Category Archives: In The News

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

Made IN AMERICA – 2.0

It’s both amazing and disheartening to see the politicizing of a Covid 19 pandemic that has rocked the USA and the world. Too many politicians place getting elected above problem-solving from what amounts to serious bio-medical warfare, intentional or otherwise . Clearly, too, they’ve shifted the more important attention away from the real culprit in this ordeal. Their immediate focus should be on assuring that another pandemic is not on the horizon. Nor should stated adversaries be allowed to finance their nefarious strategies through business wealth that we have negotiated away over the years.

It is difficult to fathom the nonchalance and outright belligerence of the Chinese government. Not only do the Chinese discount any claim of responsibility, but they continue to attack on many different fronts ranging from regional territorial grabs, to human rights, to intellectual property thefts and espionage. Oh, and hoarding medical grade masks and other PPE.

Critical American manufacturers, including pharmaceutical companies, should immediately onshore every product made there. Any other company that is involved in a defense-capable or critical technology industry-related venture should be required to produce here if they choose to remain a USA-domiciled corporation. National security and patriotism isn’t an option. A case can be made that the U.S. Defense Dept. should play a bigger role in deciding what goods and services are allowed to be made abroad.

Free traders forget fair trade. Nothing is fair about the current imbalance with China. At a minimum, they have outflanked our government trade negotiators. They only take enough non-strategic goods to satisfy our modest export quotas, like agriculture products and cars, while reverse engineering all of the more valuable and critical technology we allow there. And try and get these Chinese government-owned companies to export their valuable resources, like the rare earth minerals that are vital to much of today’s technology. All in all, American companies that export technologies or manufacturing processes that threaten our way of life, health and national security need to be brought back home. And that return would also provide both capital and opportunity for our entrepreneurs and small businesses.

The old mantra of free markets and global trade is just that…old. The U.S. must restore a legacy of controlling its own destiny and ability to guard against any and all threats domestically and around the world if it effects American interests. That’s not to say we need to be the sole 1960’s Cold War Era world cop. What’s required is overwhelming domestic-made defense materiel capability and enough deployment flexibility to smother any attempt by rogue countries to sponsor violence and terrorism as they see fit. Another long overdue initiative is to prevail on so-called allies, most notably the French, Germans and Swiss that allow their military and companies to continue to arm and aid many of the most despicable worldwide terrorist groups and regimes.

Many investor and shareholder- beholden U.S. companies will complain about cost disadvantages of bringing home our manufacturing prowess. They forget the fact, as we’ve noted in earlier posts, that virtually every good or service made in a Far East country came from here originally or was copied or taught by U.S. providers after WW II. They ignore the reality that this economic transfer has significantly eroded a good share of middle class wealth. True, cheap imports lessen the supply-side cost of buying a good or service, but lesser wages paid in replacement alternative jobs, similarly lessens what consumers can buy. Consumption ability counts at least as much as supply and it behooves the U.S. to regain a bigger share of worldwide production. Not a good net/net trade-off that sends a healthy chunk of our economic output elsewhere. Who would have guessed that a formerly poor, largely agrarian economy like China would now have more billionaires than the U.S. in the space of 25 years or so. And possess state of the art technology and manufacturing production that we largely “gifted” away.

This loss of manufacturing and technology capacity to overseas providers exacerbates the other major deflator to future U.S. economic growth. The brilliance of technology on all fronts has more than halved the number of people and mid to high wage jobs needed to perform a wide variety of functions and tasks. This one-two punch of offshoring wealth and settling for more modest wages has to be addressed and reversed. When you combine preserving the prosperity of the American way of life with critical national defense and the peaceful protection of people around the world, why would you choose to do otherwise?

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.

made in america – part 2

Here’s an excerpt from our Blog Post dated January 2, 2015. Lastly, at some point, our government and the macro-business community needs to realize that depending on others, particularly China, a devious business partner at best and a self-avowed U.S. foe, is a not only a shortsighted business strategy, but one that has much broader national security implications as well. Again, hearkening back to our WWII lessons, having an ever-ready, flexible, and potent manufacturing infrastructure at hand meant the difference between victory and defeat. That is no less a potential consideration in today’s rapidly deteriorating socio-political world climate.

Unfortunately, our admonition of 5 years ago is proving accurate. Clearly, going forward this offshore-derived Covid 19 pandemic demonstrates the material risk in relying on other countries, particularly the forever-adversarial China.

We will likely overcome what we presume is a serious, but temporary, health and economic disaster that may take 12 to 24 months to run its course. During this time, it is incumbent on both our government and corporate businesses to onshore all vital manufacturing processes and products. There’s nothing being produced today in the Asian-based region that wasn’t first created, invented, and made in the USA. Such a fundamentally sound move will restore a great deal of US prosperity and, decidedly, bolster US security on several fronts.

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.

US Sees 77 Million International Travelers in 2017

International Travelers
International Travelers

The number of international travelers rose slightly in 2017 to 76.9 million. Spending by these visitors hit a record $251.4 billion according to the U.S. Dept. of Commerce. While the number of international travelers was down slightly from 2015’s all-time high of about 78 million, the strength of visitor numbers helped allay travel industry fears about heightened federal government border and travel ban security policies.

These numbers showed a decided shift in the origin of international visitors as double digit increases in South Korea, Brazil, and Ireland offset not surprising reduced visits from Mexico and the Middle East. Mexican travelers totaled 17.8 million down from 2016’s 19 million, but still represented the U.S.’s number one source of cross-border travelers.

U.S. Travel, a travel industry trade group, noted that U.S. share of total international travel declined from 13.6% in 2015 to a forecasted 12% this year. They also are seeking an expansion of the U.S. visa waiver program beyond the current 38 countries as a means of spurring additional American visits. Under this plan, visitors need only present a passport from their host country to enter the country. South Korean visits jumped after that country was added to the list of visa-exempt nations.

U.S. Manufacturing Global Update

US manufacturing dominates
US Manufacturing

While traditionalists lament the apparent decline of our domestic manufacturing capabilities in today’s global environment, a recently-released  Brookings study found that our overall output standing has not changed precipitously since 1970. True, we have fallen to second behind China in total output, but, interestingly, they absorbed the most-labor intensive processes to grow their capabilities. This is evidenced by their 2015 20% global market share requiring a reported 129 million workers at a time when our U.S. 18 % share employed a much more efficient 16 million, down from 1970’s all-time highs of about 20 million jobs.

A national economic strategy should be to cherry-pick back the most attractive jobs that were likely offshored over the past several years which would also help regain the top spot in output.  The Trump presidency has shown more interest in reclaiming the manufacturing sector than the prior administration that saw job growth largely occur in the governmental and service sectors.

Clearly, the U.S. has invented, grown and retained the most technically efficient manufacturing processes and industries in the world. In many ways, China is at a point where the U.S. was decades ago. Going forward, it’s important that we protect our most valuable U.S. intellectual property. Equally important is our U.S. cultivation of entrepreneurs and tech-savvy small businesses to further grow tomorrow’s manufacturing innovations . This will ensure our continued dominance on the world productivity stage, and give us added protection in a rapidly confrontational international world of nations.

Smartphones, Social Media, Facebook, Oh My!

If you examine 10 year trends in consumer marketing searches, whether TV, radio, print, internet, or mobile devices, not surprisingly the fastest rising sector is PDA’s. An Edison Research consumer survey indicates that, for the first time, more people view the internet as more important to them in their daily lives than TV.  Traditional media like TV and radio, while still leaders in total views,  have not shown any material growth during that time frame. Over 135 million of Americans have smartphones. Their utilization is more than 14 times that of a desktop computer. B2C mobile sales now account for about 15% of ecommerce sales.  As highlighted in other Western Equity LLC blog articles, your business needs to prepare for on the go PDA-enabled marketing and selling.

Facebook is still the dominant player in social media with an over 50% share of social media use. Twitter and LinkedIn follow at less than 20% each. Content marketing is still key over advertising. Content that works best are social posts and updates, newsletters, and specific articles. Users tend to rely on new content first before looking at marketing add-ons. Twitter continues to make giant inroads in mobile marketing. Don’t ignore that growing audience.

If you want more information on this or related analyses, please see the 2013 Infinite Dial Report created by Edison Research or an article by Patricia Redsicker at Social Media Examiner. Good Stuff for the small business looking to expand their business.

Will Your ECommerce Sales Be Subjected To State Sales Taxes?

Earlier in May, the U.S. Senate passed the Marketplace Fairness Act that has as its aim sales tax collection from all internet site purchases. The U.S. House of Representatives has not yet acted upon this bill.

Until now, online shoppers have enjoyed buying items from ecommerce sites largely sales tax free. Most existing state tax laws only impose tax collection responsibilities on businesses that have a physical presence in that state, such as a retail store or warehouse distribution location.

Many retail associations like the National Retail Federation endorse the plan. Big internet sales sites such as Ebay oppose such collections.

2012 internet sales exceeded $225 billion, so forecasted tax revenues could approach $20 billion. There are plenty of persuasive and powerful pros and cons to this argument. Stay tuned.