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Smaller Lenders Feeling Squeeze Of Credit Crunch

The Wall Street Journal: “Smaller Lenders Feeling Squeeze Of Credit Crunch

Invoice Factoring from Charter Capital is your Alternative when lenders say “No”

As banks continue to “tighten up” their lending practices due to continued pressure from federal and state bank examiners, small business owners are finding in increasingly difficult to secure the financing they need to grow their business.

The Difference Factoring Makes
An increasingly popular way that small business owners secure capital for their growing business is factoring. Invoice factoring (also known as Accounts Receivable Financing) is the practice of selling your accounts receivable (invoices) at a discount to another company like Charter Capital. You immediately get the money from Charter Capital and we collect on the invoices.

It is important for small business owners to know that factoring is not a loan and will not show up as debt on the company’s balance sheet.

With factoring, you are free from many of the restrictions placed upon your business by traditional bank financing such as loans or lines of credit. Most importantly, with factoring, you are free to grow without having to give up equity or control of your business. This is because factoring your Accounts Receivable is technically the sale of an asset, and the funding you receive from us is not debt, but a cash asset.

In today’s competitive marketplace, getting debt-free funding in the form of factoring can give businesses the edge they need to succeed.

Fallout From Credit Crunch Creates Another One

Source: Washington Post | Tuesday, November 20, 2007

The credit crunch is back.

After improving in September and early October, markets in a wide variety of debt — including for home mortgages, consumer loans, and corporate buyouts — have sharply deteriorated in recent weeks. Investors view much of this debt as riskier than they did even at the height of the August credit crisis and are requiring higher interest rates as compensation.

While markets are behaving in a more orderly fashion than they were in August, many on Wall Street fear that the situation will get worse before it gets better. “This is just dragging on longer,” said Axel Merk, a portfolio manager for Merk Hard Currency Fund. “We’re very early in this.”

Economists increasingly worry that banks are suffering such massive losses that they will be forced to cut back their lending to consumers and businesses. That would slow the economy, much as the savings and loan crisis did in the early 1990s. Yesterday, an analyst predicted that Citigroup, the world’s biggest financial services company, would suffer another $15 billion in losses in the coming six months from its exposure to exotic types of debt.

That prediction, along with fresh negative data about the housing market, drove the Dow Jones industrial average down 218 points, or 1.7 percent. Financial markets are pointing to a strong possibility of even more bad news.

For example, futures markets indicate that there is a 20 percent chance that the Federal Reserve will cut interest rates by half a percentage point or more at its next policy meeting Dec. 11, even though it is widely understood that the central bank would do so only if there were highly negative economic news between now and then. An index measuring the cost of insuring against credit losses on 125 financially sound companies reached an all-time high yesterday. And the market for securities backed by commercial real estate loans, which had been little affected through the August crunch, is showing strain.

In August, as investors concluded that defaults on U.S. mortgage loans would cause massive losses, worldwide markets for a variety of complicated securities all but shut down. But what is happening now is different. The markets are working reasonably well, with transactions taking place. But investors have had time to digest just how great the losses may be, and how widely the impact may ripple, and they do not like what they see.

The direct losses from mortgage foreclosures will be about $400 billion, economists at Goldman Sachs estimated in a report last week. If that were the extent of the losses, the financial system could easily absorb them. But because of the way banks and other institutions work, the losses could spread far more widely.

Banks are required to keep capital on hand so they can weather losses. The mortgage-related losses are cutting into their capital and thus could cause a commensurate drop in how much they can loan. Taking into account that “multiplier” effect, the mortgage problems could reduce by $2 trillion the credit available to consumers and businesses, Goldman estimated in the report.

“The implications are that it will be harder for ordinary people to get loans,” said Jan Hatzius, chief economist at the investment firm. “That’s true not just in mortgage land but also for consumer loans, for corporate loans, for commercial real estate.”

There are tentative signs that credit is becoming less available. In October, 28 percent of senior loan officers surveyed by the Federal Reserve said their banks had tightened lending standards for consumer loans; 2 percent had loosened them.

If banks severely curtail lending, the situation could mirror that of nearly 20 years ago, when bad loans in commercial real estate and other sectors led to massive losses by savings and loans. They then cut back on lending, a major cause of the 1990 recession. But Hatzius notes that such a dire situation could be avoided if the institutions affected raise more capital through other means.

Parts of the market for packages of loans are functioning reasonably well; almost none were in August. Now buyers and sellers are both at the table. However, investors have concluded that many debt securities are riskier than they thought then, and they are requiring higher interest rates as compensation.

And it’s not only in the troubled home mortgage sector. For example, packages of high-quality loans for office buildings and other commercial properties had interest rates 0.7 percentage points higher than comparable Treasury bonds earlier this year, according to a Morgan Stanley index for commercial mortgage-backed securities.

During the August credit crunch, that premium rose to 1.5 percentage points before dropping in September and early October. But yesterday, investors required an interest rate premium of 1.7 percentage points to take on the risk of lending for commercial real estate.

“People are looking at things and saying, ‘Hey, I’m going to price the market according to what I expect will happen, not what I currently see happening,’ ” said Alan Todd, head of commercial mortgage-backed securities at J.P. Morgan, who noted that delinquencies on commercial mortgages are starting to pick up from historic lows.

Another example of the spreading sense of worry: Wall Street is closely watching the rash of bad news from bond insurers, who guaranteed complicated securities that are now going bad in portfolios across the globe.

“Will they be able to pay up on the claims as these defaults and foreclosures roll in on the underlying mortgages?” said Ed Rombach, senior derivatives analyst at Thomson Financial. “If they can’t, there’s going to be hell to pay. It’s going to lead to a whole new round of downgrades of these securities. Those downgrades will lead to a whole new round of write-offs for Citigroup and investment banks and commercial banks and hedge funds.”

Yesterday, insurance giant Swiss Reinsurance took a $1 billion write-down of losses on complicated securities tied to home mortgages, another example of how the problems tied to the U.S. housing market have spread widely and unpredictably — and of how companies are still coming to terms with the scope of the losses.

Economists speak of “tail risks,” meaning events that are unlikely to happen but would cause major disturbances if they did. And in recent weeks, many analysts think that the likelihood of these risks, while low, has risen.

Laurence H. Meyer, a former Federal Reserve governor, described three such risks in a note to clients of his forecasting firm, Macroeconomic Advisers. A major financial institution could fail or come close to failing. Government-sponsored housing-finance companies Fannie Mae and Freddie Mac could find they are more exposed to the mortgage problems than investors have factored into their stock and bond prices. And the market could lose faith in the companies that insure debt against credit losses.

“The general point is that the current circumstances are marked by sizable loses on credit positions, with no one quite sure of what the eventual magnitude of those losses will be or where they are located,” Meyer wrote. “That raises the possibility of financial markets becoming more turbulent.”

Charter Capital Joins the Houston Hispanic Chamber of Commerce

Charter Capital is pleased to announce acceptance of its membership to the Houston Hispanic Chamber of Commerce.

HOUSTON, TX – November 7, 2007 – Charter Capital, recognized as one of the most flexible providers of working capital to small and mid-sized businesses, announced today acceptance of its membership to the Houston Hispanic Chamber of Commerce.

This affiliation will provide Charter Capital with even greater opportunity to help shape the landscape of Houston’s small business community. Hispanic-owned businesses are one of the fastest growing business groups in Houston, and one of the most financially underserved, as well.

“It is without a doubt that the Houston Hispanic Chamber of Commerce is central to Hispanic business and cultural affairs and we are glad to give our support,” says Keith Mabe, Director of Operations for Charter Capital.

“By working with the Houston Hispanic Chamber of Commerce we are inspired by true professionals that are dedicated in their perseverance of success for Hispanic business owners and the community at large.” Mr. Mabe added.

Headquartered in Houston, Texas, Charter Capital (https://www.chartercapitalusa.com) provides working capital funding via a process commonly referred to as “factoring of accounts receivable”, asset-based lending, and cash flow solutions for businesses nation-wide including: freight delivery and transportation, repair, maintenance and inspection service providers, consulting firms, most other service providers, staffing firms, distributors, wholesalers and manufacturers. Charter Capital also serves business in Dallas, TX; San Antonio, TX; Austin, TX; Atlanta, GA; Albuquerque, NM; Phoenix, AZ; Nashville, TN; Indianapolis, IN; Oklahoma City, OK; and cities nationwide.

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Visa Press Release Shows Optimistic Outlook for the Future of Small Business

New Quarterly Report from Visa – Small Business Spend Insights – Provides Data-Driven Perspective on Small Business Confidence and Outlook

Small Businesses Optimistic on Future Revenue and Profits but Concerned About Rising Costs of Energy, Healthcare and Taxes

Visa Press Release- June 6, 2007

A new small business spending report released today by Visa USA indicates that, while small businesses remain relatively bullish about revenue growth, increasing expenditures on energy, healthcare and taxes are pressing concerns for small business owners. The report, titled “Visa Small Business Spend Insights,” will be published quarterly and provides a comprehensive view of the U.S. small business climate by combining a poll of U.S. small businesses with the most current Visa spending data on small business cards.

“More than most, small business owners are susceptible to the effects of rising costs and fluctuations in the economy. As such, they need to hedge against spending increases and economic uncertainty by making smart IT investment decisions and utilizing cash management tools such as payment cards,” said Wayne Best, senior vice president, Business and Economic Analysis, Visa USA.

Small Business Spending Outlook
The report identified the following four key spending areas that are currently of top concern among small businesses:

Energy

  • 75 percent of the small business owners surveyed believe that energy spending will increase over the next six months.
  • The average spend per transaction on Visa Business cards for energy-related expenditures increased 18 percent for the 12 months ending February 2007.

Healthcare

  • 34 percent of respondents expressed concern that cost of health care insurance will increase over the next six months, with this concern being the highest among small businesses with two or more employees.
  • The average spending on Visa Business cards on healthcare-related expenditures increased 17 percent for the 12 months ending February 2007.

Taxes

  • 20 percent of respondents expressed concern about rising taxes in the next six months.
    The average spending on Visa Business cards on tax preparation services and tax payments increased by 80 percent for the 12 months ending February 2007.
  • Purchases for tax payments and tax preparation have an average spend per transaction that is three times the size of the average purchase for all Visa Business card transactions.

Attracting Customers

  • 22 percent of small businesses surveyed expressed concerns about attracting new customers over the next six months
  • The average spending on Visa Business cards for advertising, management consultants/public relations, publishing and related expenses increased by 56 percent for the 12 months ending February 2007, twice the growth rate of expenditures in all categories.

Small Business Profit & Loss Overview
The report results indicate that the future outlook for both small business revenue and profits is positive based on the following key findings:

  • Nearly half (45 percent) of small business owners surveyed expected an increase in revenues over the next six months, compared with only 11 percent who expected a revenue decrease over the same period.
  • 39 percent of small business owners surveyed expected an increase in profits over the next six months, compared with 19 percent who expected lower profits over the same period.
  • In terms of cash flow, only 17 percent of those surveyed expect that they will need to borrow more money in the next six months, while just 18 percent expect to have issues collecting payment in the same timeframe.

“Visa, as a leading provider of small business payment products and processor of financial transactions, has a unique window into the spending habits of U.S. small businesses,” said Raghav Lal, senior vice president, small business, Visa USA. “By comparing small business attitudes with current Visa spending, we can provide insights into small business confidence and outlook. This analysis enables Visa and our member financial institutions to deliver small businesses with payment solutions tailored more closely to their needs.”

For more information on Visa Small Business Solutions or to view the complete Visa Small Business Insights newsletter, go to www.usa.visa.com/business

About Small Business Spend Insights
Visa Small Business Spend Insights is a quarterly survey to monitor the relative economic confidence of small businesses with $50,000 – $25,000,000 in annual revenue. More than 600 small businesses are included in the quarterly survey.

About Visa USA
Visa USA is a leading payments brand and the nation’s largest payments system, enabling banks to provide their consumer and business customers with a wide variety of payment alternatives tailored to meet their evolving needs. Visa USA is committed to increasing the choice, convenience, acceptance and security of Visa payments for all stakeholders – financial institutions, cardholders and merchants. In the United States, more than 521 million Visa-branded cards have been issued by our 13,320 financial institution customers.

Visa products generated nearly $1.8 trillion in total volume in the United States through March 2007 and enjoy unsurpassed acceptance around the globe. For more information, visit www.visa.com

“Rapid Response” Business Unit Formed to Provide Invoice Factoring Services to Small Businesses

In a recent press release Charter Capital increases it’s funding capacity aimed at providing for the urgent financing needs of small businesses.

Charter Capital formed a special businesses unit designed to provide invoice factoring services to underserved small businesses. The Rapid Response Business Unit expands our commitment to diversity as well as satisfying the financial needs of many underserved businesses.

Many Latino-owned businesses in the U.S. are expected to increase in the coming years and is expected to produce more than $465 billion in total revenues. According to the most recent U.S. Census Bureau projections, by 2050 Latinos will make up nearly a quarter of the U.S. population.

New Website Provides Comprehensive Online Guide to Factoring

Charter Capital Expands its Internet Presence with the Introduction of its Redesigned Web Site.

HOUSTON, TX – May 18, 2007 – Charter Capital, recognized as one of the most flexible providers of working capital and related financial services to small and mid-sized businesses, announced today it has launched https://www.CharterCapitalUSA.com.

The new website project was headed by Mr. Keith Mabe, Director of Operations for Charter Capital. Mr. Mabe has had extensive experience with web development, especially in the area of content based websites. “We, at Charter Capital, feel that the updated layout and increased content will increase awareness of our service offerings,” said Mr. Mabe.

Headquartered in Houston, Texas, Charter Capital (https://www.chartercapitalusa.com) provides working capital funding via a process commonly referred to as “factoring of accounts receivable”, asset-based lending, and cash flow solutions for businesses nation-wide including: freight delivery and transportation, repair, maintenance and inspection service providers, consulting firms, most other service providers, staffing firms, distributors, wholesalers and manufacturers. Charter Capital also serves business in Dallas, TX; San Antonio, TX; Austin, TX; Atlanta, GA; Albuquerque, NM; Phoenix, AZ; Nashville, TN; Indianapolis, IN; Oklahoma City, OK; and cities nationwide.

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Do You Have An Alternative If Your Lender Becomes Uncomfortable With Your Credit?

Read this Entrepreneur Magazine article first (click here).

Unfortunately, Tara Olson’s story is not unique.  Banks will often drop your line of credit if it does not meet certain profitability requirements.  This, of course, can leave your business scrambling for cash if you are dependant on bank financing or a line of credit to help buffer your cash flow.

The Importance of Cash Flow
As with most businesses, cash flow is critical to ensure funds are available to meet your operating needs. Without effective cash flow management, a business faces several problem areas, such as cash shortages, inability to pay bills, bankruptcy, or even business failure.

Cash flow is one of the most vital elements in the survival of a business, and it shows where a company may be headed.  Instead of depending on traditional bank financing, you can more easily manage your cash flow with a FactorLine from Charter Capital.  When you can predict or even control your cash flow, you are in a much better position for continued business success.

The Difference Factoring Makes
An increasingly popular way to help manage cash flow is factoring. Factoring (also known as Accounts Receivable Financing) is the practice of selling your accounts receivable (invoices) at a discount to another company like Charter Capital. You immediately get the money from Charter Capital and we become responsible for collecting on the invoices.

With factoring, you are free from many of the restrictions placed upon your business by traditional bank financing. Most importantly, with factoring, you are free to grow without having to give up equity or control of your business. This is because factoring your Accounts Receivable is technically the sale of an asset, and the funding you receive from us is not debt, but a cash asset.

In today’s competitive marketplace, getting debt-free funding in the form of factoring can give businesses the edge they need to succeed.

Raising Capital- If You Want To Raise Cash, Try Factoring

Successful small business growth

The business landscape is littered with small business owners who’ve stumbled in their search for capital. Many requests are denied. Those who are able to secure more traditional forms of funding, frequently have unacceptable strings attached. Some financial deals come back to bite the business owner in the form of substantial debt, insufficient revenue share or worse.

Raising money is difficult and time consuming, and most small businesses fail because they run out of cash. Getting additional capital in smaller chunks will get you the cash your business needs without risking a loss of equity or ownership.

Invoice factoring may be the answer to many business cash flow issues. Gaining in popularity, invoice factoring (also known as Accounts Receivable Financing) is the practice of selling your accounts receivable (invoices) at a discount to a specialized financial services company like Charter Capital. You get the money from Charter Capital and we help you collect on the invoices.

The reason many businesses make this move is to ensure the continuous flow of cash to the business without sacrificing equity or incurring debt. Essentially, businesses that use factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.

With small to mid-sized businesses, freeing up working capital through factoring can prove to be vital. The money can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.

The lesson here is: Working capital in-hand today is better than dashed dreams tomorrow.

Entrepreneur.com Article Endorses Factoring

A recent Entrepreneur.com article has some excellent tips for small businesses about managing cash flow through factoring.

URL: http://www.entrepreneur.com/article/169490

The article concedes that factoring is a great way for some businesses to get cash without going into debt. What most concerns factors is the credit worthiness of the end customer, not the business or its owners.

The reason many businesses make this move is to ensure the continuous flow of cash to the business. Essentially, businesses who use factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.

With small businesses, it is even more important to free up working capital through factoring. The money can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.