economic stimulus

Small Businesses Are Borrowing Again

November 23, 2009 by Sarah Leave a Comment

SMB owners are borrowing money again, or so says a study conducted by PayNet Inc for Reuters. The study found that smaller “microcompanies” are gaining confidence in their business and enjoying an overall improved financial health, which is good news for the economy. These businesses are often thought of as the best hope for job creation during economic recovery.

According to the study, which examined loans, leases, and lines of credit activity, businesses with less than $100,000 in outstanding debt are borrowing cautiously to invest money into their own companies. Financing originations are still down but they are no longer failing faster than the originations for larger small businesses (or those who have debt totalling above $100,000). This is an improvement over the last three years.

“This looks like an inflection point,” William Phelan, the president of PayNet, said of the study. “These little businesses are a leading indicator and the signals they’re sending are improving.”

Another encouraging sign is that delinquencies among these companies peaked at some point during the spring of this year, but have since began to improve. Phelan says a correlation can be made between microbusiness borrowing delinquencies and GDP and that makes for another encouraging sign.

Currently, most recovery efforts have come from a government stimulus effort, including the auto industry’s “cash for clunkers” and $8,000 tax credits fro first-time home buyers. But experts say a true recovery must come from private industry and customer demand, particularly small businesses.

And while critics have blasted banks who received government bailout money for not turning around and investing the money into the economy, several big banks have recently announced plans to do more small business lending. These institutions include Citigroup, J.P. Morgan, and Goldman Sachs.

PayNet provides risk management tools to the commercial lending industry. The company collects real-time loan information, including orginations and delinquencies, from over 225 leading U.S. capital equipment lenders and its proprietary database encompasses more than 16 million old and new contracts worth about $700 billion.

I.B.M Gives $2 Billion For Economic Recovery

May 1, 2009 by Zack Duncan Leave a Comment

I.B.M. The economic stimulus plan, set by Obama and the government, has lots and lots of money, an excess of $30 billion, set off for high-technology projects smarter electric grids, health information, and broadband networks for rural communities. However, this money isn’t coming yet so to get individual projects underway, there is a requirement for upfront investments to help with planning and design. I.B.M. announced that the company’s big finance unit is going to put aside $2 billion for what is called “bridge” financing high-tech infrastructures that of which will most likely qualify for the federal grants and incentive programs that are under the new American Recovery and Reinvestment Act of 2009.

According to John Callies, the general manager of the global finance unit at I.B.M., “The idea is to accelerate the benefits to communities and companies by letting them begin the investment now.”

“The I.B.M. program looks like a sound stem that will hasten the arrival of high-tech projects. The irony is that Washington has promised all this money, but you need funding to start the projects.” says John Pucciarelli, an IDC analyst. But, is the including of high-tech and complex programs a wise choice in a plan that was designed to pull our country out of a recession? Especially with the fact that private funds, like the ones from I.B.M., are such a necessity. But, despite what we want, what we think, or what we were “promised”, high-tech incentives are a part of our government’s policy now and there isn’t much we can do about it.

I.B.M. expects its bridge funding program to have an appeal to other businesses like medical centers who might be interested in adopting electronic health records, municipal utilities investing in smart grids, as well as other projects. According to Callies, “The money will be used to start projects led by I.B.M.’s big services arm. We are not doing this for altruistic reasons.”

But one has to wonder about the high risks in putting up finance for a government project whose funding is still not in hand? according to analysts, I.B.M. is at an extra risk. But the company is experienced in seeing the risks of such high-tech and complex projects and dealing with them, much more so than older, more traditional companies which focuses having funding for purchases of software and hardware. Mr.Callie and I.B.M. are convinced that hey are not taking a huge credit risk on this funding.