In the News
September 22, 2016
Worldwide, small- and medium-sized enterprises’ (SMEs) access to credit remains a challenge that a wide range of organizations are trying to address.
“The [G20] SME Finance Forum estimates that the total unmet global demand for credit by SMEs in 2016 is $3 trillion, with an astounding 200 million SMEs that lack access to credit,” according to SMEs in Global Value Chains: The case for a coordinated G20 policy approach. This is notable because ongoing or increasing shortfalls in credit access through banks and other commercial lenders can lead to requests for loose trade terms from suppliers.
Vietnam’s Ministry of Industry and Trade recently estimated that only 30% of SMEs in the country have access to bank loans. In Africa, the estimated amount of unmet trade finance is about $120 billion (USD), or about one-third of the continent’s trade finance market; and in developing Asia, $700 billion, according to the World Trade Organization’s publication, Trade Finance and SMEs: Bridging the gaps in provision.
In the United Kingdom, a number of major changes affecting access to finance and late payment for SMEs will occur this year, according to the Institute of Chartered Accountants in England and Wales. “The main banks will be required to offer businesses they refuse finance to alternative finance platforms,” it stated. “The new finance platforms will offer a range of alternative forms of finance—commercial mortgages, asset finance, cashflow/working capital and alternative finance such as peer-to-peer lending.”
- Diana Mota, associate editor
Call For Proposals: Hurry, Deadline Approaching
The National Association of Credit Management will hold its 121st Credit Congress & Exposition in Grapevine/Dallas from June 11-14, 2017. Please click here to fill out the form to submit abstracts, proposed sessions and communications pertaining to participation in the program. Submissions must be made using this form.
Please submit ideas by September 30, 2016. Any proposals that are incomplete or are received after this date will not be considered.
A working group of contractors and construction associations’ attorneys is proposing significant changes to Texas’ patchwork of procedures for asserting and perfecting mechanic’s lien claims from suppliers and subcontractors, including an overhaul of the notice system. These changes have yet to appear in a bill in the Texas legislature, which resumes in January 2017.
If passed into law, an updated notice system would require claimants to post notices with every new project, according to Randall Lindley, Esq. and Kelsey Williams, Esq. of Bell Nunnally of Dallas. Simplified notice provisions would seem to favor subcontractors and suppliers, and the elimination of statutory retainage and fund-trapping notices could make an owner’s liability unlimited. However, “It appears the revised statute would not prevent owners from continuing to use project funds to pay their general contractors in spite of unpaid subs, or simply waiting until the project is complete to make pro rata distributions to all perfected claimants,” Lindley said.
Since 2013, a working group of Texas lawyers appointed by the Texas Building Branch of the Associated General Contractors and others have been drafting a rewrite of Chapter 53 of the Texas Property Code. According to its latest proposal, the working group would eliminate notice requirements in favor of a “Notice of Furnishing,” which all claimants, other than the original contractor, would need to send to the owner and the original contractor. Instead of trapping funds, a single notice of furnishing would be provided at the outset of work and would merely preserve a contractor’s right to make a claim, Lindley explained. Currently, Texas law requires a series of past-due and fund-trapping notices, which must be sent via certified mail to specific parties on or before the 15th of a specific month before a valid lien affidavit can be recorded.
Another big change to the lien law would provide the option for owners to appoint a lien agent that would create and maintain a common website for giving and receiving notices and for furnishing information about notices on the project, he said. Owners would also have to post a Notice of Commencement on such a website.
The proposal would also change the mechanic’s lien affidavit, Lindley pointed out. Changes would include identifying the date of sending the notice of furnishing, while the statement of each month in which work was performed would no longer be needed. The deadline to file the affidavit would become the 15th day of the fourth month, or the third month for residential projects, after the work under the original contract was completed or the original contract was terminated. “This is a significant revision that may function to extend a subcontractor’s lien filing deadline, especially if materials or labor were supplied early in the project,” he said.
The Only Certainty in Global Markets is Uncertainty
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A draft cyber security law in China designed to bolster the protection and security of key information infrastructure and important data in the country could affect businesses operating not only in China, but also those operating elsewhere in the region. These businesses should pay attention to the draft and its potential impact.
Earlier in the summer, the Standing Committee of the National People’s Congress in China had a second reading of the cyber security law, a signal that the bill could be making progress toward its eventual passage, said attorney Manuel Maisog, a partner with Hunton & Williams in Beijing. The proposed law says the Chinese government will impose information security obligations on operators of “key information infrastructure,” which refers to infrastructure of which damage or leakage would jeopardize national security and public interest. This personal and critical business information refers to data collected and generated in China—essentially, if this kind of information was generated in China, operators of key information infrastructure have to keep it there, Maisog said.
It is hard to tell how the law will be interpreted and applied. The term key information infrastructure might have been drafted with particular industries in mind. If so, due to certain restrictions, many foreign investors might not be involved in some of the key information infrastructure such as telecommunications firms or broadband networks, he said.
Meanwhile, the vaguely worded draft law could apply to foreign-invested banks and financial institutions, given the potential for damage if information is leaked from these sources. Foreign-invested banks and financial institutions might therefore be considered to be operators of key information infrastructure and subject to the terms of this law, Maisog said.
If a business entity is an operator of key information infrastructure and needs to send information outside of China, the draft law provides a way forward, though perhaps a potentially cumbersome one. The business entity could undergo an examination by cyber security officials of its information security practices, he said. This could be costly, in terms of time and resources spent on passing such an audit, but if the business entity passes the examination, the information could then be sent out of the country.
Another possibility such businesses have is to make personal information anonymous. While a possibility, it may not help with “critical business information” that is not personal. Also, there is ongoing uncertainty about whether data can truly be anonymized, Maisog said.
The draft law also states that network operators would have to preserve web logs for at least six months.
What do I have to do? When do I have to do it?
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Austin, TX-based Golfsmith International Holdings LP, and its subsidiaries, is the most recent sporting goods retailer to file for voluntary Chapter 11 restructuring. According to news reports, the world’s largest golf retailer expanded to 109 stores in the United States too aggressively. The filing reflects about $200 million in outstanding loans or credit facilities. Major equipment companies total about $30 million of the outstanding debt.
The U.S. Bankruptcy Court for the District of Delaware has approved plans to close at least 20 stores before the end of October. The Ontario Superior Court of Justice approved similar relief in the creditor protection proceedings of the company’s Canada-based business, Golf Town, which has entered into a definitive purchase agreement for the sale of its assets to an entity controlled by Fairfax Financial Holdings Ltd. and certain investment funds managed by a division of CI Investments Inc. The courts granted approval to access up to $135 million in debtor-in-possession financing, which the firm says it will use to support businesses during the court-supervised process.
In the past year, Sports Authority, City Sports and Vestis Retail group, the owner of Sport Chalet, Eastern Mount Sports and Bob’s Stores, have filed for bankruptcy protection.
Kmart is another retail chain to watch. It recently announced it is closing 64 stores nationwide. Liquidation is set to start today and closings anticipated in mid-December. According to news reports, 17 of the stores are among the 235 sold last year by Sears Holdings to Seritage.
Connect, Network, Learn and Share
Held each fall, the regional conferences are a wonderful opportunity for members to learn and grow by attending educational sessions and network with fellow credit professionals from their respective geographic regions.
Western Region Credit Conference
October 12-14, 2016
Renaissance Seattle Hotel
Hosted by: NACM Business Credit Services
Central Region Credit Conference
November 9-10, 2016
Crowne Plaza Hotel
Hosted by: NACM Great Lakes Region