Alternative Lenders Step Up As Banks Cut Lending To SMEs

“Small businesses were hit harder than larger businesses during the 2008 financial crisis, and have been slower to recover from a recession of unusual depth and duration.” according to a research paper by Harvard Business School. The primary reason for that is that US high street banks have cut back on their SME lending activities to reduce balance sheets to comply with new capital adequacy regulations. This has had a substantial impact on small and medium-sized businesses in the US as funding and sufficient cash flows are two key aspects for many small businesses’ survival and the majority of small businesses have traditionally relied on bank capital for funding. Many businesses, therefore, have had to use expensive credit cards to help with cash flow management.

Fortunately for small and medium-sized businesses in the US, there are now several new trustworthy alternative financing providers that SMEs can use to secure much-needed funding. New alternative financing options include online small business loans, peer-to-peer loans, invoice financing and cash merchant advances. Before the 2008 financial crisis, none of the above-mentioned alternative funding options were readily available for small businesses. But now, more and more businesses are going down the route of using alternative lenders, as they are not receiving the service they need from their banking partners.

Online Non-Bank Lenders

Online lending platforms are offering loans to SMEs with a higher acceptance rate than banks without necessarily charges higher interest rates. Online lenders provide loans to start-ups and SMEs with a loan approval time of 24hrs or less. It’s counterparts from the banking sector usually take two to four weeks to approve loans, which is another reason why SMEs are increasingly seeking funding from non-bank lenders instead.

Peer-to-peer Loans

Peer-to-peer lenders, such as the New York Stock Exchange-listed LendingClub, offer another option for debt funding for start-ups and SMEs. Peer-to-peer lending refers to the borrowing from a range of private individuals through an online peer-to-peer lending platform. Companies can apply for peer-to-peer loans online and once their applications have been approved and the terms of the loans are agreed, the loans are listed on the online platform for individuals to invest in. Once the loan is fully funded it is dispersed to the company and repayment takes place in the form of amortizing monthly payments. Interest rates on peer-to-peer loans vary with creditworthiness, but can at times be lower than bank capital.

Invoice Financing

Invoice financing refers to a company selling its invoices at a discount in return for immediate cash to meet cash flow needs. This form of financing has previously only been available for large corporations but has now become available online through providers such as BlueVine. Invoice financing is an excellent way to fund a business that faces long payment cycles. A small fee is charged for this service, but one that is small compared to high interest bearing bank loans or small business credit cards.

Cash Merchant Advances

Alternatively, small businesses can also opt for cash merchant advances during times of funding needs. This is a popular means of financing for small businesses with very little credit history or with bad credit. Merchant cash advances are cash advances that are paid off with a percentage of daily sales revenues. Merchant cash advances use what is called a factor rate. The factor rate can range from 1.15 to 1.5 or more, which means the business will need to pay back 115% to 150% of the cash advance out of its sales. Cash merchant advances can be very costly so they should only be used for businesses that are confident they can make the required repayments.


What Are the Odds that the 2020-2022 Olympics Will Be Cancelled?

In the modern era (1896-present), the Olympics have only been cancelled in wartime: 1916 (World War I), 1940 and 1944 (World War II). But world war is not the only circumstance that could derail the Olympics; a global crisis in energy, finance or geopolitics could send the risks and costs of the Olympics beyond the reach of most participants.

The key to understanding the odds of an Olympic cancellation is Liebig’s Law of the Minimum, which states states that “growth is controlled not by the total amount of resources available, but by the scarcest resource.”

As I have outlined elsewhere, the three resources that will become increasingly scarce globally going forward are:

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Germany Warns People To ‘Stockpile’ Cash In Case Of ‘War’

The German government is warning its people to ‘stockpile’ food, water and cash in case of ‘war’.

For the first time since the end of the Cold War, the German government is set to tell citizens to stockpile food, water, medicine, fuel and cash in case of war, an attack, catastrophe or “national emergency”, the Frankfurter Allgemeine Sonntagszeitung newspaper reported on Sunday.

MerkelAngela Merkel, Francois Hollande and Matteo Renzi on Aircraft Carrier Garibaldi yesterday. Photo: Guido Bergmann / DPA

Angela Merkel’s government is to “encourage the population” to have their own “personal supplies” including having some reserves of cash in their homes. People will also be urged to keep supplies of medicines, warm blankets, coal, wood, candles, torches, batteries and matches. Read More…


Obamacare is Rapidly Becoming the Poster Child for American Inequality

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The best thing about Obama (from an oligarch’s perspective), is his uncanny ability to push through upward redistributive wealth policies while still maintaining a phony aura of caring about the little guy amongst so many of his apparently lobotomized supporters.

Countless examples of his shameless plutocrat-pandering have been covered ad nauseam here on these pages, but what’s most embarrassing for the President’s legacy, is the fact that Obamacare itself is rapidly becoming the poster child for the dramatic wealth and income inequality that has so characterized his entire administration.

Read the rest here.

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Here Is Why the Oil Market Cannot Dictate the Direction of the Stock Market Anymore

The direction of the crude oil market has been among the top factors that are deciding whether the markets will gain or lose. Here’s proof.

Earlier in the year, the US market was down as fears grew about oil companies going bankrupt due to low oil prices, thereby, hurting banks and the economy at large in the process.

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The chart above backs the point above. And as the chart above shows, it wasn’t until crude oil started a rally that the S&P 500 started recovering, before very positive vibes from the economy out-powered the crude oil market to help the S&P 500 register a new all-time high in July.

There is a new story now. A disconnect between the price of crude oil price movement and the S&P 500 level movement is growing. While the positive vibes that economic data has been sending is a big part of that, there is a new factor: Oil companies as well as banks might have found a way to protect themselves from the oil market turmoil.

Here’s what we know about the signs that banks and oil companies might have found a way to protect themselves. The iShares iBoxx $ High Yid Corp Bond ETF (HYG) is one of the tools that analysts have been using to weigh the health of stakeholders that are in danger of an oil market downfall.

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As oil prices kept falling last year, and hedging contracts expired, the HYG fund started singing to tune of the oil market, as the chart shows. Even when crude oil rallied earlier this year, the HYG also rallied. However, the correlation has also discontinued. And it is easy – and correct – to say that the positive economic vibes is the reason for that as well.

However, it is also because oil market stakeholders have been hedging against the downside. Here’s proof. In early July, Reuters reported that of the 30 largest US shale companies, 17 “increased their hedge in the first quarter of this year.

So in addition to the economic factor that has been causing the disconnect between the stock market and oil prices, the fact that the oil market stakeholders have been locking in sales at around $10 a barrel – well below current levels – has also been highly important.

Of course, it’s difficult to predict the future of oil, as there are many unpredictable variables that would go into such calculations. However, going by the US Energy Information Administration’s forecast of an average Brent price of $44 per barrel in 2016 and $52 in 2017, it is unlikely that oil prices would hit such a low level anytime soon – if ever.

Therefore, investors can expect that the disconnect between the price of crude oil and the stock market will continue for the foreseeable future. The only thing that could put the stock market drive back into the hands of the oil market is a weakening economy. Understanding these trends is just paramount to knowing how to choose the right assets to trade.

 


Our Society Is Sick, Our Economy Exploitive and our Politics Corrupt

In noting that our society is sick, our economy exploitive and our politics corrupt, I’m not saying anything you didn’t already know. Everyone who isn’t being paid to deny the obvious in public (while fuming helplessly about the phony cheerleading in private) knows that our society is a layer-cake of pathologies, our economy little more than institutionalized racketeering and our politics a corrupt auction-house of pay-for-play, influence-peddling, money-grubbing and brazen pandering for votes.

The fantasy promoted by do-gooders and PR hacks alike is that this corrupt system can be reformed with a few minor policy tweaks. If you want a brief but thorough explanation of Why Our Status Quo Failed and Is Beyond Reform, please take a look at my book (link above).

If you want an example of how the status quo has failed and is beyond reform, it’s instructive to examine the pharmaceutical industry, which includes biotech corporations, specialty pharmaceutical firms and the global corporate giants known as Big Pharma.

I hope it won’t come as too great a surprise that the pharmaceutical industry isn’t about cures or helping needy people–it’s about profits. As a Big Pharma CEO reported in a brief moment of truthfulness, We’re in Business of Shareholder Profit, Not Helping the Sick

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Trillionaire Rothschild Warns His Own Central Banking System Is Failing and Buys Gold

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We have been highlighting the wave of billionaires who are all getting out of the stock market this summer and buying gold.  Well, now it’s a trillionaire. Read more ›


Ireland’s Biggest Bank Charging Depositors – Negative Interest Rate Madness

Deposits at Bank of Ireland are soon to face charges in the form of negative interest rates after it emerged on Friday that the bank is set to become the first Irish bank to charge customers for placing their cash on deposit with the bank.

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This radical move was expected as the European Central Bank began charging large corporates and financial institutions 0.4% in March for depositing cash with them overnight.

Bank of Ireland is set to charge large companies for their deposits from October. The bank said it is to charge companies for company deposits worth over €10 million.

The bank was not clear regarding what the new negative interest rate will be but it is believed that a negative interest rate of 0.1 per cent will initially be charged to such deposits by Ireland’s biggest bank.

BOI recently failed the EU stress tests and is seen as one of the most vulnerable banks in the EU – along with Banca Monte dei Paschi di Siena (MPS), AIB and Ulster Bank’s parent RBS. All the banks clients, retail, SME and corporates are unsecured creditors of the bank and exposed to the new bail-in regime.

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Only larger customers will be affected by the charge for now. The bank claims that it has no plans to levy a negative interest rate on either personal or SME customers but negative interest rates seem likely as long as the ECB continues with zero percent and negative interest rates. Indeed, they are already being seen in Germany where retail clients are being charged 0.4% to hold their cash in certain banks such as Raiffeisenbank Gmund am Tegernsee. Read More…


The Marginal Buyer Holds The Pin That Pops Every Asset Bubble

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Economics 101 tells us that prices for all major asset classes are ‘set at the margin’. So things can get ugly fast when the marginal buyer goes on strike.

And it’s increasingly looking like the marginal buyers are beginning to head for the exit — something required for any asset bubble to finally pop…

Click here to read the full article


[KR956] Keiser Report: Why politicians should follow Mozart’s lead?

We ask why politicians don’t take a cue from Mozart and start composing policy for everybody rather than just for the elite. In the second half they continue their conversation with fracking advocate, Nick Grealy of London Local Energy about his belief that natural gas, even of the fracked variety, is a more environmentally friendly source of energy than most others – despite the arguments (he says are false) that fracking pollutes groundwater and causes earthquakes.


Are the Big 4 accountancy firms really the Big 1? Tax Justice Network Podcast

In the August 2016 Tax Justice Network podcast: The Big Four accountancy firms: Are they in fact more like the Big One? And should they be broken up? Also: Read more ›

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Election 2016 – Why Defeating Trump Won’t Make Trump Go Away

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So why am I highlighting this story? First, I think the analysis is correct, and I agree with the presumption that Donald Trump could very well launch a major media organization if he loses the election. There’s no way a man with the disposition and ego of Trump will fade away quietly from the public square. Furthermore, he’s now got tens of millions of supporters who will be looking for someone to give them direction. He’ll be more than happy to fulfill that role.

Read the rest here.

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