House approves $125M boost for SBA

Last night, by a wide margin, the House of Representatives passed a $626 billion military spending bill. And tucked deep within that legislation — on page 149 of a 161-page document — is $125 million to resurrect the Recovery Act provisions that bolstered Small Business Administration lending.
Those provisions, which eliminate fees for the major S.B.A. loan guarantee programs and increase the guarantee for the 7(a) program to 90 percent, ran out of money in late November. According to the S.B.A., they’ve been responsible for $14 billion in loans to small businesses and have increased the weekly S.B.A. loan volume by more than 75 percent since last February. The defense bill extends them through February 2010.
The S.B.A. provisions are paid for by rescinding $128 million from the stimulus package to pay for digital television converter box coupons, a program that is now winding down.
As I mentioned, the bill passed overwhelmingly, 395-34 — no doubt in large part because the House then adjourned for the holiday last night. As National Public Radio’s Andrea Seabrook reported today, Republicans who might normally oppose such add-ons (among others: extensions of unemployment insurance and Cobra health insurance subsidies for people who’ve lost their jobs) did not object. “We think that that is perfectly acceptable,” said Bill Young, a Florida Republican. “In fact, I think it’s a good idea in some of the cases.”
In fact, more Democrats than Republicans voted against the measure — and curiously, among the 23 Democratic naysayers was one Nydia Velázquez, the mercurial chair of — wait for it — the Small Business Committee! An aide to Ms. Velázquez said she has “consistently opposed funding for the war,” but that wouldn’t explain why she voted in favor of the original defense appropriations bill, back in late July, which had much the same war funding but no S.B.A. funding.
The bill now heads to the Senate, which also passed an earlier version of the bill, and appears poised to pass this one as well. “The House is out, so essentially we have to pass the bill unamended,” said a spokesman for the Senate Appropriations Committee, noting that current funding for the Defense Department expires Friday at midnight. Look for a vote in the Senate by early Saturday morning at the latest.
With the House now on holiday, action on Mr. Obama’s broader proposals (see here and here) to bolster small-business lending will have to wait until next year.

Are You Sure You Want a Business Credit Card?

Are You Sure You Want a Business Credit Card?
By Lee R. Phillips

I have students asking about establishing business credit. It’s a myth. As a small business, real estate investor, or general entrepreneur you don’t have a prayer of establishing “business credit.” You will always sign personally for any “credit” your business gets.

The major competitor I had in do-it-yourself asset protection packages went bankrupt a couple of years ago. (Beware! His products are still out there being sold by a half dozen groups. The products are out of date and there is no support – in spite of what you are told.) His company was a ton bigger than mine. It was doing tons of seminars, and the back end sales were huge (ruthless). He had signed personally for all of the company credit cards. That’s the only way you will ever get a business credit card. When his company went bankrupt, he was on the hook for over $10 million. NOT HAPPY! (Not a good asset protection technique either.)

You actually shouldn’t have a business credit card. They are dangerous. Just use a personal card for everything and then pay it each month the way the IRS wants you to.
Your personal credit card is governed by the Credit Cardholders Bill of Rights, but those laws don’t apply to business credit cards. BIG RED FLAG!

Business cards are subject to the whims of the credit card company. The interest rates can be raised at will, even retroactively. Billing cycles can be changed at will. The rules just aren’t the same at all. The real threat a business card represents is the liability of fraud. You lose your card, and you are toast. With a personal card you are liable for $50, but with a business card there is no liability limit. You’re stuck, as a business and personally, because I will guarantee you have signed personally for the card.

So, don’t use a business card. Use a personal card. You will charge everything (personal and business) on the one card. But wait, you can’t comingle money and expect your corporate (LLC) shield to protect you. Comingling money is the number one no no. You’re not comingling money by charging the card. How you make the payment to the card is the issue.

When you get your credit card statement, go down the list and check each charge. (You should always do that anyway.) By each charge, write whether it is business or personal. In my case there are a number of companies, so I have to designate which company the charge applies to. Then add up the business and personal charges. Enclose two checks in the payment envelope; one from your business account and one from your personal account. The credit card company will cash each check and apply it toward the monthly bill. Sometimes we write half a dozen checks and put them in the same envelope.

The IRS actually wants to see the money coming out of each account. If you do it that way, there is no question you are not comingling money. Your asset protection shield is safe. Yes, you could cut one check to the credit card company and then reimburse yourself from your company, but just do the multiple check thing. You can follow the same concept if you pay online. You now have the protection of a personal card, your asset protection shield is intact, and the IRS is happy. Don’t you love a happy IRS?

For other asset protection information and articles of interest, check out my website at www.phillipsassetprotection.com.

To Your Success,

Lee Phillips
LegaLees Corporation
556 East 1400 South
Orem, UT 84097
800-806-1998

Another $1 billion in small business credit vanishes

By Catherine Clifford, staff reporterDecember 16, 2009: 5:42 PM ET
NEW YORK (CNNMoney.com) -- The small business credit crunch is still deepening: Major banks cut their small business loan balances by another $1 billion in October, according to a Treasury report released late Tuesday.
The 22 banks that got the most help from the Treasury's bailout programs have decreased their small business lending by a collective $11.6 billion since April, when the Treasury began requiring them to file monthly reports. The banks' total lending has fallen 4.3% in that six-month period, to $257.7 billion.

When loan and credit lines dry up, small businesses have trouble launching, expanding, and funding their daily operations. President Obama met Monday with CEOs from a dozen of the nation's biggest banks to pressure them to do more to rebuild the economy they helped blast apart.
"We expect some results," Obama told the bankers. "I'm getting too many letters from small businesses who explain that they are credit worthy, and banks that they've had a long-term relationship with are still having problems giving them loans."
President Obama is planning another banker gathering next week. On Tuesday, he'll host a discussion with representatives of several community banks, according to a White House spokeswoman. The White House has not yet made any additional details available about the meeting and its agenda.
'Wait till next year': Banks are beginning to respond to the heat they're getting from administration officials. Bank of America (BAC, Fortune 500), which whittled its small business loan balance down further every month since April, said Monday that it will loan $5 billion more in 2010 than it did this year.
In the past six months, the bank has reduced its outstanding small business credit balances by $2.6 billion, a 6% decline.
Wells Fargo (WFC, Fortune 500) also pledged to be more active next year.
The bank has clipped a bit more than $3 billion off its loan portfolio since April, a 4% drop. But at $73.5 billion, its small business loan balance dwarfs that of any other bank, and Wells Fargo was the top lender this year through the Small Business Administration's primary loan program.
Next year, the bank will increase its new loan originations by 25% over 2009 levels, to $16 billion, according to Marc Bernstein, a Wells Fargo executive vice president and the head of its small business unit. Wells Fargo is on track to make about $13 billion in new loan originations in 2009, he said.
Like many banks, Wells Fargo says it's had a tough time lately finding creditworthy borrowers. Sales are down for most businesses, and depressed property values means business owners have less equity to borrow against in their homes and other assets.
"It just wouldn't be responsible to lend more money to those people as they are struggling to make their existing payments," Bernstein said of his bank's shrinking loan portfolio. "We want to make as many loans as we possibly can, but we require a reasonable likelihood that it is going to be repaid."
The bank is forecasting a lending pickup next year because it's optimistic about economic recovery. "There have been very clear improvements over the last six months," Bernstein said.
JPMorgan Chase (JPM, Fortune 500) is also hopping on the bandwagon. The bank said last month that it will increase its small business lending by up to $4 billion in 2010 -- though much of that may come through its new Ink line of small business credit cards. The bank said it will hire 325 additional small business specialists to work with customers and source new business.
Other efforts in limbo: President Obama's administration has been trying all year to revive the small business credit market. Most of the initiatives are currently either stalled or out of gas.
In October, Obama unveiled a collaborative effort between the Treasury Department and the Small Business Administration to make capital cheaper for community banks. The administration wants to use the Treasury's Trouble Asset Relief Program (TARP) funds to make ultra-low-interest loans to banks that will use the money to expand their small business lending.
But nearly two months after Obama's announcement, the Treasury is still hashing out the details. "We expect the program to kick off very soon," Treasury spokeswoman Meg Reilly said.
Meanwhile, a popular Recovery Act measure to boost the Small Business Administration's loan programs has run out of money and awaits Congressional action to replenish its funding pool. More than 700 SBA loan applications, totaling $390 million, are in the queue and on hold.
Washington's policymakers are attacking the lending problem from multiple directions, but haven't yet gained traction.
"This is a very hard problem to solve," Treasury Secretary Timothy Geithner said at a small business lending forum in Washington last month. Speaking to a room filled with small business owners and lenders, Geithner was candid about the struggle.
"It's not something we can easily fix," he said. "It takes a coordinated mix of different strategies and policies."