The Usual Update plus SLOOS, Getting Hard Money, and a tale of customer service.
This Week’s Economic News
Initial jobless claims are out, and that number is 217,000. That’s consistent, and no alarm bells there. 220,000 was expected, and it was 220,000 the week before.
Yes, this past week, 217,000 people were fired/laid off/reassigned/right-sized/involuntarily separated/riffed and so on. Been there, done that on both sides and it’s not pleasant.
The Trade Deficit was $61.5 billion, but no one seems to care that much. In other words, we buy more stuff from other countries than they buy from us: $61,500,000,000 more.
Wholesale inventories were up a hair, but…
Consumer credit took a big jump, increasing $9.5 billion after falling by $15 billion the previous month. That would help explain the good GDP number; people bought a lot of stuff on credit.
And, the Senior Loan Officer Opinion Survey was released for the third quarter.
The Senior Loan Officer Opinion Survey. That sounds very important.
Well, yes and no. It does give the Fed an idea what banks are thinking. So, let’s look at the SLOOS (everything is an acronym in government) for this past quarter.
The first challenge: There are roughly 4200 banks in the US. The number of banks that responded was 59.
In some instances, only 55 of the banks answered the questions.
I think you need a bigger sample to make it significant, but let’s move forward.
Question: How have your standards of lending to companies with sales >$50 million changed?
63% remained unchanged
36% tightened up. Only 1 bank reported that their standards eased.
Question: How about to smaller companies?
69% remained unchanged and everyone else tightened up.
Question: How have terms changed on the loans that were approved?
76% remained unchanged
24% tightened up.
When it comes to pricing, over 50% charged more in interest and 5% charged less.
That 5% must be behind on their goals.
In summary, the banks are not going crazy with lending. In fact, they are staying the same or getting tighter. Translated: It’s a bad time to change banks.
From my conversation with bankers in southern California, bankers are just staying with their existing customer base. They are keeping the good clients, so if they are letting someone leave the bank…
Finally, it asked the banks that got tighter in their standards, why they got tighter. 10% said that concern over their capital position was the main reason.
Folks, that’s huge. Granted, this is a small sample size, but if we translated that to the 4200 banks in the country, that’s 420 banks that are concerned with their capital position.
And this week, Citizen’s Bank in Iowa went under and was taken over by Iowa Trust and Savings.
I’m guessing they had concerns over their capital position too.
Well, now they don’t, and senior management will have a stress-free Thanksgiving.
One down, 419 to go, but hopefully not.
The Hard Money
So you got some investors, some VC – venture capital - and started a business a few years ago.
The business has losses for the last two years and is short on cash, but it’s turning around; you were profitable last month!! This is a unicorn, baby!
1 month is not a trend, thank you.
Yes, you don’t qualify for bank financing, but you need cash and you own your equipment, right? So here is what you’ll probably qualify for…
Let’s say you are asking for $3 million. Now, brace yourself…
75% on FLV – forced liquidation value – of your manufacturing equipment.
Yes, I know you think it’s worth $10 million, but in a fire sale it might get $4 million.
48-month amortization
18% plus fees gets you an APR of 20%+
And by 20%+, I mean closer to 25% all-in costs. Or more.
And to think 18 months ago, you can probably raise more money. Oh, well.
A word about customer service…
So, I had three pallets of floor tile delivered to the house from Lowe’s.
Their forklift leaves a trail of oil on my driveway. So I called them up.
By the way, the best way to bypass the phone-bot at Lowes is to say the word “manager”. It gets you right to a person.
I explain that while I am thrilled that my tile was delivered in a timely fashion, the forklift did leave a trail of oil. And their reply was kind of like this:
“Oh, well, um, I can file a claim if you’d like…”
And I reply: “Well, whatever gets the oil off my driveway.”
“We use a third-party contractor, so I’ll file a claim with them. Let me get your name and number because I’m taking off for vacation tomorrow and I’ll have someone get back to you.”
Lesson One: I didn’t buy the tile from the third party, I bought it from Lowe’s.
If your business contracts out for delivery or anything else, it’s your problem. It doesn’t matter if it’s a third party, folks, it’s your product or service, and whoever you hire to represent you is in fact, representing you, and you better hold them accountable.
You do the legwork, not the customer.
Lesson Two: The correct response is:
“I’m so sorry, that’s very disappointing. We will send a Lowe’s employee out to your house to clean it up right away. Could you please email me a picture so we can better understand the extent of the problem?”
And that’s how you handle that issue.
Then you call your vendor and chew them out, reminding them that dripping oil is not part of the service level agreement. Then send them a bill.
The year is coming to a close, folks. Thanksgiving is next week (that sure came fast), and for many companies, you will be fighting vacation days, folks taking off early, and just a general slowdown in hitting deadlines. Stay ahead of your “to-do” list, and if you really want motivation, share that list with your spouse and tell them that’s how the family has a good Christmas. They will help you stay motivated!
10 days to Thanksgiving
42 shopping days to Christmas
48 days to hit your goals for 2023.
