By Ruth Binger
When the usual suspects are rounded up to determine the reason for the decrease in start-ups and/or business failures in 2009/2010, in this author’s view, some blame must be placed on the business owner’s own failure to have introduced himself to his “better self” in the words of Napoleon Hill.
Bob Calcaterra recently noted this problem in the August 2010 Missouri Venture Forum Newsletter.
In Ralph Waldo Emerson’s essay “Experience,” he posits that all of us have an iron wire which he calls “Temperament” upon which the seeds of the individual are strung. He further argues in his essay “Compensation” that “strength grows out of our weakness and that indignation which arms itself with secret forces does not awaken until we are pricked and stung and sorely assailed.”
This veto or limitation power of adversity is the theme in the Summer 2010 Wilson Quarterly article “What Next for the Start- Up Nation” where the author speculates as to what attributes Israel start-up founders have that create so many successful start ups (persistence, mission critical focus, etc.) .
In twenty-seven years of counseling small businesses, I have found that the business owners who are the most successful are self disciplined, incredibly focused, hungry and have an iron will.
When one reviews the evidence of successful start-ups, one sees so many first and second generation Americans who will not give up. So, for those of you with the iron will or who want to develop that iron will by apprenticing at the bottom or “start where you are and build”, please check out the Microlending article in the New York Times. You will be introduced to Kiva.org, who has just started a pilot program lending to business owners in the United States. Remember, Microsoft was created in 1975, at the end of the first great recession since the Depression.
Who knows what will happen, you may become a Bill Gates.
07/31/10 6:00 AM
Banking and Finance, Business Law, Emerging Business | Comments Off |
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Stepping Back. US MicroLending with Kiva: Raising Capital + Raising You
By James M. Heffner
Loan participations are invaluable to community and regional banks who want to service their borrowers’ needs beyond its legal lending limits or risk tolerance. Loan participations frequently include “LIFO” (Last-in, First-out) and “FIFO” (First-in, First-out) provisions designed to streamline the lending process, simplify monitoring the legal lending limits, and entice banks to participate in a loan they would not otherwise consider.
LIFO loan participations are effective when the originating bank advances funds to its borrower up to its legal lending limit for that single borrower – subsequently the participating bank purchases that amount of the loan which exceeds the originating bank’s lending limit. For the participating bank’s trouble, or relative bargaining power, the participating bank is repaid its principal before the originating bank. The opposite holds true for FIFO loans. Regardless of the loans LIFO or FIFO status, in the event of default losses are shared between the originating bank and the participating bank on a pro-rata basis.
Effective January 1, 2010, FASB Statement No. 166, Accounting for Transfers of Financial Assets (“FAS 166”) altered what constitutes a transfer of a portion of a financial asset, e.g., a loan participation, to be treated as an actual sale. Per FAS 166, LIFO and FIFO participation loans do not qualify for sale accounting treatment. What this means to bankers is that the originating bank is now obligated to report that portion of the loan “sold” to the participating bank as a loan on its balance sheet. So, rather than account for only what the originating bank has outstanding, less what it sold to the participating bank, the originating bank now must include the aggregate balance of a borrower’s debt, which, in turn, is used to determine compliance with legal lending limits (see generally12 USC § 84; Reg O; RSMo § 362.170; and CSR 140-2.080).
The American Bankers Association has been proactive on this front, authoring a March 3, 2010 letter discussing the regulatory requirements for loan participations effected by FASB Statement No. 166. In its letter to the Federal Reserve and interested parties, the ABA recommends that FAS 166 should not be used to regulate legal lending limits – rather, “[c]ompliance with such limits should apply on the basis of the contractual borrower.”
To be clear, FAS 166 does not apply to loan participations where all cash flows from the entire financial asset are divided proportionately among the participating interest holders in an amount equal to their share of ownership. What is less clear, however, is whether banks must are required to modify accounting methods for loans made pre-2010 but include disbursements post-2009, such as a revolving line of credit.
In sum, until the certain clarifications are made, in order to qualify for sale accounting the originating bank must carefully review its policies and procedures for loan participations, and understand the implications that come with FAS 166.
06/2/10 6:00 AM
Banking and Finance, Business Law | Comments Off |
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The End of LIFO/FIFO Loan Participations between Banks?
