There is much talk today about these topics. What is not being said by very many at all is the focus of my blog today. The economy has been trashed. It could not have been damaged more if it were on purpose. The real estate market was given its death blow in January of 2006. Then President Bush pushed a “bailout” bill through for almost a trillion dollars. The reason we didn’t hear about it was twofold. A. The media thought it may actually work and were afraid of giving President Bush credit for it ,and B. There was an interest rate attached to it (1%) so technically not a bailout but a loan. The banks in return for this favorable loan promised they would loan it out at a much higher rate to small businesses. The banks decided to take the easy way out and reinvest this money in bonds that paid at the time around 2%. The bankers looked like heroes on paper at the time. They are not looking so heroic now. Financing dried up for small businesses ,they employ about 65% of us in America. As money grew tighter there were less profits ,more layoffs ,and less jobs. Guys it’s going to get a lot worse unless the money starts flowing to small businesses again. So thats my focus today.

President Obama is working on a job stimulus bill that will go into action in January. The good news is it will be focused on job creation within small businesses. The federal government will be basing everything on the businesses credit worthiness not the owners. This because its a jobs bill and many businesses are changing hands right now. The loans will be 80-90 % government guaranteed and the lender will underwrite the rest.

For the lender this will be a real windfall. Lending to companies with the government backing almost all of the loans will be very profitable. The loans can be cured for 6 months and sold. The lender can clear every dime as profit ,minus expenses of course.

For the small business with bad credit and late payments. Dunn & Bradstreet reevaluates your business credit every quarter. get your house in order. Show a profit for a quarter and pay everything on time for a quarter. These loans will be short lived ,I estimate 6 months availability at the most. Loans as low as 6% and as high as 25% if the feds allow it that high. Remember where there’s chaos there’s opportunity.

The commercial real estate market is crumbling as I write this. It is largely being downplayed in the media. Note that it will be much larger because it was more leveraged than housing was. This will cause banks to start a massive liquidation of properties , both housing and commercial. There is only so much that the government can stop. This will overcome any roadblocks and it’s what needs to happen for the markets to finally become stable again.

There is a “Shadow Inventory” of residential homes right now. It consists of houses that Fannie & Freddie hold the notes on and refuse to foreclose on at the request of this administration and the homes that have been foreclosed on but are not for sale. They do this so the do not flood the market with properties and lower prices by half or more from their current values.

What should you do if ?

1.My mortgage should be foreclosed on but its not.

Wait. time is on your side. If your loan is below 700k then they won’t be taking it anytime soon. They will offer to rent it to you. Offer them almost nothing plus you pay the insurance on the home. They will take it.

2.I’m a small business owner and am in deep troubel with debt.

First stop panicking. What happens when a small business owner starts running out of cash they begin trading profit for revenue. This delays the ugliness but makes it worse in the long run. A decent business consultant can come in without the stress and think clearly for you. They can get the revolving debt lowered by around 50% and have interest cut without a spot on your credit in most cases. Find a good consultant and listen to them.

3.I own a small to medium size business and life is great. I have money ,profit ,and a merry life.

To the very few out there, congrats. But just because you are doing great doesn’t mean you can’t do better. look at any debt your company has. this will be a rare opportunity to lower interest and consolidate ,even expand what’s working for you.

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That’s all i have for today. please keep in touch. If this made you think please let me know. Also if you have any questions just email me.

Ken Stepp

ken@steppmail.com