FINSUM
(New York)
In a stat that should absolutely terrify small broker-dealers, a new survey says that for small firms, Reg BI compliance may cost a large portion of your revenue every year. According to the National Society of Compliance Professionals, a small firm with $500,000 in net capital will need to pay $60,000 a year to comply with the new rule. Bigger firms have high costs too—Raymond James will spend $20m up front, and then another $5m per year to comply.
FINSUM: $60,000 a year is a lot of cost to bear for smaller firms, especially because this regulation does not expand business opportunities and will likely only shrink revenue for many.
(Chicago)
The muni market is at an interesting crossroads. There have been big fears that the current lockdown might be a huge negative for muni credits. The lockdown not only raises costs, but it constrains tax revenue at the same time. On its own, this is a big threat. However, the Fed has set up a liquidity facility particularly for states and municipalities to borrow, which is a major help. That said, analysts say some credits will be excluded. The problem is that the Fed has put limits on the size of cities and counties able to participate, as well as fairly onerous language, such as municipalities having to promise that they cannot “secure adequate credit accommodations from other banking institutions”.
FINSUM: The Fed’s restrictions on this program are surely going to constrain its efficacy. So, on the whole this seems like good news, but not as good as investors would like.
(New York)
The job losses keep coming week over week. Thursday morning has become a repetitive and gloomy event as millions of job losses hit the tape when weekly jobless claims are released. This morning the figure was 3.3m. That number means the total figure is now over 30m jobs lost in the last six weeks. The fastest drop in history by a gigantic margin. What is even more troubling is that the data underrepresents the true figure, as call centers have been unable to cope with the demand and thus have been underreporting true figures.
FINSUM: The job loss figures are absolutely staggering. California is paying $1bn in jobless insurance per day. We think the market is underestimating how deep of a recession this hit to consumer spending might represent.
COVID Loan Tracker was founded by small business owners to help fellow entrepreneurs understand when their PPP and EIDL loans will be paid. The SBA has provided very poor leadership and information, and the need for real data about when loans are actually being disbursed has never been higher. Please help yourself and fellow small business owners by filling out our survey so we can all understand when we will get our loans.
FILL OUT THE SURVEY TO HELP SMALL BUSINESS OWNERS
The SBA has been very short on details throughout the Paycheck Protection Program. While they have released “approval” numbers, there is no data on how many loans have actually been disbursed. If you are a small business owner, approval means nothing and disbursement means everything—you cannot pay employees with an approval, you need cash. With that min mind, COVID Loan Tracker has launched live stats which track the disbursement rate of PPP loans right on its home page.
You can instantly see what percent of loans have been disbursed, the median processing time, the total volume of loans processed, the median size of loan, the median employees of successful applicants and more. For a deeper dive, view the DATA page, which includes more in-depth charting.
(New York)
So who is going to benefit most in the inevitable reopening of the economy? It is a tricky question to sort out. The most obvious companies are already seeing very stretched valuations, so those probably aren’t a good buy. Accordingly, here are some interesting names to look at in a category Goldman Sachs is calling “quality-at-a-reasonable-price”: Texas Instruments, Facebook, Mastercard, Alphabet, Home Depot, Ross Stores, Colgate-Palmolive.
FINSUM: Nice range of names. On the tech side, we love Facebook and Google. They are going to make more and more money as this lockdown accelerates the shift to ecommerce. On the retail side, discount stores like Ross seem like a good bet.
(New York)
One of the most famous hedge fund managers on Wall Street made a bold warning yesterday. Jeffrey Gundlach of DoubleLine Capital, adored by the media, said yesterday that he thinks stocks will retest their previous lows. “People don’t understand the magnitude of... the social unease... that’s going to happen … We’ve lost every single job that we created since the bottom in 2009”.
FINSUM: One thing that seems certain right now is that consumer spending is not going to bounce back to where it was for some time. It is going to take years for all these people to re-enter the workforce and loosen the purse strings. A recession for the rest of the year appears inevitable.
(Chicago)
Small cap prices usually expand and contract more quickly than large caps do. This happens both in downturns and upswings. However, in this coronavirus rally, that has not held up, as small caps are faltering while their larger peers soar. For instance, the Russell 2000 is trailing the Russell 1000 so far this year. “This latest rally is very much a capitalization story — the big players were the ones that held their own”, says SEI investments. Another portfolio manager added “The secular growth force that comes from mega-cap tech stocks doesn’t appear to be replicable in the rest of the market”.
FINSUM: Small caps tend to lack the scale that would allow them to thrive even as the economy falls, which means there haven’t been as many winners as there were in large caps.
As of 10:30 AM Eastern this morning, the PPP Program re-opened for applications from this “bucket” of $310 Billion, as the first bucket of $349 Billion rapidly was depleted.
PLEASE HELP SMALL BUSINESS OWNERS BY FILLING OUT THE SURVEY
Has demand waned? On the contrary:
Not even 10 minutes after a government relief loan program for small businesses relaunched on Monday, lenders reported that the U.S. Small Business Administration system was overwhelmed and inaccessible with a flood of applications.
Lenders from across the country were saying they couldn’t get into the SBA’s system when the Paycheck Protection Program relaunched at 10:30 a.m. New York Time, said Paul Merski of the Independent Community Bankers of America. The system was down as early as 10:34 a.m. in New York, according to a person familiar with the matter.
Which is why we even put out a press release this morning demanding an additional $400 Billion rapidly be allocated to the program so the overall funding exceeds $1 Trillion.
The Federal government seems to imply that the $310B number was sufficient because that’s about how many applications were stranded that couldn’t get funded in the first round – about 1 million.
Here’s the thing, however, that’s not the true number. Based on our survey data and our estimation, over 4 million applications were not completed based on a variety of factors – including glitches on the SBA’s site, problems with the lenders, etc.
Which means even this next $310 Billion won’t be enough and why we called for at least an additional $400 Billion – with rules for disbursement that will make sure TRULY small businesses benefit, and not just large companies masquerading as small ones. Read more here, and if you haven’t yet, be sure to submit an application.
COVID Loan Tracker was started by small business owners Duncan and Rita MacDonald-Korth to help their fellow small business owners understand where PPP and EIDL money is flowing. We are empowering the business community and journalists with the data they need to keep the government accountable.
APPLY FOR PPP WITH COVID LOAN TRACKER
So much of the focus of the media covering the Paycheck Protection program has been about the awful pace and communication about application processes and approvals. However, what has been less covered is just how difficult the application process itself is. At COVID Loan Tracker, we have gotten a rare insight into the difficulties everyday small business owners are having with the application process because of the thousands of emails we are getting from CLT community members.
PLEASE HELP SMALL BUSINESS OWNERS BY FILLING OUT THE SURVEY
Those general struggles are a story for a separate article, but today we want to focus on the challenges the application process poses for immigrants and those for whom English is a second language. IRS forms in particular, which are a crucial and obligatory part of the application for every lender, are made for professional accountants, not genuine small business owners. Terms and terminology are difficult even if you are a native English speaker. If you are not one, they are nearly impossible.
The IRS does offer forms in a few languages, but not all lenders are equipped to process such forms with an expediency, which means the default language is inevitably English. Amplifying this issue is the fact that immigrants become entrepreneurs and small business owners at almost 4x the rate of native born Americans*. This means that per capita, immigrants are much more likely to deal with PPP applications issues than native-born Americans. Furthermore, the types of business that immigrants own**—gas stations, drycleaners, nail salons, hotels & motels, and specialty food stores—have been particularly hard hit by the shutdown. Therefore, in many ways the Paycheck Program excludes immigrants almost by design, and resultantly, the COVID-19 lockdown poses a much larger threat to the livelihood of immigrants than it does to native-born Americans.
COVID Loan Tracker was started by small business owners Duncan and Rita MacDonald-Korth to help their fellow small business owners understand where PPP and EIDL money is flowing. We are empowering the business community and journalists with the data they need to keep the government accountable.
Apply for PPP with COVID Loan Tracker
*https://immigrationforum.org/article/immigrants-as-economic-contributors-immigrant-entrepreneurs/
** https://immigrationforum.org/article/immigrants-as-economic-contributors-immigrant-entrepreneurs/
As most small business owners already know, the Paycheck Protection Program has been nothing short of a debacle. According to COVID Loan Tracker, still only around 10% of those who applied for PPP have received their money. As this new round of PPP funding arrives on Monday, COVID Loan Tracker has launched a partnership with Fundera to help small business owners apply for PPP.
Generally speaking, it is a very good idea to work with online lending platforms like Fundera, Lendio, and those similar. Their model for processing PPPs has proven quite successful, and we can see it in our data. See why below.
Apply for PPP with COVID Loan Tracker
After vetting several partners, here is why COVID Loan Tracker decided to work with Fundera:
1. Faster and more successful: we can see in our data that online platforms like Fundera had the highest success rates. Your application is offered to many lenders, and placed to one that is ready to process them, so you have better odds of success and faster processing times.
2. Transparency and Communication: PPP applicants will receive updates on a regular basis—this is the most transparent PPP application available.
3. Reputable and vetted: Fundera has good reviews and our founders (Duncan+Rita) personally spoke with their CEO and CTO for due diligence.
4. Pre-applications: you can fill out the application now to have it ready once PPP gets more funding.