“What a difference a year makes. We have seen in all of our businesses a big upswing starting in March and continuing through April. Last year at this time I stated that the US economy was in “shambles” with no signs of a recovery in sight. Since last summer things have been creeping up a little, but in March, around the world, we saw a real change for the better.
- Warren Buffett (Interview given to
Fox Business News April 30th, 2010)

Economists have been saying that the “Great Recession” technically ended over a year ago in spring / summer of 2009.  However, much of what is said about the US economy these days could be true or false, depending on your angle or perspective.  Regardless of what the facts say, America is just too big and too diverse to be described usefully by blanket statements.  The $14 trillion American economy is, in fact, a galaxy of smaller economies.  This notion is reinforced by simply looking at national unemployment figures which are still stubbornly high at roughly 10%.  However, when you look at the individual economic galaxies that comprise the overall American economy it is interesting to note that Michigan has nearly twice the unemployment of Texas, which has almost twice the unemployment of Nebraska.  Many business owners enthusiastically agree that the economic environment has improved significantly in recent months including Warren Buffet but there are a lot of angry doubters out there – both are probably right with the accuracy of their opinion being directly tied to their perspective or point of view.  

In last month’s newsletter, we discussed a disturbing trend in the equipment financing / equipment leasing industry – companies masquerading themselves as lenders or leasing brokers when in fact their only motivation is to steal deposit checks / advance payments / application fees from unsuspecting small business applicants.  Just within the last month, I was personally made aware of this exact thing taking place.  First Star received a credit application from a small automotive repair business in Montana.  We worked with the business owners to understand their equipment needs and the justification for their request and ultimately issued an approval.  In subsequent discussions with this company they stated that they had already submitted advance payments to a leasing broker in TX that had contacted them via blast fax.  According to the customer they were then told that their request could not be approved and that their funds had been forfeited.  Apparently, they made several attempts to obtain a refund by calling, faxing, and sending written request in the mail.  By the time this came up in conversation with me nearly two months had elapsed and the business owner had given up.

This experience further underscores the need to do some basic due diligence on all potential new business partners.  Most employers do a basic background check on prospective new employees consisting of references from prior employers, credit check, and a criminal background report at the minimum.  Many large employers go much deeper than this including personality profiling and even drug testing.  Obviously, not all of these tools are available for a business owner to research their potential lender / leasing company.  However, I got the name of the company in TX from this business owner and proceeded to look them up in the BBB (Better Business Bureau) as well as Ripoff Report (www.ripoffreport.com).  His heart sank when I forwarded him the Ripoff Report which showed a long track record consisting of numerous complaints identical to his.  He was the owner of a small company in a rural area and only lost a couple thousand dollars while some of the other complaints on Ripoff Report were for more than $30K.  It goes without saying that this business owner would have been much better off had he spent a few minutes researching this company that contacted him by fax.  A simple search in the Secretary of State, BBB, or Ripoff Report probably would have saved him money, heartache, and aggravation.

First Star has seen a tremendous pick up in business activity over the last few months presumably due to our strengthening economy.  It is clear that the pent up demand for equipment upgrades and replacements is converting to a heightened amount of buying activity.  We only hope that prospective borrowers are cautious about who they choose to engage for their equipment financing / leasing needs.  There are a lot of good companies in our industry but there are also some shady characters with underhanded intentions.

About First Star Capital

First Star Capital is an established national firm that has financed thousands of different businesses across the country and has funded hundreds of millions of dollars worth of capital equipment. We are an independent commercial lender with a specialty focus in equipment financing and leasing. First Star Capital is a direct lender with the ability to quickly and efficiently fund new financing requests between ten-thousand and ten-million dollars. Since we are a direct lender with our own funding and servicing capabilities we are able to deliver tangible value added financing solutions with the utmost flexibility. First Star Capital has the internal ability to underwrite a variety of different financing requests - nothing is too big or too complicated.

Brad Harmon

(800) 604-4817

Brad@FirstStarCapital.com

www.FirstStarCapital.com

Did You Know?

There are 27 million small businesses in the US

Small businesses represent more than 99.7% of all employers

These small businesses account for 50% of the total Gross National Product

Small businesses employ more than half of the total workforce (roughly 130 million people are employed by small businesses)

Small businesses provide 60% - 80% of the net new jobs annually

Only 3% of small businesses are franchises

The average annual revenue of a small business is $3.6 million

The average annual revenue of a small business with a website is $5.03 million

* Small businesses are defined by employee size – less than 100 people

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