December 22, 2009
As a turbulent 2009 winds to a close, credit professionals and their companies are gearing up for what they hope will be a greatly-improved 2010. Still, despite the positive indicators poking their heads out of the economy's many nooks, many finance and risk managers remain wary, as illustrated by the results of NACM's October 2009 survey.
The survey asked respondents to choose up to three of their greatest concerns for the coming year, and while the results were similar to the 2008 edition of the survey, they reflected some notable differences in the minds of the nation's credit professionals:
Looking forward to 2010, as a credit professional, what are your biggest concerns?
1 - The state and future of the economy (74%)
2 - Slow pay or delinquencies (55%)
3 - Larger customers increasingly dictating unfavorable terms (43%)
4 - Your job security (23%)
5 - Your company's perception of the credit department as a cost center (12%)
6 - Compliance with pending and current regulations, including the FTC's "Red Flags" Rules (10%)
7 - Implementation of a new technology, such as a credit scoring model or ERP system (8%)
8 - Other (7%)
9 - Relationships with other company staff (4%)
Just as it was in the 2008 survey, the economy is still viewed as the largest concern as businesses wait to see if GDP growth will dip back into the negatives or remain positive as it has since October. The survey also shows that customers are wary of economic recovery and that slow payments and unfavorable terms have further entered the minds of credit professionals.
For a full wrap-up of what the B2B credit industry expects for 2010, check out the domestic feature in the January issue of Business Credit magazine. While the survey results offer a quick glimpse into the mood of the sector nationwide, taken together with the comments from respondents, they present a much more thorough look into the unique pairing of uncertainty and optimism currently adding a stressful weight to the credit world's already heavy workload.
To learn more about Business Credit, or to subscribe, click here.
Jacob Barron, NACM staff writer
The 2010 NACM-National Honors & Awards Program
Do you know someone who...
» inspires, challenges and teaches you?
» sets a standard for excellence and integrity?
» deserves recognition for exceptional contributions and commitment?
Nominations are being accepted in the following categories:
* National Credit Executive
* CBA, CBF and CCE Designation of Excellence Awards
* Mentor of the Year
* Student and Instructor of the Year Awards
The nominations deadline is January 8, 2010. Visit NACM's Honors & Awards web page for details on nominating a remarkable credit professional for a national award.
"We're in a time of economic uncertainty," said Bruce Nathan, Esq. "The recession is over, the economy is projected to grow, but there's still a lot of uncertainty as to whether or not we'll have a double dip."
Figures from the Department of Commerce have signaled the official end to what has been referred to as the "Great Recession," but, as Nathan noted, business conditions and lending have remained so stubborn that a second dip into economic trouble doesn't seem out of the question for many companies. "The commercial real estate market may fall," he added. "Bank lending has dropped 28% in the third quarter of 2009 alone and that just continues the credit crunch that started in the fall of 2008."
In addition to tightened lending, bankruptcies have also experienced meteoric increases, with Chapter 11 filings rising 68% over the last year.
This being the case, companies have had to take even greater care to protect themselves in the increasing likelihood of a customer's bankruptcy. In the most recent NACM teleconference, entitled "Dealing With a Troubled Company: No Need to Cry the Blues!," Nathan offered a wealth of legal defenses and practices to help creditors stay safe when their customers become risky.
One of the more important things to remember in a bankruptcy proceeding is where each type of creditor falls in the pecking order. "Your claims are segmented based on a hierarchical distribution in the Bankruptcy Code," said Nathan. "The secured creditors are on top, whether they're the lender or secured lenders of a purchase money security interest, or creditors with state law lien rights, etc."
Unsecured creditors tend to be on the bottom, a position that carries many potential risks, despite the fact that Chapter 11 debtors will often attempt to rely on these creditors to see them through the proceedings and further extend credit. "Any of you being asked to extend credit in Chapter 11 are told 'don't worry, you have an administrative priority claim,'" said Nathan, noting that to get the trade credit, debtors will assure their suppliers that any credit given to them will eventually be repaid. "The problem is there are other categories of administrative claims and there is a risk that after the secured creditors are paid in full there may not be enough to pay the admin claims." Citing the bankruptcy of Ames Department Stores, Inc. earlier in the decade, Nathan noted that there aren't necessarily any guarantees despite what a debtor might promise. "The Ames Case still hasn't paid their administrative claims after something like eight years," he said.
Nathan went on to discuss how to use specific defenses and other security devices to greatly increase a company's chance of payment on its claims.
Jacob Barron, NACM staff writer
The Latest on 503(b)(9)
The passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005 created a safety net for unsecured goods sellers in the form of the 503(b)(9) 20-day administrative priority claim. However, since its addition to the Bankruptcy Code, various court cases and judges nationwide have redefined exactly what it means to hold one of these claims. To learn more about the competing ideologies and interpretations of this important section of the Code, join Deborah Thorne, Esq. for the next NACM teleconference, "The Latest on 503(b)(9)," on January 11, 2010 at 3:00pm EST. Thorne will discuss how creditors can best document their claim and how the claim relates to drop shipping, preference exposure and other items.
To learn more, or to register, click here.
A new bill proposed in New Jersey would adjust the state's lien laws to better serve the construction industry and its various participants.
The legislation revises the state's Construction Lien Law, which was originally passed in 1993, and in addition to clarifying certain terms pertaining to the meaning of "residential," also clarifies, and in some cases rearranges, procedures for the filing and amending of a lien claim as well as the calculation, distribution and enforcement of the lien fund. Other provisions amplify measures in the original law that govern the discharge of satisfied liens, codify court holdings on subjects like contract price, lien fund and lien claim, and further define the role of arbitrators in residential construction contract lien arbitrations.
The legislation was originally introduced in the State Assembly by Deputy Speaker Patrick Diegnan Jr. (D). While the state's legislative session is nearing its end and action on the bill isn't expected until after the New Year, a search continues for a Senate sponsor.
To follow the bill, numbered A4319, visit the New Jersey state legislature's website at www.njleg.state.nj.us. To learn more about NACM's MLBS, which provides up-to-date information on every state's lien and construction laws, click here.
Jacob Barron, NACM staff writer
MLBS Offers Complete Lien and Bond Services and More
NACM's Mechanic's Lien and Bond Services (MLBS) brings best-in-class service options to today's construction credit professional.
MLBS' Lien Navigator is a web-based service that provides up-to-date information for all 50 states and Canada, including notice, lien, payment bond and suit timelines, procedures and other relevant information in a state-by-state/province-by-province format.
MLBS also offers two preliminary notice to owner (NTO) services, deadline tracking, a lien and bond filing program and a suit against bond and foreclosure service. Both NTO services include, at no additional charge, a Next Action Notification Email. These reminders are sent automatically to ensure that your lien and suit deadlines are met during each step of the lien process.
For more information on NACM's MLBS, click here.
A trio of bills recently introduced in the Senate would aim to enhance small business participation in international trade and increase the sector's access to working capital.
The Small Business Trade Representation Act (S. 2861) would permanently establish an assistant U.S. trade representative for small businesses, in order to give the sector a more pronounced voice in trade policy considerations, and the Small Business Export Enhancement and International Trade Act (S. 2862) would establish an associate administrator at the Small Business Administration (SBA) for international trade, increase the number of SBA export finance specialists and raise the maximum amount of an international trade loan or export working capital program loan from $2 million to $5 million.
On the domestic side, the Small Business Job Creation and Access to Capital Act of 2009 (S. 2869) would increase the small business loan limit to as high as $5.5 million and extend the fee eliminations and increased guarantee set to expire under the Recovery Act for another year.
All three bills were jointly introduced by Senate Committee on Small Business and Entrepreneurship leaders Mary Landrieu (D-LA) and Olympia Snowe (R-ME).
"Our nation's small businesses have created 64% of all new jobs in the last 15 years, yet in the last year nearly 85% of the jobs lost have come from small businesses. Now that we have stabilized Wall Street, it is time to jump-start Main Street, and that begins with implementing the vital provisions within this bill," said Landrieu, referring to the Small Business Job Creation and Access to Capital Act. "The loan limit increase could boost SBA lending by $5 billion next year alone, while the refinancing component of the bill could help save 60,000 jobs. To ensure small businesses are able to grow and continue being the job creators they have historically been, we must make these needed changes." The refinancing component mentioned by Landrieu is a provision in the bill that would allow businesses to refinance short-term commercial real estate debt into long-term fixed rate loans through the SBA's 504 loan program, its second most-popular behind the 7(a) program.
As exports and international trade have been a fairly consistent bright spot in an otherwise grim economy, Landrieu and Snowe have been eager to get smaller firms involved in the global market, and aim to do so with both the trade representation and export enhancement acts. "Small businesses face particular challenges in exporting, and the bills that Chair Landrieu and I have introduced will take great strides toward ensuring their greater participation in international trade," said Snowe. "By improving and bolstering critical Small Business Administration (SBA) lending and assistance programs, we will be giving our nation's entrepreneurs a helping hand in surviving, diversifying and competing effectively in the international marketplace."
The more domestically-oriented of the three bills, S. 2869, has already garnered a uniformly-democratic group of 12 cosponsors in addition to Landrieu and Snowe.
Jacob Barron, NACM staff writer
Things Are Looking Up, But Don't Let Up in Getting Paid
Collect your past-due accounts, large or small, as quickly as possible through the NACM Affiliate Collection Services. Our departments are firm, but fair, with your customers. The primary objective is to collect your money.
Our Affiliate collection departments have tried and true steps in notifying your debtor and making immediate demands for full payment. If direct personal contact is appropriate, we have many resources, including the ability to draw on all of our other Affiliates nationwide. When necessary, we will forward an account to one of the bonded attorneys in our legal network. We exhaust all collection possibilities before recommending litigation to you. All funds collected are placed in separate trust accounts.
NACM Affiliate collection services include:
• Letter Services
• 10-day Demand Service
• Action and Litigation
• Litigation Service
• Status Reports
Click here to learn more about NACM Affiliate Collection Services.
New Poll Reveals One in Five Corporate Executives are Concerned Their Companies Are Breaking the Law
A poll commissioned and recently released by a project initiated to serve the interests of high-level corporate executives who are concerned about the ethical conduct of their corporation has exposed a concern among one out of every five corporate executives of publicly traded companies that their own companies "do not comply with federal, state or local laws." Further, two out of every five executives reported a concern that corporate leaders "put narrow short-term goals ahead of the long-term benefit of the company." The poll, commissioned by Voices for Corporate Responsibility (Voices), was conducted by Harris Interactive.
According to poll results, 22% of those responding answered "yes" to the question: "Have you ever been concerned that the actions of a company that you have worked for either now or in the past do not comply with federal, state or local laws?"
"What we are seeing is a crack in the confidence level of corporate executives who at one time may have believed that their company could do no wrong," said Reuben Guttman, G&E partner and co-founder of Voices. "Now, as short-term corporate decision making has led to layoffs of even high level executives, these employees are perhaps beginning to look at things differently."
"It is disturbing that 22% of the respondents believe that their own companies may be breaking the law," said Cyrus Mehri, partner at the law firm of Mehri & Skalet, PLLC and co-founder of Voices "Skirting the law may just be business as usual, but sadly the impact can be devastating to consumers, employees and shareholders."
According to the poll, 42% of those responding also answered "yes" to the question: "Have you ever been concerned that a company that you have worked for either now or in the past put narrow short-term goals ahead of the long-term benefit of the company?"
"This finding provides some insight into a root cause of our nation's financial crisis," said Jay Eisenhofer, Managing Partner at Grant & Eisenhofer, and co-founder of Voices. "When corporate directors and officers are motivated by compensation plans that reward them based on the short-term performance of their company, the long-term health of a corporation and ultimately employee job stability is often sacrificed."
Majorities of 68% or more also answered "yes" to the following questions:
— Do you believe that unethical practices regularly take place in corporations? (70%)
—With regard to the credit crisis, do you believe that senior executives in the financial services industry understood the potential consequences of their conduct? (68%)
—Do you believe that wrongdoing by senior executives led to the credit crisis? (74%)
Source: Voices for Corporate Responsibility
Look for the "A" Players
You need the "A" players. They're the most qualified—the most productive people—in your organization. And, for any open positions you have, you need them fast because any interruptions in staffing can mean missed deadlines, a breakdown in operations and loss of productivity—consequences you can't afford.
You'll find the "A" players at Careers in Commercial Credit, Collections & Finance (C4F), the online resource for the people who are educated and experienced in your related field, and who are looking for the opportunities you can provide.
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C4F: Employment Connections for the Business Credit Community
It was the night before the recession and all through the country,
Not a vendor, banker or customer was stirring, all were quite "comfy."
Mortgages were processing, financing easy and no unemployment to bear,
There were hopes that prosperity would always be there.
Credit managers, bankers and brokers were all "smug" in their beds,
While visions of more profits danced in their heads.
The farmers were dancing on ethanol dreams,
The price of corn would surely keep climbing it seems.
While out on Wall Street, there arose such a clatter,
And then Main Street suddenly joined in the chatter.
I hung to the radio, watched the TV; away to the Internet I flew like a flash,
Oh no! Oh no! My IRA and 401K had taken a crash.
Now something was abreast, and not just new fallen snow,
Is it the luster of mid-day...No! The market is really low!
When what to my wondering eyes should appear?
The Recession has come, it is definitely here!
By Tom Muter, CCE
Click here to read the rest of Muter's credit tale, just one of the stories submitted to this year's Business Credit Credit Words contest. Winners will be published in the February issue of the magazine. Look for it soon!
To view past eNews issues or to visit the NACM Archives, click here.