Politics

What Would a Biden White House Mean for The MCA Industry?

November 14, 2020
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Joe Biden - presidentWhat do small business finance companies think about the reality of a Biden White House? Will there be dramatic regulatory changes, massive new government stimulus, or significant differences in coronavirus policy?

“Not likely,” according to the head of two funders we spoke with. The CEOs of Greenwich Capital Management and Spartan Capital Group seemed to agree that overall, not much would change.

“We don’t expect any major changes to the industry to MCA,” Frank Ebanks, Spartan Capital owner, said. “I don’t think it would be any different than what we saw and experienced under Trump. Some states, some federal organizations attempted to regulate the industry, that’s already on the way, and that might continue: I don’t see it picking up any intensity.”

Ebanks’ firm has been around for four years, funding deals of up to $2 million. In that time, Ebanks has seen states like New York and California pass lending regulation and renewed activity at the CFPB, but never a fed-wide push to take on small business lending.

Nathan Abadi of Greenwich Capital Management, believes there might be short term benefits under Biden.

“In the short term, I think it’s going to be pretty good for people in our industry because under a Biden administration, we’ll see more bailouts go to SMBs than we would in a republican administration,” Abadi said. “If small businesses get bailed out, that means they can make their payments, and everyone is winning.”

He was less optimistic in the area of regulation, however.

“It’s necessary for our industry to have some vetting process and some regulation, as you saw happen with Par recently,” Abadi said. “All these other companies are taking in private investments from multiple investors, not necessarily accredited, and the money kind of goes into a black hole.”

Abadi further said that he thought while regulation is good for those who play by the rules, Democrats can go overboard.

Ebanks, meanwhile, thinks there is saftety in being a B2B business.

“Transactions between two individual companies are hard to regulate, especially when it comes to contracts,” Ebanks said. “That will stand and be around for a long time regardless of the government or who the president is.”

Ebanks continued to point out that an incoming administration would avoid changing anything that might hurt the economy now more than ever.

“I think that the President-Elect will put teams together that will attack the coronavirus situation aggressively and will neutralize it rather than try to live with it,” Ebanks said. “It’ll be tough for a month or two. And after that, it will be sort of back to normal, with just heavy aggressive localized actions.”

Let The Games Begin

November 2, 2020
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Trump vs BidenIn the run-up to the 2016 election, a Capify survey recorded that small business owners felt Trump had their best interests at heart over Clinton by a 2 to 1 margin.

The alternative finance industry, meanwhile, was largely preparing for a Clinton administration. Then Trump won.

And a lot has changed since then.

deBanked has refrained from conducting any formal survey on the matter and takes no position on a candidate, but anecdotal conversations I’ve personally had with industry participants and a review of industry chats across social networks all lean in favor of Trump.

Those positions are drawn in part from resistance to future business shutdowns, which devastated the small business finance industry, views on taxes, and views on regulatory enforcement. All in all, it’s a business decision.

Talk about Biden has been virtually non-existent. The election is a referendum on Trump.

Once a candidate is elected, we will explore what the next 4 years could be like.

Mnuchin and Powell Defend Pandemic Aid Programs, Say Congress Needs to Agree Before They Can Give out More Money

September 23, 2020
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Capitol BuildingYesterday, Treasury Secretary Steven Mnuchin and Federal Reserve chair Jerome Powell testified on the COVID response before the House Financial Services Committee.

They championed the largest stimulus package in the Nations’s history and said the economy was recovering well.

Mnuchin advocated for bipartisan support of targeted forgivable loans- a second PPP loan for businesses still losing revenue, funded by either a new stimulus, reusing the $130 billion still leftover, or reallocating $200 billion from the Main Street Lending program. Of course, all of that is up to Congress, he said.

“I think there’s broad bipartisan support for extending the PPP in businesses that have had revenue drops for a second check,” Mnuchin said.

Chair of the committee, Maxine Waters D-CA, led the questioning. She asked for removing the loan minimum, and noting the slow economic activity; she said 32% of renters could not pay their bills at the beginning of Sept. Other charges, like the possibility of a second wave, were leveled toward the executives.

In response to questions to the Main Street Lending Program (MSLP,) they argued the program was not designed as a stimulus but as a “backstop” and liquidity to already present loan markets.

This might explain why last month, the Congressional Oversite Committee investigated the MSLP because of its low adoption rate and found many problems. 

To date, less than $2 billion of loans are “in the pipeline” out of the $600 billion allocated in April. The program is designed with non-forgivable loans supplied by 509 traditional FDIC insured lenders, at a minimum of $250,000. The majority of these lenders are not accepting new customers, unlike PPP loans facilitated by more than 5,000 lenders to mostly new clients- including fintech firms.

The Fed already lowered the minimum down from $1 million, but after questioning whether it could be lowered to under $100,000, Powell said there was very little demand for loans under $100,000. In response to Representative Andy Barr R-KY, about how the program could be improved to service smaller businesses, Powell responded that the program wasn’t created for that.

“The limit now is $250,000, and we have very little demand below a million, as I told the chair a while back,” Powell said. “We’re not seeing demand for very small loans. And that’s really because the nature of the facility and the things you’ve got to do to qualify, it tends to be larger sized businesses.”

The SBA reported findings from the third round of PPP on Aug 10th. The organization found that loans under $50k were the largest category issued. 68% of the 5,212,128 PPP loans were under $50k, and 87% were under $250k. 

GOP Proposes PPP Skinny Bill, Vote Thursday

September 9, 2020
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Capitol BuildingOn Tuesday, Senate Republicans introduced a slimmed-down “Skinny Bill” stimulus proposal, offering $500 billion proposed aid that they believe both sides of the aisle can agree on.

The Bill will extend PPP loans into the fall with $258 billion and certain small businesses will also be able to receive a second forgivable loan. If passed, the Skinny will also reintroduce weekly unemployment benefits of $300- half the $600 CARES act benefits that ended in July.

The Senate will vote on the proposed bill Thursday afternoon. The vote will test the GOP’s cohesion, which could not garner enough support for the $1 trillion HEALS act introduced in July. To pass, the Bill will need seven Democrat votes and 60 votes overall.

If it passes, it will have to survive the Democrat-controlled house. House Majority Leader Nancy Pelosi has already spoken against the Bill, saying it is filled with Republican “poison pills” that cannot pass in the House. House Dems are calling the Bill wholly political. Senate Majority leader Mitch McConnell said that if the Bill can not pass, the GOP can demonstrate that Dems are “stonewalling” aid.

Interview With Polling Expert Scott Rasmussen

May 7, 2020
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On Tuesday, I interviewed nationally recognized public opinion pollster Scott Rasmussen, who is the publisher of ScottRasmussen.com and is the editor-at-large for Ballotpedia, about the trajectory of the presidential race and how the current environment is affecting how people think.

Mr. Rasmussen will be a guest speaker at Broker Fair 2020 Virtual on June 11, 2020. You can watch the video interview below.

$2 Trillion Senate Relief Bill to Pass Vote, Includes Small Business Funds

March 26, 2020
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Main StreetSenate leaders Mitch McConnell and Chuck Schumer have come to an agreement over a stimulus package that would inject $2 trillion into the US economy. With senators debating the bill at the time of writing, it is expected to pass. Said to be the largest and most robust rescue package in American history, the bill would see $300 billion go to the SBA for its 7A loan program.

“At last we have a deal,” McConnell said after negotiations wrapped up at 1:30am on Wednesday morning. McConnell later described the bill as “a war-time level of investment into our nation.”

According to Stephen Denis, Executive Director of the SBFA, who was closely engaged with the language being placed into the bill, certain small businesses who receive SBA loans may have their loan converted to a grant, depending upon how they aim to spend the financing. As well as this, Denis made clear that small businesses will be able to use these funds to pay any charges linked to an online small business loan or MCA.

“There’s different things that you can use the SBA money for,” Denis explained in a call. “Payroll support, obviously, including paid sick leave, medical, or family leave; costs related to health care; employees salaries; mortgage payments; rent payments; utilities. And then this is another thing that we got inserted into the bill, we wanted to make sure that businesses had the flexibility to use this funding to pay existing debt obligations that were incurred before the covered period. What this means is that if a business had taken out an MCA or a loan, that they could use this money to pay off the obligations.”

As well as allotting funds for the SBA, the bill provides for cash payments of up to $1,200 to be made available directly to individuals, $2,400 for married couples, and an additional $500 per child, which will be reduced if the individual makes more than $75,000 annually or if the couple makes over $150,000. $350 billion will also be made available to help small businesses mitigate layoffs and support payroll.

The most recent example of something akin to this bill is the Troubled Asset Relief Program (TARP) that was established to help financial institutions in the aftermath of the ’08 financial crisis. And with there being some surprise in retrospect to how TARP’s funds were ultimately used, there is concern about supervision of these funds.

When asked on Monday who would provide oversight for the program to fund businesses, President Trump replied with, “I’ll be the oversight.” However, since then White House officials have agreed in closed-door negotiations that an independent inspector general as well as an oversight committee will be instated to supervise the loans.

Despite stalling in the Senate several times throughout Wednesday, Denis is confident that the bill will be voted through the Senate, and following this, through the House.

“Never make a guarantee in Washington. That’s something I’ve learned in my career. But I think this is something that both sides, both Democrats and Republicans, recognize needs to get done right now. And I can’t imagine anymore political games after the agreement this morning.”

As well as this, Denis was eager to highlight that many funders and broker shops fall under the classification of a small business, and would be eligible for some of the funds promised by this $2 trillion bill; and that if you are wondering how you might access some of the relief package upon its passing through government, to reach out to him.

The Pandemic, The Economy, and The Presidential Race

March 20, 2020
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Note from the Editor: In early February, I asked one of our regular journalists, Paul Sweeney, to look into the economy and the presidential race to size up the coming election season. As he was wrapping up his interviews over the span of a month, things took a startling turn, and COVID-19 came to the forefront and changed everything. This story is an amalgamation of reporting that started one way and quickly morphed into another. In light of how fast the situation is changing, we are publishing it now rather than waiting until early April to release it in print.


masked crowd

A version of this story will appear in deBanked’s Mar/Apr 2020 magazine issue. To receive copies in print, SUBSCRIBE FREE

Chris Hurn, who heads an Orlando-area financial firm in Florida that specializes in small business lending, says he is witnessing fear and desperation among business owners whose stores, shops and enterprises have been thrown into a tailspin by the coronavirus pandemic.

“We’ve been overwhelmed with telephone calls and e-mails,” says Hurn, chief executive at Fountainhead Commercial Capital, a non-bank Small Business Administration lender which boasts more than $250 million in originations last year. “I’ve fielded over 300 inquiries from borrowers about these loans in just the last few days,” he added. “People are telling me that they’re being harmed and don’t know how they’ll make payroll. The SBA needs to act.”

What Hurn is experiencing in Florida is not just an isolated incident. Thousands of small businesses are under siege nationwide as Americans’ have gone into isolation in response to the pandemic, helping precipitate a full-blown economic crisis. As of March 17, the coronavirus – also known as Covid-19 – had leapfrogged across the globe since appearing in China in December, 2019, infecting people in 100 countries. There are now some 272,000 confirmed Covid-19 cases worldwide and close to 11,300 deaths, according to data compiled by scientists at Johns Hopkins University in Baltimore.

In the U.S., the number of cases has cleared 19,000 as of March 20, the death toll has climbed above 230, and coronavirus cases have been recorded in all 50 states. The Center for Disease Control reports that the number of cases are growing at 25-30% per day. But experts warn that, because of a lack of testing, the actual number of cases is certainly higher.

Covid-19The outbreak is drawing comparisons to the worldwide influenza pandemic of 1918. Popularly known as the “Spanish Flu,” that virus may have claimed as many as 100 million lives, according to estimates by the World Health Organization. Medical officials say that persons 70 and older and those with underlying medical conditions, such as a weakened immune system, are most at risk in the current pandemic.

“What makes this disease so lethal,” says Rachel Scott, a family physician in Austin, Texas and the author of “Muscle and Blood,” a pathbreaking study of occupational diseases, “is that people in the vulnerable population who come down with the virus are prone to contract severe acute respiratory distress syndrome. In ARDS, the virus destroys the sacs in the lungs, preventing oxygen from being delivered into the blood stream. By the time people with severe ARDS are hospitalized and treated with a ventilator, it may already be too late.”

To blunt the accelerated pace of contagion, governors and mayors are putting restrictions on citizens by curbing gatherings and monitoring interactions. Governors in 44 states have forced restaurants and bars to close shop in an unprecedented regulation of U.S. citizens. Meanwhile, millions of Americans self-quarantined and self-isolated and re-examined how they interact socially, commercially and professionally. Increasingly draconian controls to moderate the trajectory of the outbreak are not only turning cityscapes into ghost towns from coast-to-coast but throwing a giant monkey wrench into the U.S. economy.

Treasury Secretary Steven Mnuchin has reportedly warned Congressional leaders that the unemployment rate could spike to 20%.

“EIGHTY PERCENT OF AMERICANS ARE LIVING PAYCHECK TO PAYCHECK. WE’RE IN A NATIONAL EMERGENCY”

Former Labor Secretary Robert Reich has gone Mnuchin one better amid reports that 1.2 Americans had filed for unemployment insurance. In an interview on MSNBC Thursday, Reich said he feared that the unemployment rate is likely to hit that 20% mark in the next two weeks. “Eighty percent of Americans are living paycheck to paycheck,” he declared ominously. “We’re in a national emergency.”

The pandemic and the ensuing economic crisis is also casting a giant shadow over the 2020 presidential election. “It’s a black swan event that wasn’t anticipated by any of the candidates, and the reverberations for the election are going to be huge,” said Richard Murray, a political scientist and elections expert at the University of Houston.

For the past 50 years, political analysts have generally agreed, the condition of the U.S. economy was a key predictor – if not the key predictor – to the outcome of presidential elections. President Jimmy Carter, for example, had the bad fortune to preside over a problematic economy marked by oil-price shocks and energy shortages, mile-long queues at gasoline stations, and sky-high interest rates. There was even a new word — “stagflation” – coined for the phenomenon of stagnant growth and runaway inflation, recalls David Prindle, a government professor and expert on voting behavior at the University of Texas at Austin.

There were, of course, additional negative complications to Carter’s presidency. Most notable was the “Hostage Crisis” in which Iranian students attacked the U.S. Embassy in Teheran in the fall of 1979, held 44 American diplomats and aides captive for more than a year, and made Carter look hapless and helpless. Nonetheless, Ronald Reagan, a former governor of California and longtime matinee idol, hammered Carter mercilessly on the economy, demanding: “Are you better off than you were four years ago?”

“IN 1980, AS IN EVERY ELECTION, THERE WERE MULTIPLE CAUSES, BUT THE DECIDING FACTOR WAS THE ECONOMY”

Answering that question sent Carter packing to his Georgia peanut business. “In 1980, as in every election, there were multiple causes,” says Prindle, “but the deciding factor was the economy.”

President TrumpA healthy economy can serve as a mighty bulwark against opponents in a president’s bid for a second term. In the mid-1990s, an expanding economy and relentlessly buoyant stock prices – a Dow Jones Industrial Average so robust in the mid-1990’s that Federal Reserve chairman Alan Greenspan famously admonished investors for their “irrational exuberance” – allowed Bill Clinton to sail to re-election. (The good times also buffered Clinton during the ensuing sex scandal involving White House intern Monica Lewinsky.)

As the election year of 2020 dawned, a decently performing economy seemed to be serving President Donald Trump’s cause. Before the World Health Organization declared the coronavirus outbreak a pandemic in early March, the U.S. economy was coming off 10 full years of job growth and the unemployment rate had sunk to 3.5 percent, its lowest level in 50 years. Wages were also rising by nearly 4 percent per annum, noted Aparna Mathur, a labor economist at the business-backed American Enterprise Institute in Washington, D.C. “The economy is not spectacular,” she said, “but everything is moving in the right direction.”

Since then, however, the economy has been slammed as an alarmed country reacted to the pandemic. The NBA and NHL closed down their basketball and hockey seasons. Major League Baseball called a halt to spring training. The NCAA initially declared that “March Madness” would proceed and that hoopsters would perform before empty arenas, but then it pulled the plug. Even professional golf, an outdoor sport, hung up its cleats, announcing that The Masters, played at Augusta (Ga.) National Golf Course in April and the crown jewel of professional golf, would be postponed indefinitely.

empty arenaAlmost overnight, colleges and universities shut down classrooms, emptied their dorms, and opted for online coursework. Some 33 million schoolchildren in 41 states have ceased attending school. Hundreds of companies, including Amazon and Microsoft in Seattle, a city hit hard by the coronavirus, are requiring their employees to “telecommute” by working at home on their laptops.

The CDC at first advised Americans not to cluster in groups of more than 25 people, then cut that figure to 10. Americans are being prodded to engage in “social-distancing” by avoiding shaking hands and separating themselves from others by a separation of three-to-six feet from others. San Francisco has gone still further, grounding cable cars, closing down clubs and bars and restaurants and effectively putting the city on lockdown.

The city of Boston called off its iconic St. Patrick’s Day parade, Broadway theaters dimmed their lights, and Starbucks forbade customers to sit down in its coffee shops. Major events like South by Southwest, the music and cultural festival in Austin, Texas, was canceled, depriving Texas’s capital city of some $350 million in economic activity.

Jilting the festival cuts deeper than the losses to airlines, hotels, bars, restaurants, and music venues, notes Alfred Watkins, a Washington, D.C.-based economist and chairman of the Global Solutions Summit, an international consulting firm. “You have all of these people in Austin who are running events and they’re hiring caterers for sandwiches and refreshments,” he said. “You have independent contractors like videographers and photographers, sound-equipment suppliers, Uber and Lyft drivers, hairstylists, and even freelance entertainment journalists — all of whom are no longer making money. For these entrepreneurs,” he added, “losing this event is a little like retailers missing out on the Christmas season. It’s when they make their money.”

The airline, travel, leisure, and tourism industries are in free-fall. Major cruise lines suspended bookings and cut short voyages after horrific reports of coronavirus outbreaks among passengers trapped at sea, temporarily putting a $38 billion industry in dry dock.

The conventions industry, which has come to a standstill after wholesale cancellations, remains a vastly under-appreciated sector of the U.S. economy, argues George Brennan, former executive vice-president of marketing at Arlington (Va.)-based Interstate Hotels and Resorts, the world’s largest independent hotel management company.

These mass gatherings are an unheralded engine of growth, he says, packing a bigger economic wallop than they get credit for. “Conventions typically draw anywhere from 2,000 to 25,000 people,” he said. “They run 6,000 to 8,000 attendees on average, and most can only be accommodated by the top 10-20 U.S. cities, which include Chicago, San Francisco, Las Vegas, Atlanta, New Orleans and Orlando.

“Conventions are often multi-dimensional,” he added. “Attendees usually spend three to five days in town. They often shop at clothing stores and other retailers. They’ll take in sporting events or, if they’re in New York, a Broadway play. They’ll go to attractions like the San Diego Zoo, or spend an afternoon on a golf course in Florida or California.”

Conventions generate a tremendous amount of commerce and revenues for vendors and exhibitors. As an example, Brennan cites his former employer, the hospitality industry. “At hotel conventions,” he said, “you’ll see people there selling curtains and sheets, soaps and towels.”

In addition, many trade groups – Brennan cites the National Association of Civil Engineers and the American Medical Association as examples – count on the annual convention as an important component of their organization’s annual revenues. “When you pay to attend,” he says, “a significant portion goes back to the association. The convention often covers the yearly salary for a group’s staff.”

nyseAmid the dramatic behavioral changes, the stock market registered several days of panic-selling in March, capped by a record, single-day plunge on March 16: The Dow Jones index plummeted 2,997 points, the third-worst percentage loss in history. After flirting with the level at which the Dow was reading on Inauguration Day Jan. 20, 2017, the market continued see-sawing this week, herky-jerkying between mini-rallies and skids.

Hoping to prevent a coronavirus recession, the U.S. Senate adopted by an overwhelming, 90-8 bipartisan vote a $100 billion bill sent by the Democraticac-led House that expands free testing for the coronavirus, provides for paid sick leave and medical leave for some workers, and an emergency unemployment insurance and food assistance programs. The bill was signed late Wednesday night.

Meanwhile, Congress was taking up a monumental $1 trillion economic rescue plan proposed by the White House on St. Patrick’s Day (March 17) that included a bailout for the hotel and airline industries, help for small businesses, and $500 billion in direct cash payments to Americans households.

“We’re looking at sending checks to Americans immediately,” Treasury Secretary Steve Mnuchin said in a Rose Garden press conference at the White House on St. Patrick’s Day. By immediately, he added, “I’m talking about the next two weeks.”

“IF WE LOSE OUR SMALL BUSINESS ECONOMY, IT WILL BE CATASTROPHIC”

The Trump Administration’s proposed help for small businesses has a strong supporter in Karen G. Mills, former SBA administrator and senior fellow at Harvard Business School. During her tenure in the Obama Administration, Mills was a troubleshooter in several crises including the Great Recession and Hurricane Sandy. “In a worst-case scenario with this virus contagion, getting loans to people through banks is not going to be fast enough,” she told deBanked just before the White House drew up its rescue plan. “They’ll need direct loans to people and other aid. If we lose our small business economy, it will be catastrophic.”

So how will the pandemic and the state of the economy play out politically in the November, 2020 general election between President Trump and former Vice President Joseph Biden, the presumptive Democratic nominee? The result remains shrouded in the fog of the future, of course, but the election’s contours are coming into focus.

AFTER WAR AND INFLUENZA, AMERICANS VOTED ENTHUSIASTICALLY FOR HARDING’S PROMISE OF “NORMALYCY.”

Having seen him through numerous scandals, impeachment, and a trial in the U.S. Senate, Trump’s political and electoral following has been put to the test. Yet his backers remain unshakably loyal in a way not seen in 80 years, observed the University of Houston’s Murray. “More people are dug in now than at any time since the 1930s,” he says, as roughly 43% of the electorate is firmly lodged in Trump’s camp. “Trump’s support has been remarkably stable.”

The business community is a key demographic in the pro-Trump cohort, notes Ray Keating, chief economist at the Small Business & Entrepreneurship Council, a Washington, D.C. advocacy group claiming 100,000 members. “We have not polled our membership,” Keating says, “but when you look at the data they overwhelmingly vote Republican. We find that support for Donald Trump is clear and substantial.”

Richard Yukes, a Las Vegas-based oilman and longtime entrepreneur who votes his pocketbook, will be pulling the lever for Trump in the November election. The reason? Trump not only presided over a robust economy for the past several years, Yukes says, but the president slashed Obama-era regulations imposed on his industry. “Government regulation and bureaucratic regulation often get mishandled and misdirected by federal bureaucrats and Trump is for less regulation,” Yukes says. “I think America works best with less regulation.”

The owner and operator of oil wells in Wyoming, Yukes benefited handsomely last year when Trump’s Environmental Protection Agency relaxed rules governing methane leaks. The oilman reckons that complying with the regulations had been costing him an extra $1,500 per well each year.

No matter how well the economy has performed in the past three years, however, the pandemic economy promises to be a “game-changer,” says political scientist Murray, and history shows that voters are likely to take stern measure of the incumbent president’s performance during any a crisis.

Trump’s initial response to the coronavirus reminds Murray of Woodrow Wilson’s reaction to the Spanish Flu pandemic in 1918 while World War I was still raging. “As the U.S. was approaching climactic battles in Europe, President Wilson suppressed the news of the flu and the story didn’t get out though eventually people knew about it,” Murray says.

Wilson’s deceit hurt Democratic candidates who were battered in the 1918 midterm elections, just a few days before the November 11 armistice. Two years later, after Wilson had a stroke, the Democratic presidential candidate got crushed in the 1920 election by Warren G. Harding, a Republican senator from Ohio.

After war and influenza, Americans voted enthusiastically for Harding’s promise of “normalcy.”

Michael Bloomberg Says Democrats Off Limits From Investigations

December 7, 2019
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BloombergSuspect Bloomberg News might have a bias or an agenda? On Friday, Michael Bloomberg, whose company owns Bloomberg News, told CBS news that his reporters were restricted from investigating Democratic candidates while he runs for President.

“We just have to learn to live with some things. [The reporters] get a paycheck. But with your paycheck comes some restrictions and responsibilities.”

CNN reported that inside the company reporters are frustrated by how difficult this will make their jobs.

Bloomberg is an influential player in politics.

As previously reported by deBanked last year, Bloomberg Senior Editor Robert Friedman thanked a state senator from New York on twitter for proposing legislation in response to a story he oversaw in 2018. When deBanked pointed it out, Friedman quickly deleted the tweet. The democrat-led legislature then went on to pass a law that relied almost entirely on the Bloomberg news story. That law was the restriction of entering Confessions of Judgment in New York against out-of-state debtors.