Posted by: Stacy Perman on October 10
This week American Express Open Economic Pulse Small Business Monitor released a survey based on the responses of 602 small business owners across the country. If attitudes and confidence help drive the economy, according to this report, the numbers continue to deliver bad news: one in five businesses report that they risk going out of business as a result of the current economic atmosphere. While 25% of those asked said that the FDIC increase in insured bank deposits (from $100,000 to $250,000) would be helpful to them, at the same time, 45% of small business owners believe that the government’s financial rescue package will not be effective in stabilizing the economy. Concerning the economic climate, 44% of those surveyed said that they expect their businesses to be negatively impacted over the next six months while just 23% said that they expected business to grow in the same time period. Ominously, 79% reported that their sales have been on the decline.While surveys often deliver a spectrum of views, the results of this most recent OPEN data skew rather definitively -- to the south.
Posted by: John Tozzi on October 08
We've written about Kiva, the microfinance site that connects lenders with entrepreneurs in the developing world who need small loans. But it looks like US entrepreneurs are increasingly turning to microloans as well, particularly now, as banks tighten lending standards.
To be sure, microlending is a tiny, tiny piece of small business credit in the US. Microlenders tend to be small nonprofits, and all their loans combined probably wouldn't be a blip on the portfolios of one of the big banks. That said, there's some anecdotal evidence that it's a growing source of credit for some very small businesses locked out of the conventional credit market.
Last week I spoke with ACCION USA's Laura Kozien, who said that the organization is seeing more borrowers with FICO scores between 650 and 750, which is good credit. "We’ve really noticed a lot of people who formerly would have qualified at a bank," Kozien told me. ACCION USA's loan volume for June, July, and August was $1.45 million disbursed in 228 loans, compared to $1.2 million in 207 loans for the prior three months, so again, these are small amounts, but growing.
Demand for microloans in the US has jumped in the past year, according to Sara Ignas of the Association for Enterprise Opportunity, a trade group for microlenders and microenterprises. She cites the example of a trucking company in New York, turned down for a vehicle loan to buy another truck, that got a $35,000 loan from ACCION New York.
The numbers are small but the trend is interesting. Microlenders say they exist to serve those who aren't served by banks. That has long meant people with poor credit, or not enough collateral, or people in low-income communities where banks don't have much of a presence. But now that we're seeing dramatic changes in the banking sector and a tightening of credit, microloans may become a mainstream financing option for very small businesses.
Posted by: Stacy Perman on October 07
In August, we reported on this blog that cookie and frozen yogurt franchisor Mrs. Fields planned to file for bankruptcy protection in order to help restructure its business. According to thedeal.com, last week, the Salt Lake City-based company won confirmation on its prepackaged reorganization from the US Bankruptcy Court for the District of Delaware. However apparently, the confirmation did not come without some resistance. According to the WSJ, a number of Mrs. Fields frozen yogurt franchises as well as the Internal Revenue Service objected to the plan and urged the court to include additional protections. The company’s plan would slice $145.7 million in note debt while giving noteholders the majority of the company’s equity. As proposed, noteholders would swap their securities for $195.7 million in notes for $90 million in cash, $50 million in new senior secured notes and 87.5% of the company’s new common stock.
Posted by: Stacy Perman on October 07
I often get all sorts of interesting pitches in my inbox. Many try targeting their pitch to current events. So it was with great, um, bemusement that I read the following email from a Los Angeles-based moving company, UsedCardboardBoxes.com, announcing its own economic bailout plan.
According to the press release, from now until Election Day ’08, the company will provide one free, earth-friendly moving kit to any US homeowner that has just lost a home to foreclosure.
We’re trying to take the sting out of buying moving supplies… and still show the world that you don’t have to cut down a tree, to make a used cardboard box! Marty Metro, owner of UsedCardboardBoxes.
Posted by: Stacy Perman on October 07
In these times of economic uncertainty, rampant bankruptcies and businesses closing all around, it is nice to hear about one business that runs counter to both conventional wisdom and market trends. This week, Los Angeles restaurant Philippe the Original, marked its centennial. To celebrate, on Monday the little restaurant on N. Alameda Street, that claims to have invented the French Dip sandwich in 1918 (after a sliced French roll accidently fell in a hot pan full of roasting juice) –sold its famed sandwiches at its original price of 10 cents -- between 4 and 8 pm. Los Angeles Mayor Antonio Villaraigosa and the USC Marching band were scheduled to make appearances.
Established by Philippe Mathieu in 1908, the restaurant was sold in 1927 to Harry, Dave, and Frank Martin for $5,000. The trio ran the place 24/7 until World War II. It's regular customers kept the place afloat during hard times including the Depression. Now, in the 21st century, Philippe’s remains much the same. There is still sawdust on the floor, the restaurant continues to makes its own hot mustard, and its carvers (many of whom have worked steadily for the past 20 years or more) still cut up the beef and serve customers who line up in 10 cues – often 20-people deep. Although Philippe’s raised the price on a cup of coffee from a nickel to a dime in 1977, it’s motto remains: “We like to say that only the prices have changed.”
