Banks Are Approving Small Business Loans at Rates Not Seen Since Before The Great Recession

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Approvals of loan applications from small business owners reached post-recession high mark (26.9%) at big banks (assets of $10 billion+), while small banks granted more than half of the small business funding requests they received in November 2018, according to the latest Biz2Credit Small Business Lending Index™.

Overall, 2018 has been a good year for both borrowers and small business lenders. Because the economy continues to show strength and companies are doing well, small businesses in search of capital have been able to find it. For good reason, optimism among entrepreneurs remains high, according to the October NFIB Small Business Optimism Index, which has trended upward for the past two years.

Meanwhile, the Fed has continuously raised interest rates over the past 18 months. While there are signs that the increases may slow down, the hikes have made it more profitable for banks to loan money – especially when compared to the near zero interest rates that were in place during the post-recession credit crunch.

Technology has played an important role, too. Data analytics have become very advanced and have helped reduce lender risk. Thus, default rates on business loans are lower than ever before, according to Biz2Credit’s data. Further, banks and credit unions have been making SBA loans at record volumes.

SBA loans come with government guarantees against default that mitigates lender risk, thereby providing incentives for institutions to lend money to businesses that might not otherwise qualify for term loans. SBA loans help thousands of small businesses get off the ground each year, and I do not see an end to this trend anytime soon. SBA lending helps bolster the economy.


Bridge to nowhere? Some doubts on U.S. economy justified, doom and gloom is not

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Wall Street scurrying for the exits? More and more investors apparently see the economy becoming a bridge to nowhere.

Just a few months ago, investors drove the U.S. stock market SPX, -2.33%  to an all-time high. Now they’re scurrying for the off-ramp and showing fresh doubts about economy. Have things really gone south that fast?

Not really.

The economy is forecast to grow at an above-average speed of 2.6% in the fourth quarter, for one thing. Consumer confidence is at a two-decade high. The unemployment rate remains at a 49-year low. And the holiday shopping season is shaping up to be a big one.

Still, some warning signs have emerged.

Home sales have softened after a rise in mortgage rates. Corporate investment has tapered off. Job creation slowed in November. And a festering trade dispute with China and resulting tariffs have raised costs for businesses and consumers.

“It’s becoming clearer by the day that the best days for this economic cycle are behind us,” asserted Scott Anderson, chief economist of Bank of the West.

The sudden shift in perception is forcing the Federal Reserve to reconsider how many times it will raises interest rates in the next year.

Not only does the economy seem a touch more vulnerable than it did a few months ago, a recent upturn in inflation also appears to have crested. The Fed has been gradually raising rates to head off an unwelcome increase in rates, but now the problem seems less urgent.

One sign came last week in a weaker-than-expected November employment report. The economy added just 155,000 new jobs — well below the 190,000 forecast — and the yearly increase in hourly wage growth stood pat at 3.1%.

More evidence might emerge this week. The consumer price index, which tracks the cost of living, could show a flat or even negative reading for the first time in eight months. The annual rate of inflation as measured by the CPI could drop to a nine-month low of 2.2% from 2.5%

Similarly weak readings are likely in other inflation barometers for wholesale U.S. goods and imported products.

What’s a common thread?

Falling oil prices . A surge in petroleum helped fuel an upturn in inflation earlier this year that spurred the Fed to raise U.S. interest rates three times. Now lower oil prices are acting as a brake on inflation.

Lower oil prices CLF9, +1.24%  will probably deliver seemingly disappointing retail sales in November.

Americans spent a lot less filling up at gas stations, making it look like retailers had a bad month. Economists polled by MarketWatch predict a lackluster 0.2% increase.

“Here’s a word of advice on anyone planning to use the November retail sales report as a guide to how the holiday shopping season is going: don’t,” said chief economist Richard Moody of Regions Financial.


Cramer’s lightning round: I’m not a fan of Netflix’s stock as an end-of-year buy

Netflix Inc.: “Candidly, I’m not a fan of Netflix. I’m not a fan of Netflix because I think that a lot of it depends on the content and I just don’t find the content as compelling as it once was. I think it’s a good story, but not a great story, because it’s up so much for the year and that’s been a real big determinant about how stocks are doing right now.”

Cytokinetics Inc.: “Very speculative, but I’ll endorse it as long as you understand that that thing is literally one of the most speculative stocks out there.”

Yeti Holdings Inc.: “Yeah, I think [its post-earnings dip is a buying opportunity]. I actually liked the quarter. I mean, far be it from me to disagree with the market’s view, but I liked the quarter. I think it’s OK. The market liked the PepsiCos and the Gileads this week, and the Celgenes.”

The Kraft Heinz Co.: “[What’s not to love?] Well, the fact that it has no growth whatsoever. But I’ll do this for you: I’ll say that if you want to hope that they somehow manage to get some growth, then you can buy it. But if I want no growth, I want safety and I want a bond.”

Chico’s FAS Inc.: “No. Don’t ask me about Chico’s. That was a horrible quarter, frankly. I mean, that may have been the worst of the mall-based stores. No, well, obviously there’s Sears and J.C. Penney, but it was a bad call. I don’t want you in that, OK?”

LyondellBasell Industries NV: “People feel that we’re going into a big slowdown and you don’t want to own a chemical company into a slowdown, but I agree with you. I think it represents good value with a 4 percent yield, but I do prefer DowDuPont.”


What’s your excuse for not budgeting?

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Budgeting is very individual so there’s more than one way to budget successfully. Rather than give up, look for different ways to budget. Getty Images/iStockphoto

Q: I got married quite young in my early 20’s, and my husband and I never really saw eye to eye with money. We ended up getting divorced and now amicably share custody of our three kids. In a way, I find it much easier to manage my money on my own; I don’t need to be accountable to anyone but myself, or maybe I’m just making up budgeting excuses. I started seeing someone about a year ago and we’re beginning to plan a future together. He manages his money carefully and was surprised that I don’t. Is living with a budget really that important? ~Irena

A: The short answer is yes, budgeting your money is important, however, budgeting looks different for everyone. The benefit of budgeting is that you can plan how best to spend your money. You can ensure that your bills are paid, that you save for what you need throughout the year and longer-term, and you can avoid relying on credit to make ends meet. A budget also helps you determine how much more you need to earn if you find yourself running short. Knowing that you have what you need gives you peace of mind.

There are many different ways to budget. Some people prefer a spreadsheet and follow their plan quite strictly. Others are stricter with their spending to start with, or when their life circumstances change, but generally know where they stand and how much they want to spend. There isn’t one right way to do it but finding what works for you can take some trial and error. However, along with different ways to budget, are different excuses people make about why they don’t budget.

Here are six budgeting excuses we hear, along with how to overcome them:

1. “I tried budgeting once and it didn’t work.”

Giving up because you tried it once and weren’t successful is much like going to a restaurant, having a bad meal, and swearing off going to restaurants again. If you have a bad meal in one particular restaurant, you might try another one that serves different food, or you might try the same one but at a different location.

The solution

Budgeting is very individual so there’s more than one way to budget successfully. Rather than give up, look for different ways to budget. For instance, if you tried an app on your phone, try an interactive budget spreadsheet this time. If you’re better with pencil and paper, use a budgeting workbook instead. If you used pre-assigned budget categories that didn’t work for you last time, rename them and try again. Some people even budget by the type of store rather than the types of expense, e.g. Costco/big box versus groceries. Do what works best for you.

2. “There’s not enough money to budget.”

When money is so tight that you face daily decisions about what to buy and spend money on versus where to cut back, you are already budgeting more than you realize. That is what a budget is – it’s a plan for how to spend what you have.

What to do instead

Ultimately, a budget should help you move forward. When money is tight look for ways to avoid debt and improve your level of income. Tracking what you spend might identify a leak in your wallet that you didn’t know you had, e.g. giving your kids lunch money instead of packing lunches, buying coffee or treats on the run, or an expensive communication bundle that a simple phone call can cut down to size. Couple reduced spending with a slight increase in income and you may just find better balance.

3. “I don’t get regular pay cheques.”

When your pay cheques fluctuate, or your income is irregular, it can be harder to budget, but it certainly isn’t impossible. You might be self employed, work on contract, have several jobs to make up the equivalent of full time work, or you might be a student or seasonal worker. Many people in similar situations budget their money very effectively, so you can too.

3 Ways to Budget Effectively with Irregular Income

Overcome this excuse

You just need to employ different strategies. For instance, figure out your average monthly income from past tax returns and use that as the base amount for your spending plan. Open a separate savings account to use as your “budget balancer.” Set money from the better income months aside in this special savings account to top up your leaner months.

Running two budgets, one for the leaner times and one for the better times tends to be less effective because it’s easy to spend money we anticipate receiving. If something happens and our plan changes, the resulting debt on credit cards becomes an expensive and stressful reality.

4. “I’ve always managed just fine, so why change what isn’t broken?”

Setting up a brand-new budget can be as exciting as watching paint dry. Or worse, it can be a few hours of tedious work, followed by tracking your spending, making choices about what you can afford and what you can’t, and reviewing your progress on a regular basis only to find ways to feel guilty about not doing better. Is this about accurate?

How to Get Started Living with a Budget

It doesn’t have to be that way. Deciding what you want to spend your hard-earned cash on now, saving for what you want to do in the future, e.g. buy a home, travel the world or start a business, and ensuring that your golden years aren’t fraught with financial instability can be fun. It’s all in what you make of it. Find apps that work for you, both to track your spending, outline your budget, and show you the progress you’re making towards your goals. Read books and blogs that help increase your level of financial literacy. Learn how the markets work and consider trying your hand at buying and selling stock. You know where you’ll end up if you keep doing what you’re doing; imagine where a little more planning could take you!

5. “There’s always some expense that derails my plans.”

Does it feel like every time you catch a break and you’re getting ahead, life gets expensive again? You’re not alone. I was speaking with someone the other day and they had worked hard to become debt free, but they had depleted much of their savings in the process. An unexpected dentist bill, on top of Christmas and holiday bills, and a car repair expense – they were feeling quite discouraged.

How to Stop Living Pay Cheque to Pay Cheque

Avoid a budget collapse

The one thing we can always count on is the unexpected, so the solution is to plan for the unexpected. Do this by living below your means so that there is always more money than month, establish a savings account for unexpected expenses, use a realistic budget to guide your spending decisions, and protect your credit rating. Sometimes when life throws us a curve ball the only way to keep ourselves going is to pay for the expense with a line of credit. The all-important next step then is to have a solid plan how to pay the credit line off and get back on track. Having a budget makes managing unexpected expenses and situations much easier.

6. “I don’t have money problems, so why bother budgeting?”

You might not have money problems (now), but why not manage your money in a way that does even better?

Here’s why

With an effective budget in place, you know how much extra you can pay down on your mortgage, save for a vacation, or top up an RRSP contribution. With breathing room in your day-to-day spending, ensure that your credit cards are paid off in full every month, that your finances are organized, that you have a plan for what to do with your tax refund, and that you’re getting the most out of every penny you earn. When you look at those who are doing well, they pay a lot of attention to how much they earn and what they spend. If they can save $10 by packing a lunch, they will.

The bottom line on your excuses not to budget

There are lots of excuses about why not to budget. No one ever said you have to like budgeting; even those who are good at budgeting don’t always like it. When you first start living by your budget, try not to get discouraged. A new budget doesn’t really start working until the second or third month. It takes time to not only juggle things until they balance, but more importantly it takes time for you to get used to living by a budget. Go easy on yourself and don’t knock it ‘til you’ve tried it.