ss_blog_claim=bd50edc517cf0b7549fe6b5f63b6b5f8 The SLS Business Finance Blog: November 2008

Sunday, November 30, 2008

Welcome To Bank Of Amex

On Nov. 11, 2008, American Express Co. won approval from Federal Reserve banking regulators to become a commercial bank. The fourth largest U.S. credit card issuer said it is taking steps to cut borrowing costs and give it access to government funds. Regulators said they approved its application because of the "unusual and exigent circumstances" currently shaking up financial markets. The Fed's approval for AmEx was similar to the decision it made in September to transform the country's two biggest investment banks, Goldman Sachs Group Inc. and Morgan Stanley, into bank holding companies. AmEx can now issue bonds that are government guaranteed through the end of June 2012.

Industry analysts said the primary concern about AmEx is not funding, but consumer credit losses. The funding pressures are adding to the credit pressures the company is facing. Default rates among its credit card clients in the United States almost doubled in the third quarter of 2008.

Southern Lending Solutions

Saturday, November 29, 2008

Gift Ideas

The holidays are once again upon us and families all over will be looking harder than ever for the perfect toys to give their children. Nothing means more to a child than opening up a gift on Christmas day. More and more parents are searching for gift ideas on-line. The Internet makes searching for gifts more economical and saves time. Over the years name brand toys purchased at the mall have become more and more expensive for the average family. Between the cost of gas traveling to and from, as well as the high retail price make it difficult for anyone to shop. Online shopping makes the search for cheap toys possible and practical. Consider shopping online for the coming holiday season.

Some of the toys young teens are looking for are the latest gaming systems. Nintendo Wii has become of the of the hottest gift items over the year and makes a great gift that all teens love. The Nintendo ds also ranks as one of the more popular gaming systems younger children and teens enjoy playing. As the holiday season approaches consider on-line shopping for your purchases.

Friday, November 28, 2008

Consulting Projects and ACH

Consultants, like other professionals, benefit from ACH too. Most consultants have the business model in their businesses to try to attract long term projects or ongoing monthly work with their clients. There is no easier way that we've seen to track ongoing monthly billing and collection than through ACH. The web based browser allows for secured login from any computer with web access so consultants can immediately check and verify funds so they can continue or halt the ongoing projects they have with their non-paying clients. This allows consultants to use their most valuable asset, their time, to the fullest in helping clients and generating revenue.

Southern Lending Solutions

Wednesday, November 26, 2008

Professional Firms and ACH

ACH is a growing trend overall but especially so with professional services firms. These firms are the most likely to have regular customers on an ongoing basis and are likely accepting checks from them as payment for services rendered. Since ACH is an automatic draft out of a business or personal checking account, its like the automation of the check payment process.

In fact, its biggest benefit is often hidden. That benefit being the immediacy of knowing if the funds are in the account. This is so vitally important to the professional firm as they are selling 2 things: their expertise and their time. ACH helps with the lessening of wasted time on clients who aren't paying. They can immediately shift their efforts and expertise to the clients who are in good standing and keep those billable hours high.

So while merchant accounts are a good fit for those working with the public, those working on an ongoing basis with their clients may want to consider ACH instead.

Southern Lending Solutions

Tuesday, November 25, 2008

ACH Could Become A Growing Trend

Interchange has taken fire from all sides in recent years. Merchants, retail organizations, as well federal and state regulatory agencies have all questioned the ethics of interchange. Just as a reminder, interchange is the cost that Visa and MasterCard assesses for using their information highway to complete a credit card transaction. The days of Visa & MC’s “This is how we do it!” thought process might be nearing an end. Both mega giants have employed fear tactics in believing that electronic fraud is on the rise, therefore justifying the ever-increasing cost of using their infrastructure. Legislators and the merchant public at large are receiving highly conflicting reports as to whether there is truth to these statements. In my opinion, the only reason that the 2 mega giants charge interchange to merchants is because they can.

ACH (Automated Clearing House) as a whole is a substantially cheaper cost per transaction. Like checks, ACH is processed at a fixed cost. What’s the hurdle you ask? Getting cardholders and merchants to switch over to this mindset. The bankcard industry is deeply entrenched and will take time and deep advertising pockets to get it dethroned. It’s still many years down the road before ACH can compete with the brand popularity of the super giants, but I have high hopes.

Southern lending Solutions

Monday, November 24, 2008

2008 MasterCard Worldwide Emerging Markets

With global economic growth being driven by emerging markets at a rate of 12 to 1 compared to mature economies, new markets are expected to become increasingly important investment and business centers.

MasterCard just completed evaluations based on: business climate, political environment, economic growth, commercial connectivity, and quality of life. Based on these factors MasterCard has determined the following countries to posses the greatest potential in the payments industry. China, Eastern Europe, South Africa, and Latin America. South East Asia is predicted to have over 400 million subscribers purchase goods and services via mobile phones. The leading growth sectors include: transport, followed by entertainment and sporting events. Sports teams worldwide are now offering ticket purchases via mobile phone technology.

Southern Lending Solutions

Friday, November 21, 2008

S&P: Defaults Rise as Credit Quality Erodes

Reprinted from The Monitor, The Authority on the Commercial Finance Industry

Eighty-five companies defaulted through Nov. 11, 2008, affecting debt worth $284 billion, according to Standard & Poor's. The rise in defaults in 2008 is in sharp contrast with trends in prior years, when only 22 defaults were recorded in all of 2007 and 30 in 2006.

Of the 85 defaults, 70 are domiciled in the U.S., five are from Europe, four are from Asia, three are from Canada, two are from Mexico, and one is from Russia, according to S&P in an article titled "Global Bond Markets' Weakest Links And Monthly Default Rates."

"In 2008, defaults have increased significantly, particularly in the U.S.," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "The U.S. speculative-grade default rate increased for the 10th consecutive month, reaching 2.86% in October, up from 2.68% in September and a 25-year low of 0.97% at the end of 2007."

The default rate in Europe increased marginally to 1.01% from 1.00%, while the emerging markets default rate rose to 0.82% in October from 0.17% in September.

The U.S. also leads in the number of weakest links, with 156 of the 207 entities, or 75%. Weakest links are defined as issuers rated 'B-' or lower with either a negative outlook or with ratings on CreditWatch with negative implications, and they are at greater risk of default.

Editor's Note: When the largest companies, the ones S&P measures, are having default issues, this then has a ripple effect across the economy to affect supplies, middle market and smaller businesses as well.

Southern Lending Solutions

Thursday, November 20, 2008

First Personal Injury

Personal injury claims require a vast knowledge of the legal system. The average person navigating these waters would be lost in a myriad of legal terms and bureaucratic red tape. A high proficiency in personal injury law is required in order to make sense of anything that may come your way.

Expertise in bicycle accident claims is second to none with First Personal Injury. They understand the dangerous conditions the open roads often throw at bike riders. Bicyclist present a unique obstacle in the legal industry due to circumstances involved with other parties. Some accidents occur due to poor driving conditions on the road. Attorneys at First Personal Injury will carefully advice you as to the strength of your case, and than offer clear and concise options to win compensation that is owed you.

Whiplash injuries present yet another challenge in the legal industry. Pain and duress from such injuries are often severe with rehabilitation that is extensive. First Personal Injury will handle the myriad of paperwork involved with whiplash injury claims so that you can spend your time recovering. Everyone has the right to file a claim when involved in these types of accidents. Having the right attorney can be the difference between getting back to your life and being bogged down in legal red tape.

Contact a team that will fight for your rights and give you peace of mind. Attorneys at First Personal Injury have the experience and compassion to see you through these difficult times.

Wednesday, November 19, 2008

How to Improve Your Credit Score

All 3 credit bureaus generate a FICO score. FICO is a proprietary formula calculated by Fair Isaac to determine the credit risk of the borrower. Due to the fact that they all don't get the same information, the scores tend to vary, sometimes in a small tight window and sometimes as much as 50 or 60 points.

Generally speaking, 700 and higher is considered to be a good score. Often this credit score will get A or B+ paper pricing for a lease.

So how do we raise our credit score? One of the easiest ways is to tackle the Revolving Debt. Revolving Debt is all the non-mortgage debt listed in a credit report. All revolving debt (usually credit cards and store cards) have the common trait of once a bill is paid, then that amount of credit becomes available for borrowing again. Think of a CC where when you pay $500, then your credit limit increases by $500 allowing you to use that $500 for another purchase. So one of the first things we look at (as well as our funders and anywhere else where you borrow) is the % of Revolving Debt available.

Why? Because people believe (rightly) that the first thing to happen when someone is struggling financially is more is put on their CC and that % goes down. So the technique for reducing your revolving debt and increasing your FICO score is to take the minimum payment showing on your bill and add 20% to it (multiply by 1.20). Make this payment for 3 straight months and your Revolving goes down and your FICO goes up. 3 months are required as credit reports only update every 90 days so they need to see at least 3 months of doing this. Its not uncommon to see scores increase as much as 40 or 50 points in 90 days, which translates into a significant savings on lease payments.

Southern Lending Solutions

Tuesday, November 18, 2008

What Letter Are You?

If you don't know what letter you are (A, B, C, or D) in terms of your credit then you have no idea how much a lease/finance agreement would cost you.

The first step is that in most states you are allowed at least 1 free look at your credit report from the big 3 bureaus: Experian, Equifax, and TransUnion. When companies, especially mortgage companies say they take the middle score, what they mean is that they take the FICO credit score (an assessment of your credit risk) that is the middle one of the 3 bureaus since all 3 bureaus don't necessarily have the same information in them but they all calculate a FICO score. For a privately owned small business less than 10 yrs old, this is the factor that most determines your credit profile when being evaluated for approval and pricing on a lease and knowing gives you an opportunity to get the best pricing possible for your credit profile

Southern Lending Solutions

Monday, November 17, 2008

NAELB Eastern Regional Conference

The NAELB, the National Assn of Equipment Leasing Brokers, is the largest organization in Equipment Leasing or Asset Based Lending that supports the small, independent leasing/financing co like myself.

The 2nd biggest conference of the year was held in Atlanta, GA and I was happy to learn that not only are fellow brokers like myself still in business and actively seeking deals, of the 52 funders who were there, only 2 had a freeze on of accepting new deals. All the remaining funders are actively seeking business and a couple of them announced new credit facilities or other money raises that are a signal that business is being done.

So the answer to the question of "Can I get a lease for my small to mid sized business?", the answer is clearly Yes.

Southern Lending Solutions

Thursday, November 13, 2008

Other Equipment Types for TRACs

The TRAC lease is most common for transportation. However, any lease that has a residual value purchase option that is other than 10%, $1 or Fair Market Value (FMV) can also qualify as a TRAC lease. These 3 are the most common lease structures but what about a piece of equipment like a PC. After 36 months its not worth very much. If the negotiated price is 5% of the value new then its both a FMV lease and a TRAC lease. All TRAC leases are FMV but not all FMV leases are TRACs. Why? Because FMV leases have no adjustments to them during or at the end of the term like a TRAC can. What's important to remember is that both qualify as Operating Leases for maximum tax deductibility.

Southern Lending Solutions

Wednesday, November 12, 2008

On the Right TRAC

TRAC leases have an adjustment clause that can be enforced in an Open ended TRAC lease. We advise our clients to only use an open ended TRAC for transportation since they can influence the purchase price through maintenance, wear and tear and usage. The residual buyout price adjusts, however, the purchase option remains so regardless of price, you can return the car.

The rate for a TRAC is almost always lower than the rate for a Finance(Capital) Lease since the residual becomes an area where the leasing company can make $$. Think of the car where it can be purchased for $15k after 36 months or returned. Well if sold, they profit and if returned and remarketed and sold for any amount over their adjusted price they profit. In return for that opportunity to profit, the lease rates and payments go down so its a win/win situation.

Southern Lending Solutions

Tech Geek? Check our sister blog

Tuesday, November 11, 2008

TRACs Issues

So we have a TRAC lease and we know whether or not its an open ended or closed ended TRAC lease . So what issues do we have to contend with? Since there is a residual and a buyout price with purchase option in this lease, most of the main issues are about the residual.

So if you wanted to know why US based automakers got out of the consumer leasing business, here is why:

ABC Auto Company leases a gas guzzling SUV to client XYZ for 36 months. The value of the car new is $35,000 and the agreed upon price in advance, even with potential for adjustment when in an open ended TRAC lease, is $20,000. So this means the car can be purchased by the client for $20,000 at the end of the 36 month term or given back to the dealer since its a purchase option and not a purchase requirement.

Fast forward 36 months to now, gas prices have come down but everyone knows there's a chance its only temporary so who wants to own an SUV under those circumstances?? No one of course so client XYZ gives the car back. Now ABC has its value on its books of $20,000+/- room for a profit at that sale price of 10-20%. However, now no one wants this car and the best they can get for it is $12,000. What happened to the remaining 8000? Not only did they not make a profit, they took a loss and their books show a loss of 8k on the sale of the car. Enough of these make ABC's books look very weak and they decide to get out of leasing.

That has happened to the big 3 US automakers and now they don't do consumer leases.

Southern Lending Solutions

P.S. If you like this info and want to learn more about how Technology affects small businesses, please check out my new blog. I hope you like it as much as you like this one.

Sunday, November 9, 2008

TRAC Leases for Cars and Other Transportation

The most common lease type for the company car or other transportation is known as a TRAC lease. TRAC stands for Terminal Rental Adjustment Clause. What it means is that the Price can (but does not have to be) be adjusted at the end of the lease term. For instance, a car is leased for 36 months and the pre-negotiated residual value/buyout price is $15,000. Well one type of TRAC lease allows for re-negotiation at the end of term based on factors like usage and miles so the buyout price can rise for fall. This is similar to how most consumer
carleases work and its known as an Open Ended TRAC lease.

The other main type is a Closed Ended TRAC lease. This is when there is no renegotiation at the end of the term. It's used in transportation as well but is more common for other equipment types. The most common type for cars and other transportation is the Open Ended TRAC lease. All the benefits of leasing still remain like full tax deductibility, purchase option at the end so you can choose to buy the car or return it, and reasonable monthly payments.

Southern Lending Solutions

Thursday, November 6, 2008

Inspiron Logistics Corporation

According to the National School Safety and Security Services, 15 school shootings took place on US compasses in the 2005-2006 school year resulting in 27 deaths. In response to this tragedy Inspiron Logisitcs Corporation created the Wireless Emergency Notification System (WENS). In case of emergencies on school campuses the system immediately sends out wireless text messages to all of its students alerting them to the news.

Inspiron Logistics, based out of Ohio leveraged this system to create a new form of advertisement for customers. The Short Message Service (SMS), as it has been come to know is a replica of the original WENS system, yet altered for a business application. Inspiron teamed with SparkBase, a credit card processor with a vast portfolio of card loyalty merchants. The new system was designed to alert customers of last minute promotions, sales, and reward programs. Scott Dettling, president of Inspiron stated the business model was created based on the need to get information out to a base quickly and efficiently. The Short Message Service may be suitable for any business looking to relay information in this fashion.

Todd Rome
Director Of Bankcard Services
Southern Lending Solutions

Wednesday, November 5, 2008


Steve Case, former AOL CEO who runs his own investment firm, Revolution LLC, unveiled RevolutionCard earlier this year.

RevolutionCard is a cutting edge program to benefit both merchants and consumers.RevolutionCard eliminates costly interchange fees for merchants while simultaneously providing consumers with enhanced PIN-based security, identity protection, and periodic merchant discounts and incentives. The card has no picture or signature of the consumer creating a safer environment in which to perform credit based transactions. With PIN-based authentication and functionality, your 4 digit Personal Identification Number (PIN) is required to complete all purchases, which helps protect you from fraudulent purchases.
RevolutionCard allows you to create temporary PINs, adding an extra layer of security. The RevolutionCard can be used as both a credit card and store valued card.

RevolutionCard was launched in February of 2008 in conjunction with Fifth Third Processing solutions to handle the backend transactions. They are currently negotiating with several other processors to expand their footprint. Keep a look out for these guys in the future.

Todd Rome
Director Of Bankcard Services
Southern Lending Solutions

Monday, November 3, 2008

When Lower Payments are More Expensive than Higher Ones

When financing a car, the # 1 question to ask is this: Do I need to finance/lease in order to get the car I want or can I pay cash? If the answer is the former and they have a business, then leasing the car through the business is the best value. I copied these #'s from one of my sources for leasing versus buying with a car note with a standard 3k down and financing $16.66 per thousand, as is standard for car financing.

The advantages of a lease include: 1) 100% financing or little to no down payment and 2) Most importantly, maximum tax deductibility. As you can see, the value of the car and interest on it are no deductible under the consumer financing but are under the commercial lease through a business. Financing looks cheaper until you get to tax time and the dollar for dollar expensing of the commercial lease wins out every time.

So if you can't pay cash for the car you want and you have a business, then a lease is the answer. For questions about my calculations, please feel free to email me directly at

Buy w Note
Value of the Car 25000
Down Payment 3000
Buyout Price at End of Term 0
Amt Financed 22000
Months 60
Monthly Payment 416.5


Monthly Rate 0.443%
1.017% Rate on
36 Month
Rate on Car Note 5.31%
12.20% Payment

Tax Deductibility 0
Net Cost 24990