If you have any doubts about the dreary cli-
mate of small-business lending, Gary Brown
can easily put it in perspective.
Brown, a Texas-based CPA, recounted the
unfortunate case of one client whose story is,
sadly, emblematic of the current financing
crisis for small-business owners facing increasing pressure from lenders.
“He was retired and spent a lot of money
refurbishing an old house to open a restau-
rant,” said Brown. “Suddenly, the bank de-
manded that his unsecured credit lines had
to be paid off in five days and he had to come
up with $250,000. He was forced to liquidate
his 401(k) and took a huge tax hit. Afterwards,
he was cramped so tight for cash flow that he
was forced to close.”
Brown, whose Georgetown firm services
some 250 small-business clients ranging from
mom-and-pop operators to companies with
revenues of up to $250 million, revealed that
he’s had several clients forced out of business
due to banks’ no-notice call-ins of their credit
lines: “We’re seen some interesting things over
the past years, from plenty of access to credit,
to banks not loaning anything. The money is
still out there, but it’s very, very tight.”
Indeed. In 2009, lending in the commercial
banking sector declined roughly 24 percent.
Now, as the economy limps toward recovery, larger businesses have more easily
been able to raise money in the markets, but
the small-business sector, which traditionally had relied primarily on banks or finance
companies for loan products or the Small
Business Administration’s 7(a) and 504 (real
estate and equipment purchase) loans, has
found that once-flowing lines of capital have
There’s money available for small businesses — and CPAs can help clients access it
BY BILL CARLINO
either dried up or been severely constricted
by tighter guidelines and requirements.
That credit malaise was amplified when
CIT Group, the Fortune 500 lender to the
small-business community, filed for bankruptcy last November.
As a result, small-business owners are
turning to non-traditional sources of financing such as factoring, where a company sells
its invoices to a lender, or to new players that
have emerged, such as the New Orleans-based
Receivables Exchange, an online “auction”
site where business-to-business companies
sell their invoices to institutional investors
submitting the highest bid. As evidence of
the soaring popularity of non-traditional financing, the company reported a 66 percent
growth in receivables for March alone.
And earlier this year, President Obama put
forth a proposal to steer some $30 billion from
the TARP bank bailout program into a lending fund for small businesses. The fund would
be limited to banks with $10 billion or less in
assets. Obama also called for expanding the
size of loans made through the SBA Express
program from $350,000 to $1 million.
Brown, for one, often advises his small-business clients to work with local and community banks, rather than the national brands,
as he says they’re usually easier to work out
terms if you have a viable company.
BANKS: “WE’RE COMMITTED”
“There is this perception out there that the
underwriting standards have changed, but
they really haven’t,” said Kathie Sowa, who
oversees small-business lending for Bank of
America. “As banks, we’re relying on scoring
models, we’re looking at cash flow and sec-
ondary sources of payment. But there’s a lot
of business sitting on the sideline. The econ-
omy has changed the picture for many small
businesses, so they may no longer qualify, but
we’re very committed to that sector.”
She said that BOA lent more than $80 bil-
lion to small businesses over its last fiscal year,
versus $50 billion for the prior year, and $19
billion in its most recent first quarter, some
$3 billion over the prior-year quarter.
SUPREME COURT NIXES
WASHINGTON, D.C. — The Supreme Court
declined to hear Textron’s appeal in a
key tax case, letting stand a lower court
decision that allows the Internal Revenue
Service to demand legal and tax workpapers from companies. The company
had appealed a ruling by the First Circuit
Court in the case.
The IRS had requested tax accrual
workpapers from the corporate jet manufacturer, including a spreadsheet compiled by its attorneys showing potential
items of contention with the IRS and its
chances of winning them. The company
asserted work product privilege and won
two rulings, but the full First Circuit Court
ruled in the IRS’s favor. The Supreme
Court let that decision stand.
THE CPA FACTOR
Though bankers may debate claims of wheth-
See SQUEEZE on 35
Texas accounting firm Weaver has merged
with Elms Faris, expanding the Fort Worth-based firm to the Midland/Odessa market.
With the merger, which takes effect June
1, all of Elms Faris’ 53 employees, including
39 accountants and consultants and six partners, will join the combined firm, which will
use the Weaver name. Weaver ranked No. 49
on Accounting Today’s 2010 list of the Top 100
Firms, and is the largest independent firm in
the Southwest, with $58.1 million in revenue.
The combined firm will now have approximately $70 million in revenue.
“As a firm that serves businesses with
interests throughout Texas, we are very ex-
Weaver expands with Elms Faris merger
cited about this merger,” said Weaver man-
aging partner and chief executive Tommy D.
Lawler in a statement. “Having a presence
in Midland/Odessa allows us to further our
state-wide expansion. Merging with Elms
Faris will not only build our footprint and
revenue, but it will also increase the depth
of our niche practices, including oil and gas,
manufacturing and distribution, and state
and local government.”
Weaver also has offices in Austin, Dallas,
Fort Worth, Houston and San Antonio.
Elms, Faris & Co. LLP was established in
1938 by George H. Marsh, and is one of the
oldest and largest locally owned CPA and
consulting firms in the Permian Basin. The
firm provides assurance, tax, estate planning,
information technology consulting, business
valuation, management consulting, and
transaction advisory services. The firm has
been led since 1999 by managing partner Lar-
ry Edgerton, who has been named Weaver’s
Midland/Odessa executive partner.
FASB PROPOSES NEW FINANCIAL
NORWALK, CONN. — The Financial Accounting Standards Board has issued an
eagerly anticipated exposure draft of a
proposed accounting standards update
for financial instruments, a major sticking
point in FASB’s efforts to converge U.S.
GAAP with International Financial Reporting Standards.
Among other changes, the proposed
update would incorporate both amortized cost and fair value information
about financial instruments held for
collection or payment of cash flows, and
remove the “probable” threshold for
recognizing credit losses.
The comment period extends through
Sept. 30, 2010. FASB will also hold public
roundtable meetings immediately following in October to collect further input.
Details will be announced later.
FASB also issued a separate, but integral, proposed update that would require
that total comprehensive income and its
components in two parts — net income
and other comprehensive income — be
displayed in a continuous statement of
The exposure drafts for both are available at www.fasb.org.
In the People section of our May 24-June
6, 2010, issue, we incorrectly located
Texas firm Sanford, Baumeister & Frazier
PLLC in Houston; it is, in fact, in Fort
Worth. Our apologies for the error.