State of Small Business Lending

Buisness Loans admist, tight credit conditions

blackwellca — Fri, 31 Jul 2009 12:45:20 +0000

Blackwell Capital & Advisory Secures Partnership with New York Lender to Facilitate Business Loans, to Millions of Small Businesses that Need Capital.

The commercial real estate time bomb

blackwellca — Thu, 23 Jul 2009 14:13:21 +0000

There’s a new main character moving to center stage in the great real estate meltdown. Underwater homeowners vying to refinance or score a loan modification have grabbed much of the headlines (and bailout attention) to date. But now commercial real estate is moving into the spotlight as the next potential body slam for the economy.

Last week The Washington Post reported that the U.S. Treasury department has begun to contemplate what can muck things up for the economy and the recovery beyond what is currently being bailed out. This effort has come to be known as Plan C. As in, “Yikes, Plan B might not do the trick, so what do we need to focus on next?”

Reports the WaPo, “The officials in charge of Plan C — named to allude to a last line of defense — face a particular challenge in addressing the breakdown of commercial real estate lending.”

The story line reads like a sequel to the residential debacle: Commercial property owners are sitting on loans that need to be refinanced. The Real Estate Roundtable estimates that about $400 billion a year in commercial loans will need to be refinanced over the next decade.

But with commercial property values way down, vacancies way up, and the recession making it unlikely there will be a demand pick-up anytime soon, banks haven’t been inclined to offer refinancing deals. If they do open the spigot at all, the terms are nowhere near as cheap as what commercial property owners had enjoyed during the boom. Sounds familiar, eh?

Earlier this month, in testimony before the Congressional Joint Economic Committee, Jon D. Greenlee, the Fed’s associate director of banking supervision and regulation, summed up the Plan C worry: “At the end of the first quarter [of 2009],” he testified, “about seven percent of commercial real estate loans on banks’ books were considered delinquent. This was almost double from the level a year earlier.”

Greenlee says there is about $3.5 trillion of outstanding debt associated with commercial real estate, and banks had about $1.8 billion trillion of that tidy sum on their books. That computes to about $126 billion (so far) in delinquent commercial mortgages on the banks’ books.

Now if you’re Goldman Sachs, you might be able to absorb commercial real estate writedowns (reportedly of more than $1 billion) with record trading profits elsewhere. And, to be sure, the vultures are already circling in the hopes of picking up distressed commercial property.

But if the squeeze on commercial real estate is as persistent and pernicious as what we’ve seen in the residential market, it wouldn’t exactly be a shock if the government beefs up its support/bailout. Get your taxpayer dollars ready for Plan C.

New jobless claims rise to 554K, total rolls fall

blackwellca — Thu, 23 Jul 2009 13:09:57 +0000

WASHINGTON -The number of newly laid-off workers seeking jobless benefits rose last week, though the government said its report again was distorted by the timing of auto plant shutdowns.

Unemployment insurance claims have declined steadily since the spring, but most private economists and the Federal Reserve expect jobs to remain scarce and the unemployment rate to top 10 percent by year-end.

The Labor Department said Thursday that its tally of initial claims for unemployment insurance rose by 30,000 to a seasonally adjusted 554,000. That was above analysts’ estimates of 550,000.

The increase follows two straight weeks of sharp drops largely because automakers didn’t lay off as many workers as expected in early July. General Motors and Chrysler temporarily shut down many of their plants earlier than usual this year, in May and June, after filing for bankruptcy protection and restructuring their companies.

A department analyst said the government’s seasonal adjustment process expected claims to drop sharply last week, after the normal pattern of auto layoffs was complete. But that didn’t happen, causing seasonally-adjusted claims to rise.

Weekly claims remain far above the 300,000 to 350,000 that analysts say is consistent with a healthy economy. New claims last fell below 300,000 in early 2007. The lowest level this year was 488,000 for the week ended Jan. 3.

The total jobless benefit rolls, meanwhile, fell by a more-than-expected 88,000 to 6.2 million, the lowest level since mid-April. And the four-week moving average of claims, which normally smooths out some volatility, fell by 19,000 to 566,000.

But the number of people on emergency extended state and federal programs continued to rise. Unemployment insurance recipients can receive up to 53 weeks of additional benefits from the emergency programs, on top of the 26 weeks typically provided by the states.

When the extended benefit rolls are included, more than 9.1 million people received jobless benefits for the week of July 4, the latest data available.

The recession, which started in December 2007 and is the longest since World War II, has eliminated a net total of 6.5 million jobs. The unemployment rate in June rose to 9.5 percent, a 26-year high. More job cuts were announced this week, many by major airlines. Houston-based Continental Airlines Inc. reported a quarterly loss of $213 million and said it would slash 1,700 more jobs on top of 1,200 already announced. Southwest Airlines Co., which has never laid off workers, announced that 1,400 employees — about 4 percent of its work force — took offers of cash and travel benefits to leave the Dallas-based company. Among the states, New York reported the largest increase in initial claims, with 12,504, which it attributed to higher layoffs in the construction and transportation industries. The next largest increases were reported by North Carolina, Florida, Missouri and Tennessee. The state data lags initial claims by one week. Michigan reported the largest decrease, with 6,648, which it attributed to fewer layoffs in most industries. Massachusetts, New Jersey, Indiana and California reported the next largest drops.

2009-07-23 09:02:45

NSBA Report Shows Small Businesses Struggling

blackwellca — Wed, 22 Jul 2009 21:43:36 +0000

NSBA today released the 2009 Mid-Year Economic Report which illustrates a small-business community barely hanging on in the midst of the worst economic downturn since the Great Depression. According to the report, 94 percent of small businesses surveyed said the national economy today is worse off than five years ago, and those who think the economy is doing much worse jumped from 64 percent in December 2008 to 75 percent in July 2009.

Although there was a slight increase in the number of small businesses who are anticipating economic growth, and a decrease in those anticipating a recession in the coming 12 months, these changes are more likely a reflection of the dismal position in which many entrepreneurs find themselves today, and the feeling that they’ve hit the bottom with no place to go but up.

“Nearly half of small businesses, up from a third six months ago, are not confident about the future of their own business,” stated NSBA President Todd O. McCracken. “The ongoing erosion of confidence from traditionally up-beat entrepreneurs is a wakeup call to lawmakers that small business may not be able to tread water much longer.”

The report details the ongoing difficulty small businesses are facing as three key indicators—revenues, profits and employee size—all declined between December 2008 and July 2009. The number of small businesses hiring new employees in the past 12 months dropped from 18 percent in December to just nine percent in July. Revenues and profits took an even bigger hit with the majority (62 percent) experiencing a decrease in revenues, and even more (66 percent) reporting a decrease in profits. The one positive: small businesses projected less drastic decreases in job growth for the coming 12 months.

Access to capital continues to be a major issue, with 80 percent of small-business owners negatively impacted by the credit crunch—up from 67 percent one year ago. Sixty-eight percent reported worsening terms on their credit cards and 38 percent were subject to a decrease on their lines of credit or credit cards. There was, however, an increase in the number of small-business owners who used a traditional bank loan in the last 12 months. While a positive indicator that bank loans are an option for some small businesses, this increase also reflects the fact that more businesses are turning to outside sources of financing as the difficult economy has forced them to use up business savings and earnings—making access to affordable capital all the more important.

“We’re struggling. Despite several economic stimulus packages and lots of talk, only three percent of small businesses reported a positive impact of the stimulus bills on their business,” stated Keith Ashmus, NSBA Chair and co-founding partner at Frantz Ward LLP, Cleveland, Ohio. “America’s small businesses need and deserve better.”

Please click here to view the full report.

Source National Small Business Association- Distributed by PRNews wire

www.blackwellca.com

Blackwell Capital & Advisory

CIT Pursuing Financing Alternatives-amid Tight Credit Markets- Through Investors

blackwellca — Fri, 17 Jul 2009 11:27:18 +0000

CIT management announced that its Board of Directors and management, in consultation with their advisors, are continuing to evaluate alternatives to improve the Company’s liquidity. CIT is in discussions with potential lenders to secure financing. The Company is continuing to serve customers. CIT appreciates the strong support it has received from many of its 1 million small business and middle market customers, industry associations and dedicated employees. NEW YORK–(BUSINESS WIRE)–CIT Group Inc. (NYSE: CIT)

According to Allibaba.com -Many of CIT Group Inc’s largest bondholders are holding an emergency conference call on Thursday afternoon to discuss their options, as the large lender to small and mid-sized businesses teeters on the brink of collapse, a person familiar with the matter said. About 10 to 15 bondholders, each with at least $500 million of exposure, are participating in the call. Among the participants is Pacific Investment Management Co, the unit of German insurer Allianz SE led by prominent bond fund manager Bill Gross, the person said. The person requested anonymity because the conference call is not open to the public.

According to Pierre Paulden, Linda Shen and Caroline Salas at Bloomberg News ,CIT Group Inc. bondholders were holding calls yesterday to discuss whether to swap some of their fixed-rate securities for stock in the company to help reduce its debt, according to a person familiar with the situation.

CIT late Wednesday said talks with the government to bail out the New York-based company have ended. Its shares fell 75 percent on Thursday and its bond prices also plummeted.

CIT stock fell 75 percent yesterday amid a possible bankruptcy filing, which likely would wipe out the bond holders.

CIT is “continuing to evaluate alternatives,” the company said in a statement.

Pacific Investment Management Co., CIT’s largest bondholder based on regulatory filings, hosted a conference telephone call, and debt owners are considering hiring financial and legal advisers, said the person, who declined to be identified because the discussions are private. CIT, a troubled lender to small- and medium-sized business across a broad swath of the U.S. economy, has not yet proposed an exchange offer.

CIT is running short of cash and may need as much as $6 billion to avoid filing for bankruptcy protection, after the federal government on Wednesday declined to give the firm a second bailout, CreditSights Inc. analysts said.

CIT, which has reported $3 billion of losses in the last eight quarters, received $2.33 billion in funds from the U.S. Treasury in December and hasn’t been given access to the Federal Deposit Insurance Corp.’s debt-guarantee program.

“CIT indicated that it needs at least $2 billion of rescue financing in the next 24 hours or it would likely file” for bankruptcy, CreditSights analysts Adam Steer, David Hendler and Pri De Silva wrote in a report. “We believe the figure is in the range of $4 to $6 billion-plus, making outside capital sources shy away.”

The company’s shares fell $1.23 yesterday to close at 41 cents on the New York Stock Exchange.

CIT’s $1 billion in floating-rate bonds that mature next month fell 22.5 cents to 61.5 cents on the dollar, according to data from Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Credit Rating Cut Fitch Ratings slashed CIT’s credit rating seven grades to C yesterday, saying in a report that “default of some kind appears imminent or inevitable.”

If CIT fails, the effect would be felt almost immediately by retailers that are about to stock up on inventory for back-to-school shopping, Al Ferrara, head of the retail practice at accounting and consulting firm BDO Seidman L.L.P. said yesterday. CIT lends to many retailers so they can buy their goods.

David Adams, Blackwell Capital & Advisory

www.blackwellca.com

CIT’s Reach

A select list of the industries to which CIT Group provides loans and other financial services.

Aerospace

Brodacasting

Energy

Entertainment

Gaming

Healthcare

Information services

Publishing

Retailing

Security

Sports

Transportation

SOURCE: CIT Group Inc.

CIT Group Hangs in Limbo

blackwellca — Thu, 16 Jul 2009 21:18:38 +0000

Small businesses are still finding it hard it access credit, to finance their business operations. According to a report by Emily Maltby staff writer at CNNMoney, on CIT Group a major lender to small businesses, which hangs in limbo as they await a Fed bailout, has been already failing.

“Over the past nine months, the one-time financial services powerhouse has all but ceased making new loans, leaving small business advocates and owners with mixed feelings about whether CIT should be left to fail”.

Representatives from the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. have been discussing plans for federal aid to prop up the commercial lender, whose failure could affect about a million small businesses that depend on it for credit.

Lending across consumer, commercial lines flat in May for banks that received bailout funds

blackwellca — Thu, 16 Jul 2009 19:33:54 +0000

NEW YORK (AP) — Lending among the biggest banks to receive government bailout funds was flat in May as the worsening recession led to efforts to pay off debt, the U.S. Treasury said.

As the economy continued to slide, consumer and business demand for credit weakened, said the report, released late Wednesday.

Total outstanding consumer loans, including mortgages, home equity lines, credit cards and other borrowing, was flat among the 21 banks surveyed.

The average total of all outstanding mortgages among the 21 banks was $914 billion in May, edging up from $913 billion in April.

“Households are facing growing pressures from a weakening labor market and the recent declines in their wealth,” Treasury said in a release. “In this context, consumers focused on paying down debt, driving the decreases in outstanding balances held by major banks.”

However, low interest rates and low home prices did encourage consumers to seek mortgages. Mortgage originations, or new loans, increased at 15 of the surveyed banks and fell at 3, for a total of $277 billion in new loans. The number is expected to fall in later months as interest rates began to rise at the end of May.

The total credit card outstanding balance fell 1 percent to $617 billion in May, from $622 billion in April. Of the 13 banks surveyed that offer credit cards, seven reported outstanding balances increased, while six saw declines. One bank’s increase in originations largely drove a 13 percent increase in new cards issued.

The total outstanding balance of other consumer lending products, including auto, student, and other consumer loans, decreased by 1 percent in May to $470 billion from $474 billion in April, with just four banks seeing increases and 14 reporting declines.

Like consumer loans, total commercial and industrial loans were also flat, at $1.22 trillion. Banks reported that demand for this lending was “well below normal levels,” Treasury said. With downsizing and cost cutting still on the agenda, banks expect demand will remain low.

Weak market conditions and general caution among business was cited for falling balances and lower-than-normal demand for commercial real estate loans. Rising office vacancies and a surplus in the commercial real estate market were also noted. The total outstanding was $537 billion, compared with $534 billion in April.

Overall, total originations rose by 1 percent, with 14 banks showing increases and 7 posting declines.

One bright spot was small business lending. The total outstanding balance of small business loans rose 1 percent, to $269 billion, from $267 billion in April. Originations gained 7 percent.

Since Treasury’s Capital Purchase Program was created, it has funded 651 banks of all sizes in 48 states, Puerto Rico and Washington, D.C.

CIT’s Future Fades to the dark as its Peril Grows –Government talk’s end – Bankruptcy looms

blackwellca — Wed, 15 Jul 2009 23:55:08 +0000

The struggling commercial lender said its discussions with government agencies have ended and that its board is evaluating alternatives for the company, which is facing a worsening liquidity crisis after its customers drew down hundreds of millions of dollars from their credit lines.

With CIT hanging in the balance, faced with limited alternatives, amid possible bankruptcy – will its customers, mainly small businesses, would continue to have access to credit via CIT or be forced to find other sources of liquidity in a tight market.

The commercial lender said in a statement that its “directors and management, in consultation with its advisers, are evaluating alternatives” — which presumably include a possible bankruptcy filing. CIT said over the weekend that it had retained the law firm Skadden Arps, a bankruptcy specialist, as an adviser.

If it were to go bankrupt, it would join Lehman Brothers Holdings Inc and Washington Mutual Inc among large U.S. financial services companies to collapse since the credit crisis accelerated last September

Earlier Wednesday afternoon, trading in CIT’s shares was halted on the New York Stock Exchange because news was pending. The trading halt spurred speculation that the New York-based company was close to an agreement with the government on an assistance package.

But CIT later announced that “it has been advised that there is no appreciable likelihood of additional government support being provided over the near term.”

Representatives from the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation had been discussing whether to provide additional federal aid to bail out CIT, whose failure could affect hundreds of thousands of small businesses that depend on it for loans.

CIT had sought to gain access to a government program that would have backed its debt, after a previous $2.33 billion infusion of taxpayer money failed to shore up its financial health.

CIT’s shares rose 26 cents on Tuesday, or 19.3 percent, to $1.61 on investor hopes that the government would bail out the company. The stock was last traded at $1.64 on Wednesday before it was halted.

President Obama was briefed on CIT’s difficulties, the White House spokesman, Robert Gibbs, said earlier Wednesday, according to The Associated Press. But Mr. Gibbs declined to discuss Mr. Obama’s briefing and referred questions to the Treasury Department.

David Adams, Blackwell Capital & Advisory

www.blackwellca.com