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Archive for June, 2009

On Monday, banks began taking applications for the Small Business Administration’s new no-interest, deferred-payment bridge loans, just a week after the agency issued guidelines for the program. Though the early anecdotal evidence suggested that banks were leery of the initiative, it now appears that institutions, at least those that already work with the S.B.A., stand ready to make the loans, if somewhat reluctantly. However, demand for the loans is certain to outstrip supply, partly for reasons that call into question the way the program is going to be operated.

America’s Recovery Capital, as the program is called, was a provision of the February stimulus bill. The idea was to give small firms under financial stress a chance to catch their breath: The A.R.C. loans, up to $35,000, carry no fees and no interest, and are to be used to pay down existing debt. A borrowing company doesn’t have to begin repaying the loan until a year after it receives the final installment. Should it default on the loan, the S.B.A. will make the bank whole. To qualify, the business must be at least two years old, and have shown a profit in at least one of those years. Further, the company must meet a test for hardship, yet still be able to service this new debt — and prove it with cash-flow projections that look two years forward.

You’d think lenders would love this sort of arrangement; because the S.B.A. will pay interest in place of the borrowers, it’s basically free money for the banks. Yet the financial community’s enthusiasm is clearly tempered. “It’s not a profitable loan for the bank,” says Paul Merski, chief economist for the Independent Community Bankers of America, a trade association.…Continue reading

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Many banks remain stuck in the controversial program. But they will have to raise capital and post better results before they’ll be allowed to exit TARP.

A flurry of banks officially escaped the clutches of TARP after cutting checks to the U.S. government Wednesday, marking the first major payback of the billions of dollars in aid invested in banks last fall.

Still, hundreds of lenders, including industry leaders Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500), remain under the government’s thumb, leaving many banks to cope with life inside the confines of the Treasury Department’s controversial Troubled Asset Relief Program.

Banks have been working particularly hard to break free from TARP for several months now, decrying the various restrictions that have come with government aid, including restrictions on compensation for executives and other top earners.

But regulators have conceded little, fearing that many banks may be ill-equipped to withstand another bout of economic turmoil in the months ahead. There have also been concerns that banks may scale back on lending after returning TARP funds.

Small and mid-sized lenders, many of whom were strongly encouraged by regulators to participate in the program shortly after its launch last fall,….Continue Reading

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California-based Charter Capital has formed of a joint venture with Arizona’s Phoenix Financial Equipment Leasing to provide small- to mid-sized businesses locally and nationally with a broad range of customized financial solutions for their equipment and technology acquisition needs.

At the end of June both firms will move into Charter Capital’s new quarters in Scottsdale, AZ. Charter will maintain its office in California.

“The Charter team has done everything they could to help us grow both professionally and personally,” said Nick Couturier, president of Phoenix Financial Equipment Leasing, commenting on the partnership.…Continue Reading

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