October 11, 2012



News Briefs

  1. Payment System Switch to Cause Billions in Costs from Electronic Payments
  2. Small Business Lending Up among SBLF Banks, Trend Expected to Continue
  3. Agriculture Issues Starting to Hit Companies Hard
  4. Ex-Im Seeks Expansion in Vietnam
  5. Commercial Bankruptcies Down 22% through Three Quarters of 2012
  6. Trade Credit Fraud, Corporate ID Theft Not the Only Ones for Credit Professionals to Combat

 

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Payment System Switch to Cause Billions in Costs from Electronic Payments

Change often does not come without its fair share of pains. If a new report analyzing the move to the Single Euro Payments Area (SEPA) system over the next few years is accurate, those pains could be costly for European-based businesses, not to mention problems for those supplying them with goods and services on credit.

Research by Experian's United Kingdom offices found that at least 12% of electronic payments made to and from European-based businesses contain some form of data error. With the implementation of SEPA on the way in 2014 for European Union members and 2016 for those making or receiving payments electronically in euros, the speed and efficiency of payment transfers could be destroyed in a series of delays. Experian estimated that payment errors associated with the SEPA switchover could end up costing EU businesses in excess of 20 billion euros per year, and a business with 100,000 accounts, for example, upwards of 600,000 euros per year.

"The SEPA initiative is a key component to strengthening the financial foundation of the euro zone with improved and more efficient end-to-end, straight-through processing of payments. While SEPA will undoubtedly benefit organizations trading in euros, errors in bank account details held by European businesses risk causing significant teething problems as locally-implemented fixes are made redundant by the new common payments system," said Experian Director of Payment Strategy Jonathan Williams. "Businesses need to analyze their account data, fix any errors and convert this information in the correct SEPA standard to ensure suppliers, partners and staff continue to get paid on time when the new rules take effect. Early adoption is crucial."

- Brian Shappell, CBA, NACM staff writer

How's the Month Going for You?

Publications like the Wall Street Journal, Bloomberg and Businessweek want to know!

The monthly Credit Managers' Index, as reported by you, clues everyone into what's happening and about to happen in the economy. Reinforce the importance of the credit function, and help yourself. The survey only takes a few minutes to complete and builds toward recertification points.

The next survey is open October 15-19! Simply go to http://web.nacm.org/cmi/cmi.asp at any point during these dates.

Need a reminder? Sign up for the CMI reminder email, sent when the survey opens each month.

Small Business Lending Up among SBLF Banks, Trend Expected to Continue

The U.S. Department of the Treasury issued a report this week indicating that banks receiving capital from the agency's Small Business Lending Fund (SBLF) have markedly increased their small business lending. In total, SBLF-supported banks have increased their lending by $6.7 billion over a $36 billion baseline, and by $1.5 billion over the prior quarter.

The SBLF was established as part of the Small Business Jobs Act, signed into law in 2010. By incentivizing certain types of loans made to certain types of customers, the fund encourages community banks to increase their lending to small businesses in order to jump-start company growth. Overall, Treasury invested more than $4 billion in 332 institutions through the SBLF.

"Today's report is further indication that the Administration's Small Business Lending Fund is continuing to help create an environment in which entrepreneurial small businesses can succeed and excel," said Deputy Secretary of the Treasury Neal Wolin. "Banks in the SBLF program continue to show large increases in the lending available for small businesses to grow, create jobs and support families in communities across the country."

In its quarterly use-of-funds report, the Treasury also measures loan performances of SBLF banks in comparison to a control group of non-SBLF banks, showing a sharp contrast. SBLF banks have increased business loans outstanding by a median of 27.4% over baseline levels, versus a 0.4% median increase for the control group. Business lending among SBLF banks has also outshined that of their non-SBLF counterparts across median measures of size, geography and loan type as well.

Although typically an issue of perennial concern, lending to small businesses has been on the rise in recent months, and the trend is expected to continue. According to the Fair Isaac Corporation's (FICO's) most recent quarterly survey of bank risk professionals, respondents, by more than a two-to-one margin, said that both the approval rate for small business loans and the total amount of credit extended to small businesses would increase rather than decrease over the next six months.

- Jacob Barron, CICP, NACM staff writer

For more on the FICO quarterly survey, visit http://blog.nacm.org/.

NACM-Canada 14th Annual Conference Opens in Two Weeks

On October 25-26, the Crowne Plaza Toronto Airport Hotel will host NACM-Canada's 14th Annual Credit Conference and Expo.

Proudly featuring keynote speaker Peter Hall, economist for the EDC, this conference offers these other expert-led sessions to aid in your continuing professional development:

• Differences between Common Law and Civil Code As It Applies to Commercial Credit
• Productivity Enhancements: Making Good Great
• Connect Your Way to Success
• Social Media Strategies for the Credit Professional

For more information on the conference, click here.

We look forward to seeing you in Toronto!

Agriculture Issues Starting to Hit Companies Hard

The Chapter 11 filing of California-based Zacky Farms, LLC may seem pretty run-of-the-mill, but it could foretell a rash of problems from the fallout of droughts in the United States and abroad if repeated for more than one season.

As noted in the August 2 edition of eNews, the spring and summer drought that plagued America's heartland, as well as farming districts in nations like Russia, among others globally, seriously affected crop yields. It was also noted in the Credit Managers' Index for August that a domino effect leading to higher domestic food and fuel costs that struggling businesses can ill afford wasn't far behind. Enter Zacky Farms.

Proprietors of Zacky Farms, which filed for bankruptcy protection this week in Sacramento, noted the company is dealing with escalating losses due to historically high feed prices caused largely by the poor corn crop, and resulting high prices for what did make it through the poor weather conditions. As such, Zacky's turkey and chicken business operations endured significant losses in recent months.

Summer editions of the Federal Reserve's Beige Book economic roundup found that its Chicago, Kansas City and Dallas districts were showing widespread reports of stressed crops because of excessive heat and drought conditions. The hardest hit was corn, which is used in everything from cattle feed to ethanol production. Fed and NACM experts have noted that insurance is common for important crops like corn, but the bleed-over effect could have a dangerous impact on margins as well.

The hope is that the good farm income year of 2011, and the years leading up to it, created sufficient financial reserves to help more companies than not in the United States survive a one-year blow. But, as a several studies have noted, food prices are on pace to set new global records by next summer.

- Brian Shappell, CBA, NACM staff writer

For more on the present conditions in the agriculture sector, as well as manufacturing and others, as reported in the Beige Book from the Federal Reserve released this week, visit http://blog.nacm.org.

MLBS Workshops

Liens & Bonds: Managing the Process from a National Perspective

And...

UCC Filings and the Best Possible Position to Get Paid

Tuesday November 13, 2012
8:00am–12:30pm and 1:00–3:15pm, Philadelphia, PA

Click here for more information and to register.

Ex-Im Seeks Expansion in Vietnam

Though the Export-Import Bank of the United States (Ex-Im) has identified Vietnam as one of its nine key markets, the proportion of U.S. exports to the country remains disappointingly low. In Fiscal Year 2011, for example, Vietnam accounted for $185 million of Ex-Im's credit exposure, representing a drop in the bucket considering the size of the bank's multi-billion-dollar portfolio.

Wednesday, however, Ex-Im began a series of trade finance seminars in cities throughout Vietnam as part of a "roadshow" designed to boost U.S. exports to the region. The seminars, scheduled in concert with the American Chambers of Commerce of Ho Chi Minh City and Hanoi, Vietnam's two largest cities, are designed to publicize the availability of export financing to Vietnamese companies and hopefully allow U.S. sellers to gain more of a foothold in what many expect to become an important market for the U.S. in years ahead.

"We are excited about the growth opportunities in Vietnam and want to see companies tap into Ex-Im Bank for their financing," said Ex-Im Bank Chairman and President Fred Hochberg. "Our exports will help grow jobs both in the United States and Vietnam."

Earlier this month, Ex-Im also approved a $118 million direct loan to the government of Vietnam for the export of a Lockheed Martin Space Systems Company telecommunications satellite, representing the bank's first satellite transaction with the Vietnamese government and the infrastructure-oriented nature of the kind of business opportunities Vietnam offers exporters. "These opportunities promote economic growth in both countries, which in turn supports American jobs in vital U.S. industries," said Hochberg. "The satellite transaction in particular reflects the unsurpassed quality of American technology and the demand for it abroad."

Approval of transactions to Vietnam are somewhat complicated by a lesser-known element in Ex-Im's charter that requires presidential approval for any loan of $50 million or more to a Marxist-Leninist country. Barring a change to the charter, Ex-Im could only consider the recent satellite transaction, and any future large transactions, after having received the president's permission.

In addition to infrastructure needs, Vietnam also offers new opportunities to the U.S. agriculture sector due to an increase in demand for and consumption of food products. The country's gross domestic product has remained above 4% for all of 2012, hitting 5.4% in the third quarter.

- Jacob Barron, CICP, NACM staff writer

NACM's Distressed Business Services

Many NACM Affiliates are part of a national network that provides assistance in the rehabilitation or liquidation of businesses in severe financial difficulty.

While courts can take several months or more to start a reorganization plan, NACM Affiliates can assist in getting a plan approved in as little as 30 days. Experienced professionals are ready to step in at the most difficult time. NACM Affiliate staff members can serve as secretary to creditors' committees, provide other needed advisory services and are fully aware of the prevailing laws and regulations relevant to each situation.

Click here to learn more about NACM's Distressed Business Services.

Commercial Bankruptcies Down 22% through Three Quarters of 2012

Commercial bankruptcy filings for the first three quarters of 2012 fell by 22% compared to their 2011 counterparts, according to the American Bankruptcy Institute (ABI).

Through the end of September, there were 44,750 commercial filings, marking a sharp drop from the 57,613 filings during the same period in 2011. Chapter 11 filings also fell during the first nine months of 2012, as the 5,889 filings represented an 11% decrease from the 6,627 Chapter 11 filings during the same period in 2011.

All in all, bankruptcy figures continue to decline as total filings for the first three quarters of the year fell by 14% to 921,219, down from 1,073,021 during the same period a year ago. "We remain on pace for the lowest total bankruptcies since before the financial crisis in 2008," said ABI Executive Director Samuel Gerdano. "Sustained low interest rates and weak consumer spending will continue to slow bankruptcies through the end of 2012."

On a monthly basis, September 2012's total of 87,492 bankruptcies indicated a 21% decrease compared to the 110,410 filings in September 2011. Total commercial filings fell even faster, with September 2012's 4,021 filings representing a 30% decrease from the 5,772 filings in September 2011, and Chapter 11 filings registered a 25% drop with 693 filings in September 2011 falling to 523 last month.

The same five states with the highest per capita bankruptcy-filing statistics, representing total filings per 1,000 population, remained at the top of the list with Tennessee (6.98), Nevada (6.84), Georgia (6.51), Utah (5.99) and Alabama (5.92) all remaining well above the national average of 3.97.

- Jacob Barron, CICP, NACM staff writer

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Employment Connections for the Business Credit Community

Trade Credit Fraud, Corporate ID Theft Not the Only Ones for Credit Professionals to Combat

As noted in last week's eNews, credit payment fraud continues to be a thorn in the side of today's credit manager. And while keeping a wary eye on these developments is critical, that doesn't mean taking an eye off the non-credit-related schemes is by any means a good idea. This is especially so while on business travel.

Case-in-point, one of NACM's own members was unfortunately stung by a hotel scam while attending the recent NACM All South Credit Conference in Nashville. This is a tale that all traveling credit professionals should read and heed.

The scam is simple, yet nefariously effective. The scammer simply calls the front desk and asks to be connected to a certain room, often very early in the morning before the guest is even out of bed and thinking clearly. The scammer then identifies himself/herself to the guest as a front desk employee who noticed a problem with the guest's credit card upon check-in, and needs the information again. There are hundreds of recently reported instances nationwide where, perhaps because groggy or perhaps because it seems like a logical request from what is believed to be a hotel employee, the guest gives the credit card number, security code on the back and expiration date—everything a criminal needs to then make fraudulent purchases on the guest's account.

In such a situation, it is suggested that such requests be handled face-to-face with the hotel's front desk staff. It just might unearth a scheme and save you from being another credit card fraud statistic while on business travel.

- Brian Shappell, CBA, NACM staff writer

 

To view past eNews issues or to visit the NACM Archives, click here.

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