Did the SBLF Do Anything?

Posted on September 26, 2011 by insidemainstreet in Inside Main Street

As the Small Business Lending Fund comes to a close today, it is time to ask: Did the SBLF Do Anything?

As the Small Business Lending Fund expires today, it seemed timely to look back at the impact of the program slated to inject $30 billion into small businesses that only disbursed $2.4 billion. The SBLF rewarded qualified community banks with funding that cost as little as 1% if they boosted small business loans by 10% or more. But the program had its share of hurdles.

Many lenders cited the sputtering economy and burdensome rules and regulations as their main deterrents from the program. Last month, the National Small Business Association said 64% of businesses reported having adequate financing, up from 59% a year earlier, and 36% said they were unable to obtain adequate financing, down from 41%.  In a white paper released earlier this month, the Treasury said more than 40% of community bank applicants failed to meet the minimum statutory requirements of the program.

According to James Sterngold and Cheyenne Hopkins of Bloomberg, the lenders that did succeed said they met their growth targets by poaching customers from weaker competitors, providing “little net benefit to the stalled economy.”

Another fact is that more small business loans are being repaid than renewed. Commercial and industrial loans of $1 million or less to small businesses fell to $283 billion at the end of June, from $309.95 billion on June 30 of last year, according to a FDIC quarterly report. As of September 14, 191 banks have received $2.4 billion. Of that, 89 used the capital to repay taxpayer money they had received under TARP.

Lack of demand, more repayment than renewal, or strict regulations? Whatever the reason, the fact remains the SBLF did not have its intended impact. But as one banker said, “You can’t force the banks to lend.”

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Investment Firm to Raise $50 million to Grow Companies

Posted on September 26, 2011 by insidemainstreet in Inside Main Street

Atlanta-based Buckhead Investment Partners LLC (BIP) will launch a $50 million venture capital fund, Urvaksh Karkaria of the Atlanta Business Chronicle reports, just three years after raising its first fund and as two other Atlanta groups announced plans to put a combined $200 million to work. BIP hopes to capitalize on a “substantive investment pipeline,” one executive said, noting current deal flow has been the strongest since 2004.  The fund will invest in early-stage firms in the health care IT, digital media franchising, and specialty finance sectors. BIP plans to do 10 to 14 deals, investing four to five million dollars in each over a two or three year period. The $50 million is expected to come mostly from wealthy individuals, foundations, endowments and family offices, and BIP expects to complete raising the new fund early next year. “Our goal is to launch a series of $50 million funds and put the money to work over shorter time horizons. Staying smaller eliminates a lot of the pressures to put money to work, which often times leads to hasty decisions,” one executive commented, “Entrepreneurs are more likely to risk launching new ventures in a city if there’s a greater likelihood of getting funding locally.”

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Two Bankers Recruit Five Straw Borrowers for $1.9 million in Fraudulent Loans

Posted on September 23, 2011 by insidemainstreet in Mugshot Monday

The former President of Pinehurst Bank, former Chief Credit Officer and Senior Vice President, and a former customer all face new charges in their alleged check-kiting scheme which led to the bank's closure in May 2010.

Two former officers of failed Pinehurst Bank and a bank customer are facing additional charges for recruiting five straw borrowers to get $1.9 million as part of their alleged scheme to defraud  Pinehurst Bank.

John Markert, former President of Pinehurst Bank, Gregory Pederson, former Chief Credit Officer and Senior Vice President of Pinehurst Bank, and George Wintz Jr, a 71-year old customer of the bank, were each charged with five counts of misapplication of bank funds in June, according to Jake Anderson of Twin Cities Business.

It is alleged that from March 2006 through January 2010, the three misapplied close to $1.9 million from Pinehurst Bank in an elaborate check-kiting scheme. Wintz is accused of kiting increasingly large sums between Pinehurst Bank and a second bank until late February 2009, when the second bank discovered his insufficient funds and returned more than $1.8 million in bad checks to Pinehurst Bank.

Markert and Pederson then allegedly recruited five straw borrowers to get $1.9 million in loans from Pinehurst for Wintz, and the three each concealed the scheme from the bank’s board and regulators. Additionally, Wintz is also accused of embezzling more than $160,000 from his company’s 401(k) plan.

Pinehurst was closed by regulators in May 2010.

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Former Alabama Credit Union President Sentenced for Bank Fraud

Posted on September 23, 2011 by insidemainstreet in Mugshot Monday

Michael John Young, former president of Alabama Central Credit Union, has been sentenced to seventeen months in prison for bank fraud in connection with fictitious companies whose bills were paid through the Birmingham-based credit union.  According to a press release from the FBI, between April 2009 and June 2010, Young submitted fraudulent bills and invoices on behalf of two fictitious companies he had created. Neither business had provided any services or goods to the credit union. Young, as president of Alabama Central Credit Union, would authorize payment by the credit union of those bills and invoices he submitted and the money paid to the accounts was controlled and ultimately spent by Young.  He has also been ordered to pay $140,000 in restitution, as well as the same amount to the government as proceeds of illegal activity.

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Collaboration Stops $10 Million Fraud

Posted on September 22, 2011 by insidemainstreet in Fraud Friday

The cooperation of Export-Import Bank's loan staff, internal OIG, and international authorities have stopped a $10 million direct loan fraud against the bank.

Export-Import Bank, an independent federal agency that helps create and maintain US jobs by filling gaps in private export financing, announced Wednesday that in collaboration with it’s internal OIG and international investigators, it has stopped a $10 million direct loan fraud in progress.

According to the press release, the fraud was uncovered when Ex-Im Bank staff reviewed the financial statements of a prospective borrower, an England-based telecommunications service company, that had applied for a $10 million loan.

Questioning the statements’ authenticity, the matter was referred to Ex-Im Bank’s internal OIG. The OIG found that an international broker, acting on the borrower’s behalf, submitted the loan application and included financial statements that appeared to have been prepared by an internationally recognized accounting firm. Further investigation revealed the financial statements were false.

When confronted about the fraud the purported borrower, actually a Ukrainian entity operating out of a business front in Great Britain, withdrew the loan application.

Since 2009, Ex-Im Bank’s OIG investigations have resulted in nearly 50 criminal charges, numerous arrests, and over $130 million in criminal forfeiture, restitution, and cost savings to the American taxpayer.

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California Investigates Bank in Campaign Treasurer Fraud Case

Posted on September 22, 2011 by insidemainstreet in Fraud Friday

California banking regulators have launched an inquiry into how First California Bank handled numerous accounts controlled by Kinde Durkee, a longtime treasurer for prominent politicians who has been accused of fraud. Durkee was arrested September 2 at her firm’s office on a charge of mail fraud for allegedly sending falsified reports to the State Fair Political Practices Commission. According to John Hoeffel and E. Scott Reckard of the Los Angeles Times, Durkee is accused of taking $677,181 from the campaign of Assemblyman Jose Solorio (D-Santa Ana), and used money from clients’ accounts to pay for trips to Disneyland and the Long Beach Aquarium, as well as mortgage payments and business expenses. Many California politicians have been locked out of their accounts since Durkee’s arrest, and the bank has declined to turn over control of those accounts to campaigns and organizations unless they “agree to indemnify and hold the bank harmless” for any misappropriated funds; a move that has raised questions about the bank’s involvement. Financial institutions are required to establish reasonable procedures to prevent fraud, as well as report suspicious transactions to their principal regulator.

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Banks Vow to Ramp Up Lending to Small Businesses

Posted on September 21, 2011 by insidemainstreet in Inside Main Street

After meeting with Vice President Joe Biden and SBA Administrator Karen Mills in Cleveland this week, Citigroup, KeyCorp, and others pledged more than $20 billion to small business lending.

As loans guaranteed by the SBA hit record highs, US Vice President Joe Biden and SBA Administrator Karen Mills met with 13 banks in Cleveland on Tuesday.

The result?

Citigroup pledged $24 billion in loans to small business in the US over the next three years, a sum that would significantly increase the bank’s lending to such businesses, the American Banker reports.

KeyCorp also stepped up to the plate, saying it would provide $5 billion to small business owners over the next three years. M&T Bank said it would increase small business lending by $50 million from 2010’s level in each of the next three years.

In April, JPMorgan Chase pledged to provide $12 billion in small business loans this year alone, 20% more than last year’s commitment.

But all of these pail in comparison to Wells Fargo, who earlier this month hit the $1 billion mark for SBA loans in a single year; the first bank to do so in SBA’s history.

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SBA Loan Turns Media Veteran Into Franchise Owner

Posted on September 21, 2011 by insidemainstreet in Inside Main Street

Alan Green, former TV news photographer turned ad pitchman, was close to financing his newly purchased existing franchise with credit cards before turning to the SBA. Though banks are still the top source of lending for small business owners, the SBA has increasingly lent to individuals like Green who private lenders deem to risky, Angus Loten of Wall Street Journal’s Smart Money writes. This fiscal year, SBA’s two main loan guaranty programs have already exceeded a record-high $18.4 billion (50,000 loans), up from $8.3 billion (40,000 loans) in 2009. As much as $4 billion (14,000 loans) went to start-ups. But despite the milestones, banks still aren’t just handing out cash.  Complaints of extensive documentation requirements, high rates and longer processing times are common, but at least for Green it all worked out. “In just three weeks I had a check in my hands,” Green said, “I don’t think they would have approved it for a start-up. This was a business that had and could be profitable, and I had strong management and marketing experience in my favor.”

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OnDeck Delivers Over $150 Million to Main Street Businesses

Posted on September 20, 2011 by insidemainstreet in Inside Main Street

On Deck, a technology platform that connects Main Street businesses to capital, announced this week it has surpassed the $150 million milestone in delivering capital to thousands of small businesses. The announcement represents a 50% growth surge in the past eight months. “We launched On Deck to fundamentally change the way Main Street businesses access capital,” President Brad Kime said. On Deck’s platform determines credit worthiness on factors such as cash flow and business credit data instead of the personal credit score. Their typical customer is a small business owner that has been in business more than one year and has revenue between $300,000 and $3,000,000. Of the $150 million delivered, Main Street restaurants and retailers have each received over $30 million; automotive and healthcare practices $15 million each; and millions more to a variety of small business industries.

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Former NFL’er Says He Is Broke and Living With Parents

Posted on September 20, 2011 by insidemainstreet in Inside Main Street

Former ten year NFL player, three-time Pro Bowler, and two-time Super Bowl winner Chris McAlister now says, "I'm broke as a joke and living with my parents."

We’ve all heard the statistic of how many former professional athletes are broke within three years of their retirement.  Add former Baltimore Ravens cornerback and three-time Pro Bowler Chris McAlister to the list, as he was quoted last week as saying he is, “Broke as a joke and living with my parents.”

McAlister was a first round pick in 1999 and played 10 seasons with Baltimore, winning a Super Bowl in 2001, before a brief stint with the New Orleans Saints in 2009 and retirement.

On top of the first round money he received in his rookie contract, McAlister signed a $55 million contract extension in 2004. But by 2011, McAlister says, “I live in my parent’s home. My parents provide me with my basic living expenses as I do not have the funds to do so.”

In court documents filed by McAlister, he asked for relief on paying $11,000-a-month to his ex-wife for child support, even though they were only married for 13 months, according to the story first released by TMZ. But, there is no way that $55 million has all gone to child support. Couldn’t M&T Bank, the Raven’s stadium sponsor, have helped McAlister figure out an investment plan?

Celebrity worship can quickly turn sour when stories like this show how far stars can fall with no future income or skills after retirement.

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