Two Ships Passing in the Night

Picture this – a majestic cargo ship, “The United States” (The US) steams out of port to the rest of the world with its cargo – billions of dollars to invest in far away lands.  Another majestic cargo ship, “The Republic of China” (The China) steams out of port to the rest of the world with its cargo – trillions of dollars to invest in far away lands.   Its first stop is the United States where it hopes to unload billions of dollars of its cargo.

 The captain of The US is told to unload his cargo, wait for factories, manufacturing facilities, fabricating facilities, call centers and so forth to be built and then load his ship with the products and services made and come home.  When home the products and services are “unloaded” and millions of dollars are loaded on The US and it is sent out again so “payment” for the products and services is made.  With enough product, the owners of The US shut plants in the US and lay off workers as they are not needed and are more costly than those overseas.  And the owners of The US add to their treasure.

The captain of The China does not have specific orders.  Look for investments and make them as soon as possible he is told.  Simply wait and the cash starved politicians (mayors, governors, economic development concerns, etc.) and societal leaders will rush to you with many offers and many deals. 

Continue reading

1 Comment

Filed under Economy

Dear PBO #2 – Small and Mid Sized Firms

Below is my letter to the President regarding the economy; it is in summary form.  To see full details click the Dear PBO page and go to the June 23 letter.

Dear Mr. President

Last week I suggested tax credits as a way to stimulate the economy, with the focus on changing attitudes and behaviors using fiscal policy.  Let’s not forget the engine of the economy, the small and mid sized businesses.  Small and mid sized businesses need two sources of capital – bank credit and private capital. 

 Of course the behavior of the banking industry has dried up credit.  During recent times many a banker cut credit lines, called in loans, did not renew maturing term loans and mortgages and failed to increase credit when needed.  Small and mid sized businesses have balance sheets that are leveraged, cash flow is weak or negative, collateral is weak and getting weaker as accounts receivable customers continue to fail or fall behind on paying and commercial real estate values falter.  This fuels the bankers’ argument against lending. 

Continue reading

3 Comments

Filed under Dear PBO

Dear PBO #1 – Changing Behavior

Below is my letter to the President regarding the economy; it is in summary form.  To see full details click the Dear PBO page and go to the June 16 letter.

Dear Mr. President

By now I am certain you have been inundated with suggestions, advice, recommendations, etc. on how to improve our economy.  And you may think “oh here’s another” – but I would not be taking up my civic duty without expressing these thoughts. 

 Do know my objectives are not politically motivated and while I may agree or disagree with your policies, my advice is strictly business oriented.  So my fist bit of advice – stop throwing money at the economy.  Government spending is always needed at the time of an economic crisis to “keep people fed”.  It is always viewed by business people though, as short term, a band aid.  And while this was needed, it’s time to do what will really change the economy – change behavior.  Government spending does not change behavior or curb anxiety in the business world, it simply moves money around.  TAX CREDITS.

Continue reading

Leave a Comment

Filed under Dear PBO

Does understanding globalization require a business lobotomy?

When in business school in the 1970’s I learned many of the new business buzz words, that of course went with concepts – management by objective, asset based lending, alternate energies, and stagflation. 

 Entering the business world in the 80’s I learned of synergism, deindustrialization, ROI, strategic planning, mission statements and of course leveraged buyouts.  I was told if I did not understand these concepts and embrace them I would be left behind, I would be on the outs.  I did understand and I remember Continental Illinois Bank & Trust and all the savings and loans.

 In the 90’s the buzz was vertical integration, cyberspace, ERP, dotcom, e-commerce, benchmarking, entrepreneurship, interest rate swaps, derivatives and of course securitization.  These were the new concepts – get on board or be left behind – don’t let the naysayers win.  Be innovative and forward thinking – and then I think of boo.com, Washington Mutual, Fannie Mae and Freddie Mac.

Continue reading

4 Comments

Filed under Community Development

Community Development… Financial Infrastructure – Part Two

Part Two: Business Support

The successful community has a strong financial infrastructure.  In Part One of this series I spoke of Capital Providers.  Now the support providers are analyzed. 

Like capital providers, the business support function is an important feature to offer businesses looking at your community to move to or to set up a new business.  While this may not appear to be a crucial community developmental goal (since many businesses have some expertise to handle many business functions and need to rely on capital providers alone) in almost every case, all business who think they have all they need managerially, is in deep need of experts.  This is a need that has simply failed to appear clearly to management.

Professionals

Most communities have a pretty good level of primary support professionals.  These include professionals supporting accounting, legal, marketing and human resource and organizational development.  Continue reading

6 Comments

Filed under Community Development

Community Development …Financial Infrastructure – Part One

Part One: Capital Providers

Any community or region wanting a strong business environment will start where many businesses start – finance.  In particular, growing businesses, as well as those in startup or turnaround mode need access to capital.  Without an array of capital sources, any community will be hamstrung in seeking superior businesses and entrepreneurs to locate within their boundaries and will be impotent to help its local businesses when they get into trouble.

To have a strong financial infrastructure a community must have exceptional resources in primary as well as secondary capital access sources.  Then there are fringe or innovative and unique capital providers.  Each of these sources are further broken into equity, debt and support/indirect.  We will deal with fringe and unique sources as well as the support and indirect sources in a later report. Continue reading

6 Comments

Filed under Community Development

Are there two economies emerging from this recession?

There seems to be a lot of data coming out that suggests that we are not “all in it together” on this economic recovery.  And while most companies do not recover from an economic event in unison, this one appears to be pointing to more stark changes that if unchecked could lead to long term or even permanent changes to our business structure.

What leads me to believe this may be the case?  Economists announced that our recession ended in June 2009.  That may be technically correct, since then a number of unique (maybe even conflicting) trends have developed that has to do with the large corporations and the mid sized and most important, the smaller business of the U.S.

Continue reading

1 Comment

Filed under Economy

You think it’s been tough now… just wait

We have been suffering the ills of a difficult economy for a couple of years.  For the most part, those companies that were able to hang on, did and the weaker ones have either failed or are in the process.  To stay healthy during this time many companies downsized their employment, ditched inventory and did not replace any fixed assets unless quite necessary.  Many positioned themselves to take advantage of the recovery – whenever it comes!  Well, I hope it comes slowly.  Why?  To get a lot of orders at one time requires a build up of permanent working capital along with cash, trade credit or bank loans.  Working capital has likely been weakened, cash is still tight, trade credit will be difficult because your suppliers are in the same boat and bank loans – well that’s going to be the hardest. Continue reading

67 Comments

Filed under Banking

Welcome

Welcome to bizfinancejournal.  We are not an ordinary business site – we are about finance – business finance!  We will bring update on financial management, risk, banking, external financing and economic news.  All in the simplest format we know how.

9 Comments

Filed under General