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Bank of America (BAC) is increasingly cutting off lines of credit to small businesses and...

Bank of America (BAC) is increasingly cutting off lines of credit to small businesses and demanding they pay their balances in full or offering repayment plans at very high interest rates, according to an LA Times story. One business owner says he has cut staff from 200 to 80 after the bank told him the $96K debt his business owed must be repaid in full before the end of January.
Comments (48)
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    Signs of serious stress. Time to 'fess up and raise capital.
    3 Jan 2012, 05:20 PM Reply Like
  • D_Virginia
    , contributor
    Comments (2280) | Send Message
     
    And thus goes the vicious cycle.

     

    The economy tanks.

     

    Banks tighten lending.

     

    This causes the economy to tank even more.

     

    So banks will tighten lending even more.

     

    This causes the economy to tank even more.

     

    Etc, etc, etc...

     

    Such a great economic recovery we have! :)
    3 Jan 2012, 05:21 PM Reply Like
  • JaxxBat
    , contributor
    Comments (527) | Send Message
     
    Beloney.. This is how we get out of the bad deals and loose money and a good thing for our future..

     

    Ron Paul anyone?
    4 Jan 2012, 09:07 PM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    shhhh,

     

    Don't tell Bbro.
    3 Jan 2012, 05:22 PM Reply Like
  • bbro
    , contributor
    Comments (9319) | Send Message
     
    BAC doesn't need to issue debt for at least the next 4 years...
    3 Jan 2012, 05:43 PM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    http://bit.ly/rGRz2f

     

    http://bit.ly/wsDkwy
    3 Jan 2012, 06:25 PM Reply Like
  • bbro
    , contributor
    Comments (9319) | Send Message
     
    Dan Freed... hardly a balanced journalist...still if you read 2 years
    worth of 10q's ( subject to felony charges if lying) as opposed to
    reading internet garbage subject to no rules you might get a balanced
    look...BAC Profitable short term no....liquid very much so....solvent
    yes ( you have to do the homework)...134 billion dollars of tangible common equity versus 58 bill of market cap...something is priced in...
    me personally no equity investment in BAC but the debt looks like an opportunity....
    4 Jan 2012, 02:29 AM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    More good news.

     

    http://bit.ly/yejhe4
    4 Jan 2012, 09:11 PM Reply Like
  • bbro
    , contributor
    Comments (9319) | Send Message
     
    No...it is a sign of BAC shrinking in size...they have 1.041 trillion in
    deposits and only 932 billion in loans,,,,don't need the business...
    3 Jan 2012, 05:22 PM Reply Like
  • zubikov
    , contributor
    Comments (99) | Send Message
     
    Totally agree. Moynihan's biggest priority is trimming the fat, bad loans, contingent losses, and risky mortgage exposure while retaining the same core businesses. Not an easy task obviously, but this is a sign of him trying to create a more attractive, leaner bank.

     

    If you're an investor, this is a good sign. If you're trying to squeeze free cash from them with no credit, this is bad news. Life will go on.
    3 Jan 2012, 05:33 PM Reply Like
  • mope940
    , contributor
    Comments (42) | Send Message
     
    Never borrow money unless you can pay it back at any given time.
    Cutting staff is not a problem. Every big Corp worldwide has cut staff since 08 and profits are soaring.
    3 Jan 2012, 05:22 PM Reply Like
  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    My business has a $100k line of credit with BAC. I borrow from it maybe 6-8 times per year and pay it back within 45 days. 1-2 years ago I received notice from BAC that my line of credit would be reviewed and I'd be advised accordingly if it would remain open or not. It was reviewed as promised and no changes were made by BAC.

     

    Bottom line, if you have good credit, you don't have anything to worry about.
    3 Jan 2012, 05:24 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    Native Texan
    Bottom line, if you have good credit, you don't have anything to worry about.
    ======================...
    I have a very good credit and I am still worrying about many things.
    Life is bigger than credit score
    3 Jan 2012, 07:29 PM Reply Like
  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    Coddy, my comments was specific to lines of credit with BAC.

     

    Unrelated to this point, the fact that you're "worrying about many things" is EXACTLY why YOU have good credit and likely a clear conscience. Worry, consider, ponder and plan and you'll find that your worries will become fewer. Putting faith in God helps too.
    3 Jan 2012, 07:41 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    Agree with native Taxan on worry issue
    3 Jan 2012, 09:02 PM Reply Like
  • bbro
    , contributor
    Comments (9319) | Send Message
     
    When will Seeking Alpha do a story on the good BAC does for the communities???

     

    Don't you love anecdotal stories as a basis of rigorous evidence.
    3 Jan 2012, 05:24 PM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    Bbro,

     

    Why don't you post a story of how BAC benefits society.

     

    Hard to find I guess.

     

    http://bit.ly/xOGJ4R
    3 Jan 2012, 05:33 PM Reply Like
  • bbro
    , contributor
    Comments (9319) | Send Message
     
    "Each year, our volunteers donate more than 1,000,000 hours to help meet critical community needs across our global footprint."

     

    Wonder what daytraders donate??
    3 Jan 2012, 05:57 PM Reply Like
  • alpharox
    , contributor
    Comments (380) | Send Message
     
    "our" volunteers? LOL.

     

    Back to the BAC-subsidized crack-aid cooler, bbro. Do you think they get nicknames like "bankster" for no reason?

     

    "We don't need to raise no stinking capital!" [Maybe I'm paraphrasing...]
    3 Jan 2012, 06:06 PM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    Anybody that has invested any money in BAC has nothing left to donate.

     

    Volunteering? Really?

     

    It's all part of the illusion you are buying into.
    http://bit.ly/vFiKJW

     

    http://bit.ly/tutGpf
    3 Jan 2012, 06:16 PM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    So much for debt service.

     

    It appears the principal balance matters after all.
    3 Jan 2012, 05:25 PM Reply Like
  • rambler1
    , contributor
    Comments (395) | Send Message
     
    $96K was the difference between employing 200 people & 80? It seems a little hard to believe. Guy needs to hustle & find a smaller business friendly bank. Another thing I don't understand people staying with Bank of America. Go with the service you could get with a smaller bank & do everyone a favor. Obviously Bank of America is no longer the place to be.
    3 Jan 2012, 05:26 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    ron284
    $96K was the difference between employing 200 people & 80?
    ======================...
    I think you misunderstood what this guy said.
    He said that time was tough, and now he has business for only 80 people, while he used to have it for 200.
    It is not because of need to repay credit line, he laid off this people

     

    Bussiness credit line > 25K has to be secured by personal property(home) or business assets.
    In my understanding re assessment of assets is ongoing process

     

    Poor guy lost more than half of his business according to employee count

     

    Bank of America has legal obligation to re assess limit of his credit line.

     

    His choices are: pay in full, find line of credit from other Bank, file bankruptcy
    ----------------------...
    Here are some guide lines from BAC web site

     

    your source of repayment is established
    and profitable
    • enough working capital is available
    or being requested
    • there are no missed loan payments
    and your credit is problem-free
    • collateral is available to back up the
    new loan
    3 Jan 2012, 08:33 PM Reply Like
  • phxcrane
    , contributor
    Comments (415) | Send Message
     
    The news media is trying to get as much out of this story as they can. Ninth time I've seen this lead. Please who cares. If there credit is good they can go to some other bank. Tom I sure hope your shorting BAC. You seem to get a lot of pleasure out of their problems.
    3 Jan 2012, 05:27 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    phxcrane,

     

    I'm not short BAC. I am long MBI which has serious litigation against both BAC as a plaintiff and a defendant.

     

    I haven't been willing to short BAC because it's trading well under book and has raised up enough cash to forestall liquidity issues. So they should be able to come out of this, although it will take time.
    3 Jan 2012, 05:47 PM Reply Like
  • Ricard
    , contributor
    Comments (3829) | Send Message
     
    Kill this company.
    3 Jan 2012, 05:32 PM Reply Like
  • youngman442002
    , contributor
    Comments (5131) | Send Message
     
    This guy owns a bike messenger service..Probably going the way of the do do bird.....
    3 Jan 2012, 05:33 PM Reply Like
  • Financial Insights
    , contributor
    Comments (945) | Send Message
     
    haha 96000/120 = 800 dollars per year per employee. Man those bike messengers are really hitting the jackpot.
    3 Jan 2012, 07:27 PM Reply Like
  • who me
    , contributor
    Comments (23) | Send Message
     
    BAC is now implementing tactics commonly used by the MAFIA.
    Pay up now or we put you out of business. The only difference
    is BAC is under the umbrella of law . It pays to be a bankster.
    3 Jan 2012, 05:34 PM Reply Like
  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    Sorry guys, I'm not going to fault BAC or any other bank who attempts to collect on outstanding and past due debts.

     

    Good heavens, the next thing you know people are going to blame banks for people not being able to afford their mortgages!
    3 Jan 2012, 05:40 PM Reply Like
  • Financial Insights
    , contributor
    Comments (945) | Send Message
     
    Native,
    Curious to know if you can share the interest rate on your line of credit? thanks
    3 Jan 2012, 07:33 PM Reply Like
  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    Sure, it's 5.75%, opened the business line of credit in 2005
    4 Jan 2012, 08:41 AM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    Native,

     

    The point of this story is they can (and do) call loans in full for those that are current on payments under the existing agreement.

     

    Ironically, as they are so big, many businesses that will be affected and fail as a result, are counterparty to other businesses that owe BAC money as well.

     

    They will seal their own fate.

     

    That's what bad management does.

     

    Sadly, it is likely only common shareholders will suffer.

     

    Thereby they seal their own fate
    3 Jan 2012, 05:46 PM Reply Like
  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    If in fact they're forcing people to repay who aren't behind on their payments then shame on them.
    3 Jan 2012, 06:00 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    Native Texan
    If in fact they're forcing people to repay who aren't behind on their payments then shame on them and F`em.
    ======================...
    Because being not behind is not enough
    Just compare what you posted earlier regarding your own use of your line of credit with how these guy using his

     

    While you using it as an enhancement to your robust business, this guy using it as his the only life support device

     

    So, why Bank should treat you both to the same limit

     

    Should this guy prove to his Bank that he has ability or at least has plan to develop his ability to repay his principal, or should Bank be happy with minimum payment still coming in and eventually to be crashed like in 2008
    3 Jan 2012, 09:21 PM Reply Like
  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    Simply put, both parties must adhere to their end of the agreement. If either is in breech, due process is in order.
    3 Jan 2012, 09:31 PM Reply Like
  • twice
    , contributor
    Comments (89) | Send Message
     
    wow. if this is widespread, i have no idea how the economy can avoid recession.
    3 Jan 2012, 06:01 PM Reply Like
  • twice
    , contributor
    Comments (89) | Send Message
     
    the fed needs to force a recapitalization of BAC, if this is happening because of a capital shortfall. anyway, further motivation for me to maintain my short of BAC.
    3 Jan 2012, 06:02 PM Reply Like
  • jma5760445@aol.com
    , contributor
    Comment (1) | Send Message
     
    Something doesn't add up in this story. The bank calls in a credit line of $96,000 and the guy has to lay off 120 people...?
    3 Jan 2012, 06:02 PM Reply Like
  • Josh ODonnell
    , contributor
    Comments (229) | Send Message
     
    The bigger ya are...the HARDER you fall. BAC will be in ruins in the next 2 years...They are hiding billions if not trillions of toxic mortgage backed securities off the balance sheet...They will need another bailout by end of 2012, if not sooner if they will survive...

     

    1 trillion in deposits? So what..people are still banking with them...and probably still will as long as there accounts are fully backed by the FDIC..which is a total joke...Because everybody knows the FDIC is bankrupt by over a trillion. The stock is 5.80 for precisily that reason... They are insolvent.
    3 Jan 2012, 06:31 PM Reply Like
  • Financial Insights
    , contributor
    Comments (945) | Send Message
     
    Its comments like these that really make my day. Thanks!
    3 Jan 2012, 07:28 PM Reply Like
  • Bryant Chung
    , contributor
    Comments (8) | Send Message
     
    When financial crisis hit back in 2008, major banks slashed home equity line as well as credit card lines. Now, it is happening to Business line of credit. These are waves of what had came in reality, and we have to think about what will come in next wave. We shouldn't critize anybody since each one of us have opinion. But, it is time to see the forest rather tree. In the forest, there is more than one tree.
    3 Jan 2012, 08:30 PM Reply Like
  • phxcrane
    , contributor
    Comments (415) | Send Message
     
    Credit to loose. Credit to tight. Someone is always whining. And if its a slow news day we hear every minute detail. Bring Back OWS. At least they were fun to laugh at.
    3 Jan 2012, 08:39 PM Reply Like
  • morgan105
    , contributor
    Comment (1) | Send Message
     
    Lots of Laughs to BAC and Companies were the shoe fits! The amount of money that any CEO in any stock exchange company earns in one year is unjustified. Now, just think of what he receives in retirement. Wake up people and politicians!
    3 Jan 2012, 10:28 PM Reply Like
  • mcdonaldfive
    , contributor
    Comments (32) | Send Message
     
    BAC is being forced to reduce its risk weighted assets. Unsecured loans have got to be at the top of the risk profile. They are only backed by the profit potential of the company and perhaps some personal assets of the business owner.

     

    When the Fed says they are going to run a stress test what does that mean in your mind? It means they are going to take risky loans like this business loan and cut it in half and then see if the bank still has enough to repay its depositors. BAC has to reduce the risk in its portfolio. They don't have a choice in the current regulatory environment.

     

    What amazes me is that most people cannot connect these dots. When the Fed (or Congress) says they want the banks to be safer then the banks have to stop making risky loans. In the current case they are saying the big banks have to be less risky be a significant percentage more than the smaller banks. They have effectively told BAC to give some of their risky business to a smaller bank - and that is what is happening. If the business owner can't get credit at a smaller bank to replace what BAC was giving him then he is a casualty of the regulatory environment. Connect the dots. BAC is a safer bank witout this business loan. Another bank should take advantage of the regulatory environment and extend this business new credit. It's all good .... keep telling yourself that. We're from the government, we're here to help.
    3 Jan 2012, 10:31 PM Reply Like
  • Matthew Lewis
    , contributor
    Comments (317) | Send Message
     
    Someone with a shred of intelligence. Rare to find these days in the comments section of SA :)
    4 Jan 2012, 01:17 AM Reply Like
  • acesfull
    , contributor
    Comments (314) | Send Message
     
    This is just another hatchet job by the media. They're trying to make BAC look like the evil villain again, preying on innocent small business customers. The headliner did'nt mention that the loans only affected a very small percentage of borrowers that were considered risky loans, and that they were given a year notice that their current loan arrangement would be changed. Sounds like the bank is simply correcting some bad loan arrangements, which makes sense, and not raiding small businessmen so as to fleece them of more cash, which the headline article is implying. The media needs some new boogiemen. This is getting old already.
    4 Jan 2012, 06:44 AM Reply Like
  • zubikov
    , contributor
    Comments (99) | Send Message
     
    How did BAC become the love-to-hate scapegoat for all things wrong with our economy? For those screaming "die BAC!", why? What problems will this solve? Are you looking at the company from the perspective of an investor, an angry customer or a college kid? I'm just curious, how one publicly traded firm can amass so much hatred and bad publicity. I personally think many analysts, pundits and news orgs do so because it's easy and it's popular.

     

    I am in fact trying to defend them, because if they're gone, someone else will quickly step in and fill a void (could even be a non-American bank), so getting rid of them won't solve anything. They do provide tonnes of jobs worldwide, 95% of which are hard-working, modest paying jobs that aren't "banksters" but programmers, analysts, risk and loan officers, etc. that just want to do a good job and have absolutely no bad intentions. They also still extend a lot of good credit for honest businesses

     

    It's so easy to focus on the negative and side with the herd, that sometimes no good news can ever change your mind.
    4 Jan 2012, 09:16 AM Reply Like
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