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Businesses turn to alternative lending
By Harold Brubaker
INQUIRER STAFF WRITER
Shawn Landgraf, chief executive officer of a Pennsauken company that sells motor scooters, knows all too well how tough the credit markets are right now for small businesses.
That's why he was happy this month to land a $1 million line of credit after negotiating for six months - even though his Power Sports Factory Inc. is facing an interest rate that amounts to 27 percent a year.
Landgraf said the company could handle the rate because it moves inventory quickly, and the interest on a motorbike amounts to just 6.75 percent if it sells within three months. "Our margins are so good," he said, "that that is a tenable position for us."
The problem for a company like Power Sports Factory, which recorded $2.08 million in sales for the nine months ended Sept. 30, and sold 2,000 motorbikes last year, is that even before the credit crisis, inventory financing cost 15 percent because so few lenders were willing to venture into the scooter and motorcycle market, Landgraf said.
The loan to Power Sports Factory is an extreme example in terms of the interest rate, but it nevertheless illustrates persistent problems in the credit markets, even as the U.S. Treasury Department doles out billions of dollars to large and small banks "to help meet lending needs of local consumers, businesses," in the words of a Treasury statement this week.
"The credit market is dead. There is no credit market," said Martin Rotter, a Glenside businessman who has several companies that generate about $5 million in sales from the manufacture of roofing products. "The problem is nobody can go to their bank and talk about getting short-term, 60-, 90-day loans for inventory or payroll."
But that is not the end of it, said Rotter, who recently laid off all six employees at his highly automated factory in Georgia because he has no work for next month. "The credit market does not stop with the bank," he said. "If a manufacturer's sales are down, he doesn't have any cash flow. He can't give credit to his customers."
Rotter said his biggest supplier had every customer on credit hold, which means "you can't get anything unless you pay back bills."
Daniel J. Meckstroth, chief economist with the Manufacturers Alliance, a trade group in Arlington, Va., said that, across industries, big companies were squeezing suppliers. More than half the companies surveyed recently by Meckstroth said they were giving themselves more time in contracts to pay suppliers. The average climbed to 56 days from 34 days over the last year, he said.
On the other hand, many companies are trying to get their suppliers to pay more quickly, Meckstroth said. "It becomes a vicious cycle" that is "particularly hurting small businesses," he said, "because they have less market leverage."
All of this means busy times for alternative finance companies, such as Crossroads Finance L.L.C., the Boca Raton, Fla., company that gave Power Sports Factory its $1 million line of credit.
"We are seeing 10 transactions a day right now that I probably never would have seen before," Crossroads president and CEO Lee Haskin said. "There is no place for these businesses to go."
Some potential customers walk away from Crossroads offers when they see how expensive it is, Haskin said. "Three months later, they come back to us after they've looked everywhere for money."
Haskin, who demanded that Power Sports Factory put up 50 percent of the money for the scooters sold under the Andretti brand, said he was confident that he would be able to sell the scooters himself to get his money back if things did not go well for Power Sports Factory.
Haskin is less confident that banks will get back to normal anytime soon: "We're probably looking at this for the next year or two year before the trickle-down effect causes any bank to lend money."
--------------------------------------------------------------------------------
Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.c
Businesses turn to alternative lending
By Harold Brubaker
INQUIRER STAFF WRITER
Shawn Landgraf, chief executive officer of a Pennsauken company that sells motor scooters, knows all too well how tough the credit markets are right now for small businesses.
That's why he was happy this month to land a $1 million line of credit after negotiating for six months - even though his Power Sports Factory Inc. is facing an interest rate that amounts to 27 percent a year.
Landgraf said the company could handle the rate because it moves inventory quickly, and the interest on a motorbike amounts to just 6.75 percent if it sells within three months. "Our margins are so good," he said, "that that is a tenable position for us."
The problem for a company like Power Sports Factory, which recorded $2.08 million in sales for the nine months ended Sept. 30, and sold 2,000 motorbikes last year, is that even before the credit crisis, inventory financing cost 15 percent because so few lenders were willing to venture into the scooter and motorcycle market, Landgraf said.
The loan to Power Sports Factory is an extreme example in terms of the interest rate, but it nevertheless illustrates persistent problems in the credit markets, even as the U.S. Treasury Department doles out billions of dollars to large and small banks "to help meet lending needs of local consumers, businesses," in the words of a Treasury statement this week.
"The credit market is dead. There is no credit market," said Martin Rotter, a Glenside businessman who has several companies that generate about $5 million in sales from the manufacture of roofing products. "The problem is nobody can go to their bank and talk about getting short-term, 60-, 90-day loans for inventory or payroll."
But that is not the end of it, said Rotter, who recently laid off all six employees at his highly automated factory in Georgia because he has no work for next month. "The credit market does not stop with the bank," he said. "If a manufacturer's sales are down, he doesn't have any cash flow. He can't give credit to his customers."
Rotter said his biggest supplier had every customer on credit hold, which means "you can't get anything unless you pay back bills."
Daniel J. Meckstroth, chief economist with the Manufacturers Alliance, a trade group in Arlington, Va., said that, across industries, big companies were squeezing suppliers. More than half the companies surveyed recently by Meckstroth said they were giving themselves more time in contracts to pay suppliers. The average climbed to 56 days from 34 days over the last year, he said.
On the other hand, many companies are trying to get their suppliers to pay more quickly, Meckstroth said. "It becomes a vicious cycle" that is "particularly hurting small businesses," he said, "because they have less market leverage."
All of this means busy times for alternative finance companies, such as Crossroads Finance L.L.C., the Boca Raton, Fla., company that gave Power Sports Factory its $1 million line of credit.
"We are seeing 10 transactions a day right now that I probably never would have seen before," Crossroads president and CEO Lee Haskin said. "There is no place for these businesses to go."
Some potential customers walk away from Crossroads offers when they see how expensive it is, Haskin said. "Three months later, they come back to us after they've looked everywhere for money."
Haskin, who demanded that Power Sports Factory put up 50 percent of the money for the scooters sold under the Andretti brand, said he was confident that he would be able to sell the scooters himself to get his money back if things did not go well for Power Sports Factory.
Haskin is less confident that banks will get back to normal anytime soon: "We're probably looking at this for the next year or two year before the trickle-down effect causes any bank to lend money."
--------------------------------------------------------------------------------
Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.
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working whats going on today
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well thnx looks good
ok thnx
maybe who knows
Good morn stock
here we go
have you ever seen cbai its a stem cel but the stock stinks iam not sure why
i agree lets push
not sure kets see what happens today
thnx will check them out
markets look like there are green today
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10-4
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yay me too lets see ehat happens they came down alittle
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what was your pick?
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PSPF
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GM 'Xplosivestocks'
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Economic forecasters see more job cuts ahead
Monday January 26, 7:22 am ET
By Jeannine Aversa, AP Economics Writer
Economic forecasters see gloomy outlook with more job cuts in months ahead
WASHINGTON (AP) -- It's shaping up to be another lousy year for workers, with more companies expecting to cut payrolls in the months ahead.
That's part of the latest outlook from forecasters in a survey to be released Monday by the National Association for Business Economics that depicts the worst business conditions in the U.S. since the report's inception in 1982.
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Thirty-nine percent predicted job reductions through attrition or "significant" layoffs over the next six months, up from 32 percent in the previous survey in October. Around 45 percent in the current survey anticipated no change in hiring plans, while roughly 17 percent thought hiring would increase.
The recession, which started in December 2007, and is expected to stretch into this year, has been a job killer. The economy lost 2.6 million jobs last year, the most since 1945. The unemployment rate jumped to 7.2 percent in December, the highest in 16 years, and is expected to keep climbing.
"Job losses accelerated in the fourth quarter, and the employment outlook for the next six months has weakened further," said Sara Johnson, NABE's lead analyst on the survey and an economist at IHS Global Insight.
Just last week, Microsoft Corp. said it will slash up to 5,000 jobs over the next 18 months. Intel Corp. said it will cut up to 6,000 manufacturing jobs and United Airlines parent UAL Corp. said it would get rid of 1,000 jobs, on top of 1,500 axed late last year.
The NABE survey of 105 forecasters was taken Dec. 17 through Jan. 8.
Also in the survey, 52 percent said they expected gross domestic product to fall by more than 1 percent this year. GDP measures the value of all goods and services produced within the U.S. and is the best barometer of the country's economic fitness. The last time GDP fell for a full year was in 1991, a tiny 0.2 percent dip. The economy shrank by 1.9 percent in 1982, when the country was suffering through a severe recession.
Forecasters have grown more pessimistic about the outlook. In the October survey, no forecaster thought GDP would fall by more than 1 percent.
In terms of business conditions, more reported customer demand dropping, capital spending reductions and shrinking profit margins.
Altogether the report "depicts the worst business conditions since the survey began in 1982, confirming that the U.S. recession deepened in the fourth quarter of 2008," Johnson said.
Many analysts predict the economy will have contracted at a pace of 5.4 percent in the fourth quarter when the government releases that report on Friday. If they are correct, that would mark the worst performance since a 6.4 percent drop in the first quarter of 1982. The economy is still contracting now -- at a pace of around 4 percent, according to some projections
Godd morning every one
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sorry iam around now