Category Archives: Budgeting

FRB Main street loans

The Federal Reserve Bank of Boston has launched their Cares Act-related Main Street Loan programs. These 95% FRB guaranteed facilities are aimed at higher-end small and mid-sized businesses that were performing well before the Covid 19 economic disaster. Certain non-profit organizations are also eligible. They are available through participating banks. Not all banks have signed up at the time of this post.

Most businesses will vie for the “New” or “Priority” loan options that start at $250 thousand ranging to $35 million or $50 million. These are five year floating rate term loans. The interest rate is either one or three month LIBOR plus 3.00%. At this week’s current rates, that would create an interest rate slightly below 3.25%. Interest payments are deferred for the first year and principal payments are deferred for the first two years. Full loan amortization occurs during years three through five.

Eligibility is tied to a borrower’s 2019 EBITDA. From the two loan types above, the borrowing amount is either 4X’s 2019 EBITDA less existing loan amounts and unused credit lines or 6X’s. The remaining amount calculated must exceed the $250 thousand threshold. There is no loan “forgiveness” associated with these loans. Essentially, these Main Street Loans are targeted toward larger, more profitable companies than the earlier Paycheck Protection (PPP) and Economic Injury (EIDL) business loans and grants of the U.S. Treasury and SBA. For more information, visit https://www.bostonfed.org/supervision-and-regulation/supervision/special-facilities/main-street-lending-program/information-for-borrowers.aspx

SBA Disaster Loans

Most U.S. businesses, except the very large, are eligible to apply for Covid 19 – related SBA Disaster Recovery Loans. There are two major initiatives: 1) Economic Injury Disaster Loans (EIDL) – keeping businesses viable by operating expense and debt payment loans, and; 2) Paycheck Protection Program (PPP) – protecting employee staff count and payroll contributions by loans to fund these costs as well as building and utility expenses. It’s beyond the scope of this post to discuss the considerable detail associated with these initiatives. Businesses are eligible to apply for both loans. Check www.sba.gov for more details.

Uber and Starbucks Top Business Expenses

Uber and Starbuck Business Expenses
Business Expenses

Third quarter 2018 business expenses showed a decided thriftiness according to a recent study released by Certify, a leading travel and business expense tracking service provider. Their analysis consisted of reviewing more than 10 million expense reports that were submitted. Gone, apparently, are the Mad Men TV series days of two martini lunches.

Uber, Starbucks, and Amazon top the list of expense chits submitted. Even with this prominence, Uber’s 11% share and the other two’s 4% are relatively modest. Uber has negatively impacted traditional taxi, shuttle and limo services, but sees important competition from 6th place rival Lyft. Starbucks is making inroads with a more complete dining experience than just coffee service. Amazon is also catapulting on it’s known retail strength with more and more business users.

Other top ten companies expensed include travel-related carriers Delta Airlines, American Airlines, and National Car Rental. Familiar names rounding out the remainder of the leaders were Shell Oil, Walmart and McDonald’s. Hampton Inn, though not in the top ten, was the most expensed hotel chain. In food delivery, for those in-office working lunches, Grubhub continues to lead, but is threatened by fast-growing Uber Eats.

There are certainly exceptions to the low cost nature of reported business expense transactions, especially in long-lead or high dollar sales and service industries where wining and dining tradition still holds fast. Let your sales report and bottom line be your guide.

Need 2016 Q1 Consulting?

Consulting
Consulting

As Q1 2016 comes to a close in a few weeks, is your small or mid-sized business on track to achieve or exceed your strategic goals? Are there particular metrics that don’t measure up?

Are you driving revenues as expected with decent margins? Are you gaining profitable customers? Is cost control your only salvation to date? Are any new initiatives working?

Do you have links to your subsidiary functional plans that align so that your entire business is hitting on all cylinders? Is your communication process good at getting specific expectations to those colleagues that need to perform? Does everyone have “walking around” understanding of goals and objectives? Do they “buy-in”? In our experience, many planning processes are either too “elegant”, cumbersome or non-specific. Plans can fail if they don’t lead employees to the correct behavior every day.

Planning Maxim

“Doing the right thing is more important than doing things right”.

An independent consulting check-up can help determine if your internal planning, budget and operational reviews have identified material issues and any corrective actions that may be required. It may also uncover other factors that may be missed or are considered off-limits or sacrosanct.

Now may be the time for a fresh set of eyes. All too often, owners and managers are great cheerleaders for their business (as expected) at the expense of simultaneously being vigilant and fierce critics. It’s important to identify and mitigate any competitive weaknesses before your competitors or customers do.

As fabled GE CEO Jack Welch reportedly once said “change before you have to”.

The end result of a consulting evaluation may assure your company’s ongoing high performance results. Western Equity will consider consultative, interim, temporary, or part time senior engagements. Please contact us regarding your requirements.