The world's largest retailer is slipping stateside. Image: galaygobi/Flickr/CC BY

Walmart, the world’s leading box store, has been steadily losing customers in the United States. To lure shopper back, the store is using heavy coupon promotions and free samples on its website.

US sales on the decline

Though it is the largest retailer worldwide, Walmart’s revenue has been on the decline in the U.S. for more than two years now. The retail giant has been steadily losing business amid the rise in the popularity of the dollar store. Walmart’s holiday season last year was another disappointment that made stocks dip. Recently, press about the failed class action suit, which accused Walmart of discriminating against women employees, also damaged the mega store’s image.

Coupons and samples to lure shoppers

Walmart’s move to combat losses is to lean heavily on an old ploy, coupon promotions and free samples. But by concentrating the heaviest promotions on the store website, Walmart is attempting to adapt to the way consumers shop today. Walmart’s site, according to the research firm ComScore, was the 29th most visited site in the U.S. in May. The store is offering more coupons than ever and making the site more user-friendly. The site even offers a download for PCs to make it easier for customers to print out coupons.

Promotions from the site

The store’s site today showed bargains on everything from chili to specific movies on DVD and Blu-Ray. There was a giveaway of lens cleaner just for visiting the optical section at any store location. There were many larger discounts only available on the site. Items bought online can be picked up at store outlets for free or delivered for a small added fee.

Samples in stores

Walmart is offering a multitude of free samples in stores — the old try-it-before-you-buy-it approach. In-store events, promoted by calendars on the website, advertise multiple items which can be sampled. July’s promotions include coffee, cereal, yogurt, olives and more.

Sources

Daily Finance
AZ Central
Walmart

Learn how to write a cover letter that gets attention. (Photo Credit: CC BY-SA/Joel Gillman/Flickr)

In order to taste victory in the job market, you must convince a hiring manager that you can financially benefit the company and that you are likable, too. Before securing an interview, stating your case begins with a cover letter. Learn how to write a customized cover letter that emphasizes your unique qualifications to stay ahead of the game.

Don’t just send a resume

For the most part, resumes are a painful bore for employers. Names and jobs change, but the anonymity remains the same. The cover letter is an applicant’s chance to stand out from the herd and capture some interview time. Tailor your cover letter to the company in your sights, and your chances of receiving attention increase. It isn’t as hard as you think.

Changing names on the fly

Admittedly, resume blasts to large groups of companies within a desired field require a great deal of time if you plan to customize each cover letter from scratch. Thus, just changing names to suit the occasion can work, provided you’ve put thought into truly tailoring your language to match the requirements of the best companies within the chosen industry.

Ramp up the detail

A cover letter shouldn’t merely restate the objective or opening statement from your resume — perhaps it shouldn’t do that at all. Change the introduction, including pertinent details you’ve gleaned from your research of the target company. Point out how your work has increased efficiency, “dollarizing” your worth whenever possible. Once your cover letter packs that extra punch, you can flow in bullets regarding your skill set to sell yourself.

Use the best bullets your career can provide

Bullet points are visually convenient for quick reference. An HR staff member or hiring manager can scan your skills and experience to see if it matches up with what the company needs. Address specific requirements laid out in the job ad for the position, but don’t parrot them back exactly. Artful manipulation of language is key. Along the way, use spell check and as many human proofreaders as you can find before clicking send.

Throw the boomerang

Marketing guru Jeffrey Fox wrote a book entitled “Don’t Send a Resume: And Other Contrarian Rules to Help Land a Great Job.” The book is an invaluable resource for any job seeker, plus it’s short and cheap. When it comes to cover letters, Fox prefers the “boomerang” letter as a response to job ads more than the cookie-cutter resume and cover letter. Not merely an arrow that points to your resume, a boomerang letter is a sales letter that gives a prospective employer a snapshot of your skills and ambitions as they relate to generating money for the company. And like any good sales letter, the high point of a boomerang letter is the point where you assertively ask for the job.

Skip the HR department after the cover letter is sent

Sources

“Don’t Send a Resume: And Other Contrarian Rules to Help Land a Great Job”

eHow

Job Finder Advisory

Quintessential Careers

Credit reporting agency Teletrack has been fined nearly $2 million by the FTC for illegally selling credit reports. Photo Credit: TrinityCreditServices/Flickr/CC-BY

Credit reporting agency Teletrack, which specializes in subprime credit reports, has been fined by the FTC for selling credit reports illegally. The agency was found to have sold credit reports to payday loan lenders and has to pay $1.8 million in fines to the Federal Trade Commission.

Company cited for selling credit reports for marketing purposes

The Federal Trade Commission has slapped credit rating agency Teletrack with $1.8 million in fines for illegally selling credit reports to payday loan companies for marketing purposes, according to WalletPop. Teletrack has agreed to pay the fines, but insists that it acted entirely within the law. The FTC says the company violated the Fair Credit Reporting Act, which prohibits the selling of financial information such as credit histories or borrowing habits of customers or similar information for any reason other than a “permissible purpose,” according to Statesboro Business and Lifestyle Magazine. Marketing is not a permissible purpose.

Huge presence in subprime credit market

Teletrack is one of the largest subprime credit reporting agencies. It reports the credit history and activities of hundreds of thousands of people who use subprime credit products. Also known as alternative financial services, Teletrack compiles data on people who borrow payday loans, purchase furniture through rent-to-own companies, use car title loans or get an auto loan through non-prime lenders. The FCRA doesn’t prevents companies like Teletrack from providing information when asked for a credit check and paid by a second party, but selling information to third parties for non-approved purposes is grounds for an FTC lawsuit, according to Forbes.

New rules for credit scores

Until the past few years, it was fairly difficult for consumers to obtain much information about their credit history or learn about how that information is being shared with their creditors or third parties. Part of the financial reform laws of the past few years include new rules and regulations concerning credit reporting and credit scores, according to NASDAQ. The Dodd-Frank Act created the new rules last year, and the Federal Trade Commission and the Federal Reserve are implementing them this year. Now, any creditor that uses a credit score as a factor in creating the terms of a loan must tell consumers what their credit scores are.

Sources

WalletPop

Statesboro Business and Lifestyle Magazine

Forbes

Nasdaq

Bank of America has agreed to buy back investments to the tune of $8.5 billion. Image: MoneyBlogNews/Flickr/CC BY

Bank of America Corp. agreed Wednesday to pay out $8.5 billion to investors who lost on mortgage-backed securities purchased from the lender. The blue chip investors claim the securities were of poor quality. The investments tanked when the bottom fell out of the housing industry. The payout could pave the way for some mortgage-related investors to bring action against other banks.

Investments of poor quality

The dispute started last fall when Bank of America received a letter from 22 investors. The letter claimed that mortgage-backed securities they bought from Countrywide Financial Corp. before the financial crisis did not meet the seller’s promises about the quality of the borrowers or of the collateral. The Charlotte, N.C. based bank acquired Countrywide Financial in 2008 for $4 billion.

The investors, which include BlackRock Inc., MetLife Inc., Pimco Investment Management and the Federal Reserve Bank of New York, paid out $105 billion total for the investments. The original face value of all the bonds covered in the deal totaled $424 billion. The investors were asking for $47 billion of the bonds to be bought back.

Not B of A’s first buyback this year

Bank of America already paid out $2.6 billion in buybacks to Fannie Mae and Freddie Mac in January, and $1.6 billion to insurance provider Assured Guarantee Ltd. in April. Because of these added expenses, the bank expects to report a net loss of $8.6 billion to $9.1 billion in the second quarter of this year.

CEO could be in hot water

The mortgage buyback deal is the largest ever in the U.S.  The Wall Street Journal speculates that the bank’s CEO, Brian Moynihan, who acquired the top job only a year and a half ago, may have reason to fear for his position. Last year, Moynihan vowed to fight “day-to-day, hand-to-hand combat” against investor buybacks and to “not just do a settlement to move the matter behind us.”

May pave the way for other buybacks

The precedent of this buyback deal may lead to others, says the Wall Street Journal. Investment holders, who feel their mortgage-backed securities didn’t perform the way they were promised may decide to seek similar deals with other major U.S. banks. Bank of America, JPMorgan Chase and Wells Fargo banks collect payments for about half of all outstanding mortgages in the U.S.

Sources

CBS
Wall Street Journal
AOL News

Though the Better Business Bureau is a trusted institution, many businesses insist the rating system is akin to robbery. Image from Wikimedia Commons.

One of the supposed safeguards against unethical companies is the Better Business Bureau ratings system. Customers have long relied on the bureau’s grading system, but now the BBB is plagued by allegations that it runs a “pay-for-A” scheme.

Long-standing business rating service admits mistakes were made

The Better Business Bureau is thought to be among the few resources that consumers can trust in order to find out whether a business is trustworthy. The BBB has existed for decades and gives the public at large a way to vent frustrations at dealings that went sour, but there is a growing body of evidence that something could be rotten about the state of the BBB. Allegations have been made repeatedly over the years that businesses have to pay for a membership to get an “A” rating. According to a recent article at DailyFinance.com, the finance and business news site of AOL News, in response to questions on whether its rating system has a “pay to play” component, a BBB rep admitted “mistakes” had been made.

Rating system changed after news sting

The BBB announced last year that it was going to change its business rating system following a sting operation by a small group of Los Angeles area businessmen, an anonymous blogger and an accompanying “20/20″ news segment, according to ABC. It was also revealed that some very high profile companies have received disparaging grades for not being members. Some companies that have received F grades that aren’t BBB members include Wolfgang Puck restaurants, Disneyland and the Boston Ritz Carlton hotel. The Boston Celtics basketball team at one point held a D minus, and the New York Yankees currently have a C minus. The Boston Red Sox, as fate would have it, have an “A plus” rating– and the team is a BBB member. The sting operation by some Los Angeles area businessmen established a company called Hamas, after the Palestinian terrorist organization, and by simply paying $425 for a membership, Hamas received an A minus rating.

Holes exist in some nets

The group that created the Hamas company also created a BBB listing for a company they called Stormfront, the name of a neo-Nazi organization, which also received an A rating. It is not that the BBB is simply a “pay to play” organization, though it has been criticized as such by a fair number of people. The BBB does give consumers a legitimate forum to air grievances and use an impartial third party to register legitimate complaints about businesses.

Sources

Daily Finance

ABC

ABC on BBB Hamas

ABC on Ritz Carlton

BBB New York Yankees

BBB Boston Red Sox

A gas station in the now-defunct town of Empire, Nev. Image: aturkus/Flicker/CC BY

The town of Empire, Nev., has been wiped off the map. Even the town’s zip code has been deleted. The company owned-town was the last of its kind, and was a victim of the recession. Located about 100 miles north of Reno, the town was owned by the U.S. Gypsum company, which mined the mineral and turned it into drywall Sheetrock for the construction industry. The company is the nation’s largest supplier of Sheetrock. But the factory shut down on Jan. 31, 2010. The 99 employees were reduced to four who stayed to clean things up. After that, residents were given five months free rent to finish out the school year.

Welcome to Nowhere

As of last Monday, the town ceased to exist. All 300 former residents have moved on and even the town’s zipcode, 89405, no longer exists. All that remains is an eight-foot tall chain-link fence around the 136-acre plot with a sign reading “Welcome to Nowhere.”

The mining town was founded in 1923. It was bought by U.S. Gypsum in 1948. In its heyday, the town had a population of more than 750. The company rented apartments to its employees for $110 to $125 dollars a month, and two-bedroom houses for $250. The company provided water, sewer, trash, cable TV and Internet access free of charge. It had four tree-lined streets, a tennis court, a swimming pool, a nine-hole golf course and a community hall. Former residents say it was the kind of place where you could leave your door unlocked and never worry.

‘The recession just outlasted us’

The drywall industry peaked in 2006, when the company had $297 million in profits. But over the past three years, U.S. Gypsum has reported losses of $1.5 billion. With the recession has come a vastly reduced demand for Sheetrock. Steve Conley, who was employed by the company since the early 1970s, said, “the recession just outlasted us.”

Calvin Ryle, 62, who worked at the plant since 1971, was given the task of shutting down the conveyor belt for the final time. “The worst thing you can hear in a board plant is silence. You’re a part of building America. It’s not just making Sheetrock here,” he said. The plant’s maintenance foreman, Aaron Constable, reported that Ryle wept as he shut the belt down.

Gold mines and gold helmets

A great many of the employees have found work in Nevada gold mines, an industry that is booming. The Gerlach-Empire school, to which the 23 Empire children were bussed every day, has been reduced from 73 students to just 12.

Rumors abound that if the economy recovers, the plant will reopen. But most former residents are not holding their breath. Ryle told the Christian Science Monitor before he moved that he planned to leave his gold helmet behind in his house. The gold helmets, worn with pride by the factory workers, were awarded to employees after 25 years of service.

Sources

Huffington Post
Daily Mail

Are payday loan cases clogging Utah courts? / Image: bloomsberries/Flickr/CC BY-ND

A recent study indicates that payday loan cases are clogging the courts in Utah, particularly in the city of Provo. But payday lenders say the report is biased and misleading.

80 percent of all small claims cases

The Coalition of Religious Communities reports that payday loan cases made up 80 percent of all small claims cases in the district court of Provo, Utah, between 2005 and 2010. The report further claims that payday loan cases make up 70 percent of justice court cases in Provo and 62 percent of all cases in Utah County. “The sheer number of cases adds to already severely backlogged court dockets,” the study concludes.

“We went to court one day, and in 35 minutes, they looked at almost 800 cases,” said Linda Hilton of the Coalition of Religious Communities.

One firm especially guilty, report says

Hilton says one large firm, Check City, has a particularly unfair policy. The company’s contract has a clause requiring all prosecutions to be handled in Provo, where it is headquartered. This causes an undue hardship for borrowers living in other parts of the state, claims Hilton.

A spiral of debt?

An editorial in the Daily Herald claims that, in essence, the taxpayers are paying for the collection agency of a controversial industry. The editorial goes on to surmise that the volume of cases supports the idea that people who are financially desperate enough to take out payday loans will continue getting into deeper debt.

“We had this feeling from the clients that were coming in that something was not right,” Hilton said. “But our experience here is that most people are in debt for months and months.”

Most cases default

Reannun Newton, a Provo City Justice Court administrator, disagrees. “Because most of them go to default, they process pretty quickly.” She went on to explain that, though the court may have several hundred payday loan cases a day, typically only about 10 people will show to contest them. “It is a lot of cases, but anyone who files a small claim has to pay a [$65] filing fee.”

Courts generate revenue

“Not only are these court cases not burdensome on city government or taxpayers, but the courts are generating revenue for cities and counties, thus benefiting local tax payers,” said Wendy Gibson, community relations director for Check City.

Taking it to the lawmakers

Republican Congressman Brad Daw of Orem claims to be looking at what other states are doing about payday loan regulation. He has suggested that limiting borrowers to one loan per paycheck might be one possibility. Linda Hamilton plans to take the Coalition’s report to lawmakers before this year’s session is out.

Sources

Desert News
Daily Herald

JPMorgan Chase paid out $27 million in fines and reimbursements for allegations relating to its auto loan sales tactics. Image: DragonFlyEye/Flickr/CC BY-SA

JPMorgan Chase bank has agreed to pay a $2 million fine to settle claims that it used false statements and high-pressure sales tactics in some of its auto loan products. The company has also previously paid out about $25 million to reimburse customers who bought the loans.

Fines levied by the OCC

The $2 million fine against JPMorgan Chase was levied on Wednesday after a probe conducted by the Office of the Comptroller of the Currency (OCC), the Treasury Department agency that oversees national banks. In addition to its auto loan sale methods, JPMorgan Chase was also compelled to review its sales practices for mortgages and credit cards. The OCC claims to have found other questionable practices there as well.

Auto loans sold between 2008 and 2009

The OCC’s case involves allegations that from January of 2008 until May of 2009, JPMorgan sold auto loan products that would allow customers to cancel or suspend payments in the case of certain unfortunate unforeseeable events, such as the loss of a job or untimely death. Borrowers were charged a monthly fee for the contract.

Sales script provided by the bank

The sales staff of the bank allegedly made false statements when selling the products, often working from a script provided by JPMorgan Chase. The script included rebuttals to objections that potential buyers might raise.

JPMorgan does not admit or deny wrongdoing

The bank stopped marketing the products in 2009. As part of the settlement agreement, JP Morgan Chase will neither admit or deny any wrongdoing. JPMorgan Chase said in a statement that the company is pleased to to settle the matter. It has reimbursed the purchasers of the product and revised its sales practices.

Second largest bank in the U.S.

The banking giant became the nation’s second largest in September of 2008 when the Federal Deposit Insurance Corp. seized Washington Mutual (WaMu) and sold its banking assets to JPMorgan Chase.

Sources

Huffington Post
CNBC
Reuters

Beware of payday loan collection scams. / Image: ivanpw/Flickr/CC BY

Many of us in this tight economy are living from paycheck to paycheck. Payday loans can be a resource for people living close to their means when unforeseen expenses occur. Scammers, however, are preying on these already financially stressed people with threatening phone calls, trying to bully them into paying non-existent debts.

Lenders bound by laws

Legitimate payday loan companies offer small, short-term loans for people who wish to borrow against their next paycheck. However, when collection becomes an issue, these lenders are bound by laws. They are not allowed to harass their debtors, nor can they threaten arrest or jail.

Scammers in many states

In February, Maria Brown of Houston, Texas, contacted authorities reporting scammers. “They contacted me and really had me believe I was going to jail for check fraud,” Brown said. She had taken out payday loans before the calls, and the scammers seemed to have access to those applications. They sounded legitimate because of the information they possessed about her. Brown realized she was being scammed only after checking records and verifying that she had paid off her loans.

Consumeraffairs.com warns of a North Carolina caller described as “having a thick accent” who has been harassing North Carolina consumers for “a couple of years now.” The man uses abusive language and threats to frighten consumers into paying phantom debts with their credit cards. Arizona’s Attorney General’s office reported a similar scam in May. Callers claimed to be from fictitious law firms or government agencies and threatened legal action if the victims didn’t pay money owed on payday loans.

Company names to look out for

Scammers may say they represent real companies that they are not actually affiliated with, or they may use use made up company names. Illinois Attorney General Lisa Madigan reports that consumers should beware if callers say they represent Morgan & Associates, Federal Bureau of Investigators, DNR Recovery, DNI Recovery, Legal Accounts Association, Department of Law and Enforcement, Cash or ACS.

Fair Debt Collection Practices Act

According to the Fair Debt Collection Practices Act, debt collectors are not allowed to threaten arrest if you can’t pay. There is no law in the U.S. that allows arrest for unpaid loans. Collectors are also not allowed to harass, annoy or threaten any kind of violence. It is also a crime to falsely represent themselves as lawyers.

What to do if targeted

Consumers who receive these calls should never verify personal information over the telephone. Ask for written proof of the debt, which is something legitimate collectors are required to supply. Suspicious consumers may also wish to check their credit report to be sure there have been no unauthorized credit card purchases or loans taken out in their name. Report any suspicious or threatening calls to the Federal Trade Commission, the Better Business Bureau and your state Attorney General’s office.

Sources

Credit.com
Lawyers.com
Consumeraffairs.com

Goldman Sachs claims the Senate subcommittee's characterization of its subprime business was “sloppy and incomplete.” (Photo Credit: CC BY/Ludovic Bertron/Flickr)

Goldman Sachs Group Inc., the securities firm Sen. Carl Levin, D-Mich., once described as a “financial snake pit, rife with greed, conflicts of interest and wrongdoing,” is preparing to strike back. The Wall Street Journal reports that the firm plans to counter the Senate’s financial crisis subcommittee’s 639-page report, which alleges that Goldman Sachs sought to profit by betting against the housing market and betraying its clients. Reports indicate that Goldman’s defense will focus on what the company believes to be “sloppy math” on the part of federal regulators.

‘Sloppy math and incomplete analysis’

The Senate Permanent Subcommittee on Investigations went through tens of millions of documents disclosed by Goldman Sachs, yet the securities firm says in its defense that the Senate’s analysis was incomplete. Goldman Sachs has not denied that the firm profited from the subprime mortgage crisis as prices fell and borrowers defaulted, creating the big short. However, the firm believes data suggest the Senate’s numbers are inaccurate.

One document the Senate found particularly damning for Goldman Sachs was a chart that characterized the company’s net short positions against the housing market being as high as $13.9 billion on June 25, 2007. Goldman says that number appears artificially large when juxtaposed against the 2007 net revenue of $11.6 billion the Senate reported. Goldman claims its actual net revenue was $46 billion.

Insider trading, truthful and accurate

The WSJ reports that Goldman Sachs will use data on bullish mortgage trades to temper the opportunistic venom behind such numbers, data to which the Senate already had access but chose not to highlight in its report. Goldman argues that billions of dollars in bullish trades – as well as more than $5 billion invested in prime mortgage bonds – more than offset the subprime short bets.

Despite the fact that former Goldman Sachs corporate board member Rajat Gupta backed away from his position following allegations of insider trading, the firm maintains that its dealings with the U.S. government have been “truthful and accurate,” according to a company representative for CEO Lloyd Blankfein.

Goldman Sachs gambled more than $1 billion of Gaddafi’s money

Sources

The Atlantic Wire

Goldman Sachs

Wall Street Journal

Losing the ability to offer loans against tax refunds has caused tax preparation giant Jackson Hewitt to seek bankruptcy protection. Photo Credit: kenteegardin/Flickr/CC-BY-SA

Tax preparer Jackson Hewitt recently filed for Chapter 11 protection for a short bankruptcy. Hewitt and other tax preparation firms were dealt a heavy blow when changing regulations made it impossible for tax firms to secure funding for tax refund loans. Refund anticipation loans are often vilified alongside payday loans as preying on the poor.

Rule change sends tax preparation industry into tailspin

In 2010, a rule was changed that has severely hampered tax preparation firms, especially those that made much of their money from offering short term loans against tax refunds, or refund anticipation loans. The Internal Revenue Service informed preparers that they will no longer be able to see whether a person is receiving their entire refund, according to USA Today. That caused  funding partnerships to dry up. H&R Block dropped refund anticipation loans altogether before the 2011 tax season. Jackson-Hewitt became the largest entity offering them. Because of the IRS rule, bank regulators consider the loans too risky and therefore look dimly upon companies that still lend them, according to Reuters. Because of that, Hewitt has not been able to secure further financing on its debt and has filed for Chapter 11 protection.

Quick bankruptcy

Hewitt maintains it will be in bankruptcy protection only for a few months, in order to restructure itself and begin repaying its debts. The company got in trouble with its lenders because Hewitt relied heavily on refund loans and needed financial backing to fund the loans and got heavily in debt. However, the company intends to come out of bankruptcy and no longer rely on tax refund loans. The last major organization funding the refund loans, Republic Bank and Trust, is currently in the midst of a battle with the Federal Deposit Insurance Corporation. Republic, according to BusinessFirst, is being fined $2 million by the FDIC for continuing to fund the loans despite warnings to stop doing so. Republic maintains that because it made a record profit during the first quarter of the year while funding the loans, the loans can be lent responsibly.

Credit product disappearing

The refund anticipation loan, or RAL, is going extinct. Consumer groups liken them to payday loans; a person who has their tax returns prepared and is getting a refund is offered a portion of the funds immediately by the preparer. The refund is turned over to the preparer, with the difference being the “fee” for the lender. For instance, a person receiving a $600 refund is offered an RAL of $530 by a preparer, and the customer gets the cash within a few days rather than waiting weeks for a check from the IRS. If the return is accepted, the customer gets the RAL and the preparer gets the refund once the IRS disburses it. The FDIC objects to banks funding RALs because no credit check can effectively be performed before disbursing the loan to the customer.

Sources

USA Today

Reuters

BusinessFirst

Sending someone money via a mobile device is easy with clearXchange. (Photo Credit: CC BY/Gunnar Bothner-By/Flickr)

Bank of America, JPMorgan Chase and Wells Fargo have banded together to challenge PayPal for online payment service superiority, reports the Associated Press. A new mobile payments service called clearXchange now makes it easier for consumers to make person-to-person payments via a mobile number or email address. The trio of U.S. banking giants anticipates that clearXchange will eventually replace traditional money transfers entirely.

Lower fees than prepaid debit and eBay’s PayPal service

Despite the fact that big banks originated the cavalcade of account fees that customers have begrudgingly paid for years, Bank of America, JPMorgan Chase and Wells Fargo are marketing the Charlotte, N.C., clearXchange as a much less fee-intensive service than old options like prepaid debit cards and eBay’s PayPal online payment service. Only customers of the three banks will be able to use the person-to-person clearXchange at first, but that will change if the mobile payment service spreads.

JPMorgan’s Director of Mobile, eCommerce and Payments Jack Stephenson told the Associated Press that clearXchange couldn’t be simpler.

“Customers will be able to send and receive money even more quickly and easily,” he said, “with full confidence their funds are in a bank account without worrying about cash, checks or higher-cost services.”

PayPal a big oak to fell

According to eBay, PayPal currently boasts about 100 million active users and processed $27.4 billion in payments in the first quarter of 2011, a 28 percent increase from a year ago. PayPal’s revenue hit $992.3 million, and eBay is confident PayPal’s revenue will soon eclipse that of its parent company on an annual basis.

‘An innovative game-changer’

Wells Fargo Executive Vice President Mike Kennedy told Business Wire that clearXchange’s simplicity will change the mobile payments game.

“This is an innovative game-changer in electronic payments,” he said. “We want our customers to be able to easily send money to anyone without having to establish a new account outside their primary bank. All our customers need to know is the email address or mobile number of a friend or family member and (clearXchange) takes care of the rest.”

Sources

Business Wire

Associated Press

ROAM Data, Inc.’s Rob Stringer on end-to-end encryption

LinkedIn's share price more than doubled during its IPO debut. (Photo Credit: CC BY/Mario Sundar/Flickr)

Share prices during the IPO of online social network LinkedIn’s stock soared into the stratosphere this week, reports the Wall Street Journal. This has set many Wall Street brokers on edge as concerns over a new tech bubble surface. The prices are so high that brokers are advising investors to short LinkedIn stock, as a massive decline is anticipated.

LinkedIn numbers reminiscent of late-1990s dot com bubble

Reports indicate that LinkedIn’s stock ramped up 109 percent Thursday and completed the first day of trading at $94.25 per share, reflecting a $9 billion market capitalization that was 592 times above actual earnings. The price continued to rise Friday.

“Even if you think (LinkedIn is) a great business model, the feeling is that the valuation is way beyond what even the most bullish guys were hoping for,” said youDevise Ltd. Short-term trading analyst Timothy Murphy.

How a LinkedIn short sell works

In order to short sell LinkedIn stock, investors “borrow” the stock, then sell it in a bet that the share price will fall and that they can then buy shares back and return them to the lender. A fee in the form of an annualized percentage of the stock’s value is what investors pay for borrowing.

Ultimately, the only way investors will profit from short sales of LinkedIn stock is if the value drops severely. According to head of equities and derivatives Jonathan Bensimon of Société Générale in New York, betting on the fall of LinkedIn is a pretty big gamble.

“It’s going to be a tough game and a dangerous game,” Bensimon said to the WSJ. “Even if someone thinks it is valued way too high, he should think twice before shorting the stock.”

This is not your father’s dot-com bust

Over each of the past 12 months, LinkedIn has made about 7 cents per share, reports the Washington Post. Yet this week’s IPO explosion was an entirely different animal. The Economist notes that related social media and tech companies like Facebook and Twitter were estimated to be worth $76 billion and $7.7 billion pre-IPO, respectively. Groupon, Zynga and Rovio aren’t far behind.

Should the bubble burst

Valuing companies at more than what time-tested giants like Boeing and Ford are currently worth without proven, long-term business plans in place is reminiscent of a dot com bubble, but the difference now, according to The Economist, is that there’s a global dimension to the latest tech company awakening that the late-1990s bubble did not possess.

Many of the companies in question originated outside the U.S., such as Skype (Estonia) and “Angry Birds” creator Rovio (Finland). As a result, some experts believe the new tech bubble is more secure in its diversity. But if the bubble does pop, the spillover effect that dragged down the entire stock market in the late-1990s dot com bust won’t be there this time.

Sources

The Economist

Wall Street Journal

Washington Post

Wikipedia entry for short selling

Newly minted billionaire Reid Hoffman of LinkedIn

For small businesses that need loans smaller than $100,000, new options are becoming available every day. Image: Flickr / somekindabetty / CC-BY-SA

In business, there are big-idea startups that attract millions of dollars of funding. Then, there are most businesses — restaurants, coffee shops and specialty retailers that provide the day-to-day services we all use. A new startup called OnDeck is trying to help these 5 million businesses qualify for loans more easily.

The problem with small business lending

For many small businesses, qualifying for loans can be a challenge. Many financial institutions are wary of lending to businesses without a credit history or business history. Loans for amounts less than $100,000 are often considered not worth the work it takes to vet a full business with the standard 14-item business loan package. Faced with these two realities, many owners of businesses with fewer than 25 employees end up using their personal credit to secure financing. While this does tie business success to personal accounts, it also creates a dangerous brew of expensive financing and risk to personal finances that scares many potential business owners.

OnDeck provides a business solution

Cloud-based and interlinked, OnDeck aims to streamline the creation of financial reports and information for lenders. Businesses input their business profile, link the profile to their online banking, accounting and credit-card processing accounts. That information is blended with industry data, tax data and regional information to create a full financial profile, prospectus and business credit report. This system, five years in the making, creates the kinds of reports that big businesses use to qualify for choice loans. The reports also provide more real-time information than banks currently use, hoping to streamline the process for loans between $5,000 and $150,000.

Other resources for small businesses

OnDeck provides new financing resources for small businesses, but it is not the only new resource for getting small business credit. A new government partnership called StartUp America aims to provide discounts, resources and information to help small business owners get their business going or growing. The Small Business Administration also provides loan guarantees, counseling and information for small business owners. There are lots of resources out there for entrepreneurs willing to look for them.

Sources

TechCrunch
Startup America Partnership

Every small business owner can employ these tips for surviving the recession doldrums. (Photo Credit: CC BY/Don O'Brien/Flickr)

For many small businesses, layoffs, hiring freezes and elimination of services have been business as usual during the recession. Survival during tight economics times can be difficult, but with some time-tested strategies in place, small business owners can still capitalize. From Smart Biz and About.com Entrepreneurs, here are some small business tips for surviving a recession.

Focus on the strength of your business

When business begins to hit a lull, too many small businesses go into panic mode and try to be all things to all people in order to maintain a customer base. Rather than leaping into new ventures and releasing new products, focus on your strength in order to maintain market share. You carved out your niche by doing what you do best, and a recession is not the time to change that stance.

Think outside the box to find new markets

Thinking outside the box in your search for new places to do business enables you to market your core product to a previously untapped customer base. Even though a small business may have limited cash flow and expenditure allowances, spending a little bit more in order to provide service to an unexplored market niche can be a very worthwhile investment.

Understand your best customer

Even if you know which niche market you want to target, you have to know your specific audience. This is the only way to know what customers need and how your small business can meet those needs better than the competition. As Smart Biz suggests, it could be reduced prices, bundled packages or more one-on-one work with clients. Know what clients want, adapt to their needs and provide strong customers service. Customer loyalty is sure to follow.

Stand out in the crowd

In order to gain an advantage over the competition, it doesn’t pay to merely copy what they’re doing. Through observation, market research and a great deal of determination, small business owners can discover what in-demand services and products are not otherwise available. Whether it’s an innovative pricing model, customized services or a product that meets customer demand with greater efficiency, don’t be afraid to stand out from the competition.

Hire outstanding talent

It’s been said many time: a company is only as good as the people it employs. Thus, it makes sense to screen potential employees, not only for experience and skill set but for the right personality fit.

Help customers make money

A great way to help build customer loyalty is to empower customers to make money of their own. The boom of online social networking has opened up a world of moneymaking opportunities. For some small businesses, affiliate network programs enable businesses to keep customers in the loop while customers receive a percentage of affiliate sales.

Sources

About.com – Entrepreneurs

Smart Biz

How to figure profit and loss

The microfinance industry, which came to prominence through its pioneer Muhammad Yunus (pictured) of Grameen Bank, is being rocked by scandals and poor economic performance. Image from Wikimedia Commons.

The microfinance industry and the microloan came out of the last several decades as a novel way to empower low-income people by extending them credit. Microlenders have been showered with praise and even Nobel prizes. However, some modern microfinance firms don’t appear to be following in the ethical or economic footsteps of the ones that came before.

Microlending firms founder

Microlending firms in Asia have experienced turbulence recently, leading some to question what the future of microcredit holds in that region. SKS Microfinance, according to the New York Times, has lost about 70 percent of its stock value on the market since its initial public offering in August of 2010. In the last quarter of 2010, the company posted a loss of more than $15 million after posting a profit of more than $14 million in the first quarter. The Indian government has been legislatively cracking down on SKS and other microcredit firms after numerous accusations of strong arm loan collections have become rampant. Last year the Economic Times reported that about 30 people in the state of Andhra Pradesh committed suicide in a 45-day period, allegedly because of debt to microcredit lenders.

Governments square off

The governments of Bangladesh and India have both pushed back against microlenders that they say crossed the line. The central bank of India passed legislation capping interest rates on microloans to 26 percent and loan amounts to 50,000 rupees or about $1,120. Furthermore, state politicians in Andhra Pradesh encouraged people to stop paying their debts to microloan lenders, and loan repayments there fell to about 10 percent, according to Forbes. In Bangladesh, Muhammad Yunus was forced from his position as head of Grameen Bank, the institution he founded, which has lent out billions in microloans to impoverished people around the world. Yunus won the Nobel Prize in Economics for his work. Lenders are accused of forcing people into a vicious cycle of debt and some are accused of using illegal or immoral methods to get borrowers to pay their debts. Yunus has been openly critical of for-profit lenders; he contends that the motive to make money rather than to help people get out of poverty is crippling microcredit as an economic tool.

The end may not be in sight

Microcredit lenders may be struggling because of economic and political conditions, but the model is beginning to take off in other countries. The Kiva organization uses donations from private individuals to raise capital for microloans all over the world. There are also American versions of microfinancing opening up. For instance, the Samuel Adams brewing company launched a joint venture with the non-profit foundation ACCION USA. Entrepreneurs can get small l0ans of a few thousand dollars to start the food-related business of their dreams, according to USA Today,. The Small Business Administration has loan programs for startups.

Sources

New York Times

Forbes

USA Today

Economic Times

Yes, you can – if you keep up with your business metrics. (Photo Credit: CC BY/Search Engine People Blog/Flickr)

With apologies to the late, great Broadway composer Frank Loesser, you can’t succeed in business without really trying. But how do you know if you’re really succeeding in business? According to Entrepreneur, you must benchmark your business against industry competition. Metrics like net profit, liquidity and turnover ratios are some of the key measurements for business success.

Know where your small business stands

Benchmarking may seem labor-intensive, but the truth is that there are sources for all the data a small business owner needs to tell whether their business is doing well. Some of these sources are relatively inexpensive, according to Entrepreneur. Here are three key ways a small business owner can find benchmarking data:

1. Get to know business owners and associations. If you reach out to owners of businesses that are similar to yours – but outside your market area, so that competition isn’t an issue – you may be able to share financial data. Similarly, joining industry groups that conduct anonymous financial polls can give you a general idea of how your industry is faring.

2. Find industry directories. Revenue and growth figures are broken down by sector in directories like Chain Store Guide.

3. Pay for market research. Costs here can run from inexpensive to highly expensive, depending upon the scope of the study and industry concerned. Sometimes you may be able to glean some free stats from a press release about a study. Companies like Sageworks can provide you with accurate data.

What a good market study should include

According to Sageworks, accurate, up-to-date, relevant reports give business owners the best deal for their money. The most current information helps business owners understand what they must do now, and data gleaned via a focused view of a specific business field provides the most applicable solutions to overcoming barriers to business success.

Sageworks CEO Brian Hamilton suggests business owners pay close attention to these financial metrics in a market study:

Net profit before taxes margin

This is before-tax net profit divided by sales for a given period of time. In basic terms, it’s how many cents in profit a business earns from each dollar of revenue. Obviously, the higher the better.

Liquidity ratios

Two ratios are important here: current ratio and quick ratio. The former is assets divided by liabilities, and it is a good, long-term metric. The latter is cash plus accounts receivable, divided by liabilities. This is more of a short-term gauge.

Turnover ratios

Turnover ratios measures how well a business manages and moves its inventory in terms of liquidity. The three most significant turnover ratios for business owners are accounts receivable turnover, accounts payable days and inventory days ratio. Accounts receivable turnover measures the number of days that a company takes to turn receivables into cash. Accounts payable days ratios measure the number of days it takes companies to pay vendors. Finally, inventory days ratios account for how many days it takes to sell inventory. For more info on calculating these ratios, visit Sageworks’ website and About.com Business Finance.

Sources

About.com Business Finance

Chain Store Guide

Entrepreneur

Sageworks

Stories are human glue for businesses

Someone interested in a personal loan or small business loan can apply for one in minutes by using crowsourcing sites. Image from Wikimedia Commons.

Small businesses are able to get funding through crowdsourcing like any private individual looking to do the same. Crowdsourcing is raising funds by getting a large number of people to contribute small amounts of funds bundled into one personal loan. It’s also called peer to peer lending.

Crowdsourcing model bypasses typical middleman

Over the past few years, there has been a lot of attention paid to crowdsourcing. The idea is to use a social media-like model to raise loan capital or donations for causes. People or organizations simply put their ideas and how much they need to raise on a crowdsourcing site, and other individuals or organizations can pledge funds toward the goal. Some crowdsourcing sites don’t actually collect the funds unless the target is reached, like Kickstarter. Kickstarter was the site a Detroit man used to crowdsource, or crowdfund, the necessary capital to bring Detroit a life-size Robocop statue. (The film took place there.) The idea is simple; try to raise money from one’s peers on the internet by going around the cumbersome traditional middlemen: banks.

Entrepreneurs turn to crowdsourcing

Crowdsourcing is a way for business owners or individuals to get access to loan capital, whether it’s to fund a startup small business or if a person simply needs some personal loans. People launching a startup company can turn to crowdsourcing sites or peer to peer lending sites like Prosper and Lending Club. The model is similar; applicants state the reason for the loan and how much they need, and investors pledge funds if they are interested. The site usually gets a small percentage of the funds raised as a fee for facilitating the service, according to USA Today, and borrowers can accept or decline terms on any installment loans that are offered them. Small businesses just getting off the ground can look into microfinance sites like Kiva that allow investors to put small dollar amounts into a loan for a small business, starting at the amount of $25.

Borrowers should do their homework

If a businesses or people are interested in crowdsourcing a project, they should know exactly what they are looking for in order to apply through the most appropriate service. For instance, Kiva Microfinance is a good place for small startups looking for microloans. Lending Club is fairly discerning, as the site will reject anyone with an insufficient credit rating, and it rejects far more people than it accepts. These are great opportunities for investors, as Kiva boasts nearly a 99 percent repayment rate and Lending Club has similarly high rates of return, according to MSNBC. Lending Club usually has a rate of return between 9 percent and 10 percent of the total investment, according to Slate.

Sources

USA Today

MSNBC on the Robocop Statue and other crowdsourcing sites

Slate

See more at Kiva and Lending Club

Is it natural to restrict consumer choice? (Photo Credit: CC BY-ND/NAME/DownSouth.us)

Payday lending has been outlawed in Arkansas since 2009, but that hasn’t stopped some consumers in need from looking to online payday loans funded from outside the state. Unfortunately, freedom of choice isn’t viewed kindly by Arkansas Attorney General Dustin McDaniel, reports the Arkansas News. McDaniel’s office obtained court orders barring two online payday lenders from issuing loans to Arkansas residents.

Arkansas has a 17 percent APR cap

Payday lending laws in Arkansas specify that interest be capped at 17 percent APR, a far from tenable rate, as numerous independent studies have shown. The online payday loans in question charged 300 percent APR, which is not out of the question in the industry, although the numbers are deceiving because the loans are not 12-month loans.

Kansas-based companies Geneva-Roth Capital and Geneva-Roth Ventures, which do business online under the banner of Loanpointsusa.com, were named in one judgment. The companies agreed to stop issuing payday loans to Arkansas residents, cancel about 700 pre-existing loans in the state, give up more than $700,000 in claims and pay the State of Arkansas $60,000 in legal fees.

The second judgment, against Kansas-based Arrowhead Investments (which also transacts as Galaxy Marketing), forced the company to stop issuing Arkansas payday loans, abandon $44,370 in claims against 162 Arkansas residents and pay the state $30,000.

All payday lenders involved were required to withdraw negative credit marks against any Arkansas borrowers.

Legislating against the people

Regarding payday loan laws in Arkansas, one might wonder why it was deemed necessary in the first place to restrict consumer choice. While they didn’t have payday loans specifically in mind, two very famous men had poignant things to say about unjust laws. Indian independence leader Mohandas Gandhi once said that “An unjust law is itself a species of violence,” while U.S. civil rights figure Martin Luther King, Jr. said that “An individual who breaks a law that conscience tells him is unjust … is in reality expressing the highest respect for the law.”

While the two men were not addressing the concept of payday loans specifically, their message is clear. Unjust laws can be injurious. The conflict exists between federal and state law, as payday loans are a legal consumer finance product on the national level. The same holds true for most states, which makes one wonder why Arkansas consumers need such protective guidance from their nanny government.

Sources

Arkansas News

Arkansas State Board of Collection Agencies

Loanpointsusa.com

Payday loan lenders are continuing to thrive despite economic conditions. Photo Credit: diaper/Flickr.com/CC-BY

Despite an increasingly hostile regulatory climate, payday lenders are finding ways to thrive. Payday loan legislation is constantly changing as states waffle on banning or allowing the credit product, but the largest firms are still doing well. Overseas expansion and increasingly diverse product offerings are helping publicly traded payday loan businesses to grow.

Largest payday loan companies expanding overseas

Payday loan lenders are often maligned as hyenas that pounce on the poor, but the characterization has not kept the largest payday lending outfits from expanding and posting profits in rougher economic times. Cash America, EZCORP and Dollar Financial Group all posted profitable first quarters for the year, according to Reuters, and have managed to keep growing despite gloom among American consumers and an already harsh regulatory climate. All three are among the largest alternative financial service firms and are publicly traded. Cash America posted a 13 percent increase in revenues, helped by international online short term loans that the company offers to customers in the U.K., Canada and Australia. Dollar Financial Group posted a 21 percent rise in revenues that came mostly from online lending, and EZCORP shares rose by 6 percent. All three are expanding overseas operations.

Regulation battles continue

The regulatory climate for payday lenders constantly changes. Numerous states constantly are trying to either loosen or tighten restrictions. For instance, the New Hampshire House of Representatives recently killed a bill that would have allowed lenders to start operating in New Hampshire, where the loans are currently prohibited, according to the New Hampshire Business Review. The California legislature is currently considering a bill to raise the borrowing cap on payday loans, according to the Silicon Valley Mercury News, amid a lot of controversy and accusations that politicians are being bribed by lobbyists. The state of Missouri, according to the Columbia Daily Tribune, recently killed a bill that would have tightened restrictions.

The future of subprime credit

Any form of credit carries risk for the borrower, including credit cards and mortgages. However, many people want to see payday loans legislated off the face of the earth. It isn’t likely to happen; forms of short term credit have existed since the beginning of civilization, and as long as there are unexpected expenses, there will be a need for something similar to payday loans.

Sources

Reuters on Cash America, Dollar Financial, and EZCORP

New Hampshire Business Review

Columbia Daily Tribune

Silicon Valley Mercury News