeted toward start-up, newly-established, or growing small businesses, the microloans are short-term loans up to $35,000 each for working capital or inventory and equipment purchases. The intermediary lenders who distribute the loans can choose to lend more than that limit.”

China’s Rich Have $1.1 Trillion in Hidden Income, Study Finds [Bloomberg]
“China’s households hide as much as 9.3 trillion yuan ($1.4 trillion) of income that is not reported in official figures, with 80 percent accrued by the wealthiest people, a study showed.

The money, much of it likely “illegal or quasi-illegal,” equates to about 30 percent of China’s gross domestic product, the study, conducted for Credit Suisse AG and published last week by the China Reform Foundation, found. The average urban disposable household income in China is 32,154 yuan, or 90 percent more than official figures, according to the report.”

It’s Time to Give Up Spreadsheets for Tracking Carbon Emissions [Green Biz via AccMan]
Give up on spreadsheets? The horror. “CFOs, CIOs and sustainability teams at large companies have used spreadsheets for years to track corporate carbon emissions.

We are now, however, at a tipping point where the benefits of carbon management software, also known as enterprise carbon accounting (ECA) software, outweigh the benefits of spreadsheets.

With many large companies recently completing their Corporate Social Responsibility (CSR) reports and Carbon Disclosure Project (CDP) questionnaires, and entering budget planning in the fall, it is time to move away from spreadsheets to reduce risk, save money, increase productivity, and establish an enterprise-class source of record for carbon emission data.”


Budget surplus in Maryland? Believe it. [CPA Success]
California, New York – Pay attention.

Do I Owe My Employees a Career Path? [You’re the Boss/NYT]
“Being responsible for your workers’ jobs is hard. Being responsible for their careers is harder.”

TrueBlue Named to Top of Forbes’ “Most Trustworthy Companies” List [Business Wire]
“TrueBlue, Inc. ranked at the top of the list of companies with the ‘most transparent and conservative accounting practices and most prudent management,’ according to a new ‘Most Trustworthy Companies’ list compiled for Forbes by Audit Integrity, an independent financial analytics company.

Audit Integrity’s Accounting & Governance Risk rating, or AGR, rates companies’ accounting and management practices from 0 (very aggressive) to 100 (conservative); companies with a lower rating have been more likely to suffer equity loss, issue financial restatements and face class action suits, Forbes.com says.”

Maxine Waters Whacked, Barney Frank Untouched [Jonathan Weil/Bloomberg]
JW on the Maxine Waters’ ethics violations and how Barney Frank managet to be smart enough (or just politically savvy enough) to keep himself clean-ish.

Willing But Not Always Able: The Latest on Small Business Lending

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

We hear a lot from small businesses about how hard it is to get a loan and a lot from bankers that demand from credit-worthy borrowers is down. Now a new study provides insights into the situation, by exploring the top reasons why banks are turning down applicants, along with plenty of other data. And because it includes asset-based lenders and other funding sources, it offers a wider view of just what’s going on in the financing landscape.

The study, from researchers at Pepperdine University, surveyed 1,430 borrowers, lenders and investors, looking at changes over the past six months. Since the most detailed analysis focused on banks and asset-based lenders, here’s a look at the most salient points:


Banks – Demand certainly does seem to be down, judging from responses from the 56 banks studied. About 11 percent reported an increase in applications over the past six months compared to 77.2 percent who had a decrease. But the quality of borrowers is up, according to 55.6 percent of those surveyed. That’s compared to 22 percent who reported a drop. And the number of approvals? That’s gone through the roof. About 76.5 percent reported an increase.
What are the reasons for turning down applicants? Top on the list is quality of cash flow. Almost 25 percent cited that as the reason. And 20.8 percent pointed to quality of earnings.

Asset-based lenders – The 52 asset-based lenders reported the mirror opposite, at least when it comes to demand. Sixty percent had an increase in applications vs. 8.7 percent who experienced a decline. Also while more lenders reported a drop in the credit quality of applicants, a majority saw an increase in the quality of borrowers who were approved.

As you might expect, the top reason for rejecting an application was insufficient collateral (30 percent). “In the weak economic environment, the valuation of collateral is going down,” John Paglia, an associate professor at Pepperdine and author of the study, said to me. Second on the list was quality of earnings (15.8 percent).

What’s it all mean? For one thing, asset-based lenders are attracting more interest from prospective borrowers, but the economy has done a number on their most important criteria, collateral. As for bankers, it seems they’re on the level when they say they want to make loans, but they can’t find suitable prospects.

Apparently when they do get a live one, bankers are more than ready to lend.

Don’t Get That Excited About the Growth in SBA Loans

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

It’s time to dial down all the fuss about SBA loans.

First, there are the reports about increases in SBA loan dollar volume, thanks to the stimulus bill. For example, according to the SBA, over a period of about a year, average weekly loan dollar volumes increased more than 90 percent in the two most popular programs, 7(a) and 504, from the average before the passage of the stimulus bill. 7(a) loans can be used for such purposes as working capital and the purchase of equipment, while 504 provides long-term, fixed-rate financing for buying real estate and other fixed assets used for expansion or modernization.


But, a recent analysis by Scott Shane, professor of entrepreneurial studies at Case Western Reserve, shows this conclusion should be taken with a big pitcher of salt. According to Shane, the level of growth is only impressive when compared to the previous year’s poor results. That is, in 2009, the volume was about $180,000,000. So, the approximately $300,000,000 for the first 27 weeks of the 2010 fiscal year represents a big jump. But compared to, say, 2006 and 2007, it’s about the same.

Then, there’s the more important matter of just how many small businesses get SBA loans in the first place. The answer is: Not many. Take the 7(a) program, which comprises 90 percent of SBA loans. According to Shane, last year, less than one percent of small businesses with employees received one of these babies. If you look at non-employer businesses, which comprise the majority of all small companies, their share was between one tenth and one twentieth of one percent–about 50,000 small businesses out of 29.6 million.

Of course, 2009 was a lousy year. But, the data still suggests that all the attention being given to the SBA-loan program may not be warranted. That, in turn, has some pretty serious implications for government policy. Those businesses that got SBA loans undoubtedly were helped, possibly increasing their sales and, perhaps, their hiring. But, to reach more companies, the programs just aren’t enough. Another approach is needed to help the vast majority of businesses that don’t use these loans at all.

Are Direct Loans from the Small Business Administration a Bad Idea?

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

With all the news about President Obama’s proposals to increase bank lending to small business, there’s one obvious question that needs to be addressed: Why not have the Small Business Administration take a more aggressive role? Why not allow the agency to lend directly to small businesses?

The issue came up at a recent hearing held by the House Financial Services and Small Business Committees.

Turns out, the Small Business Act creating the SBA allows the agency to do direct financing of companies, as the You’re the Boss blog recently pointed out. And through at least the 1980’s, they did so, lending to companies rejected by banks.


Plus, in the past year, the Senate has introduced legislation to help the SBA make direct loans. And the House has passed two bills creating programs aimed at direct lending. That legislation would create a program which would exist only in a recession, through which the SBA would help small businesses fill out loan applications. Then, if no bank were willing to lend, the agency would step in.

But the Obama administration is against any and all such proposals. The reasons: 1) The agency doesn’t have the staff or the resources; 2) It would take as long as a year to get such a program up and running; 3) Administrative costs would be in the billions of dollars; and 4) Historically, SBA direct loans have had higher cumulative loss rates than other SBA-backed loans.

Those, in fact, are pretty convincing arguments.

It might just be that, while it sounds good on paper to give the SBA the power to lend directly, the reality is very different. Sure, drastic action is needed to increase bank lending. But this one might be thoroughly impractical.

The bottom line: Ultimately, it’s bankers who probably are more qualified than anyone at the SBA to make these decisions. In a time of scarce government resources and a need for fast action, the most efficient approach is for the SBA to do whatever it can to encourage banks to lend.

Of course, whether the steps proposed by the Obama administration are likely to do that is the $64,000 question.