Economic Recovery & System Reboot

To Overthrow the Darkness: Calling All the New Heroes

2010-08-29T14:47:00.021-06:00

(Excerpt with permission of the author):

"Only the boldest among us can acknowledge the role that fear plays in their lives. The bold are like those captives freed from Plato's cave -- they are no longer servants to ignorance. If you are governed by fear -- and who is not -- and if you can acknowledge what it does to you, what it costs you and others for whom you care, and even the world to which you owe your best being, then you at last know, really know, to whom your final obligation belongs.

If you are still afraid, imagine your tombstone: "Here lies one who was not here, one who did not show up!" That is something to really fear; compared to this, our daily fears are trivial.

Every day, dual demons show up to make us miserable. One is fear, as we have seen, and the other is lethargy, a sweet, sibilant, seductive, susurrus that summons us to sleep. How easy to fall back into the sleep of innocence, naivete, fundamentalism of one kind or another, avoidance, rationalization, and self-deception. These demons are the enemy of life.

Yet nature has provided us with an energy greater than these intimidating and seductive beasts, if we but call upon it. What we call "the archetype of the hero" is the specific constellation of energy whose task is the overthrow of darkness. When we see, for example, images of St. George and the dragon, what is he fighting? How many dragons have you seen? What is a dragon? A dragon is an archetypal, universal image representing the devouring fearfulness of life -- that which would destroy you, or swallow you, or take you back to the cave. Sound familiar? Fear, and lethargy! So, the hero energy in you is nature's answer to the diminution and extinction of life. We are called to fight the dragon, slay its power. The dragon shows up every day, no worse for the wear, and ready to scare you back into a corner of your life, to swallow you, and to annihilate the life energy you are supposed to incarnate in this world. Whatever we are running from will sooner or later back us into the corner anyway. Sometimes, the things we fear show up in the flurry and flux of daily life, and sometimes at the hour of the wolf when we awaken to discover that not even sleep helps us hide. As poet Fleur Adcock expressed it:
It is 5 a.m. All the worse things come stalking in
And stand icily about the bed looking worse and worse and worse.
(Adcock, "Things," Poems: 1960-2000)
So, then, now you know your task: to become what the gods want, not what your parents want, not what your tribe wants, but what the gods want, and what your psyche will support if consciousness so directs. A person who can undertake a conscientious inventory will be stunned to learn how much his or her life is driven by fear, as well as the many devices we evolve to manage it. Such a person then knows, really knows, what his or her life asks. The meaning of our life will be found precisely in our capacity to achieve as much of it as is possible beyond those bounds fear would set for us. There is no blame in being fearful; it is our common lot, our common susceptibility. But it may be a crime, an impiety against the gods, when our individual summons, our destiny, is diverted or destroyed by fear. For those of us who can address this inventory, our mantra, summons, and daily discipline becomes: That Life Not Be Governed by Fear. "

James Hollis, PhD, from

What Matters Most - Living a More Considered Life,

Shock and Awe: That Life Not Be Governed by Fear, pages 13-15

Appearing in Calgary, September 2011

A Hat Tip to Fred, Charlie, Marvin, Tom and Chris

2010-02-10T14:42:00.008-07:00

A hat tip and thanks to Fred, Charlie, Marvin, Tom and Chris -- guys from similar industries and backgrounds, with a common "go-for-it" attitude. These are the guys taking the risks to acquire equipment and build their ventures while all around them businesses are failing, people are being laid off and economic forecasts remain grim.

Whether scrounging for capital, making their own repairs, running equipment themselves or chasing down receivables, these characters make the economy work; they understand that you have to do it yourself. No one instills a work ethic in someone else -- it comes from within. With no business school knowledge to fall back on, no government grants to leverage from, painfully little support from bankers on which to rely, these hardy types are the backbone of what one hopes is an emerging recovery.

I am happy to call them clients. I'm proud to call them friends.

Welcome Them All

2010-01-25T08:30:00.006-07:00

Without reference to religious beliefs or political persuasions, Canadians already know what we need to do. Let's get it done.

The calamity in Haiti has led to an outpouring of support from all Canadians. The scope of the devastation has touched us and we have responded in the only immediately practical way possible -- we opened our wallets.

While the cash flow into Haiti will be of use, the prospect of years of rebuilding will mean displacement and stagnation for hundreds of thousands, if not millions of Haitians. Beyond the basic necessities of life provided in camp-type facilities the near term looks grim for health care, education and economic development.

It's time to open the doors to our amazing country. Let's bring in those who most need our help to heal and get a new start in life. With so many seriously injured, orphaned and uprooted, how can we not share our riches and resources to extend a hand up and a way out?

It's Not 'Just Business' -- It's Personal

2009-08-26T03:58:00.008-06:00

How many times have you heard the phrase "It's not personal, it's just business"? Do you remember who said it and how it made you feel?

Reflecting on these few words -- often uttered casually, as if self-evident, justifying or rationalizing a certain style of enterprise -- one has to wonder how much they are part of a stale ethic, a kernel of an ideology that ought to be examined more closely and challenged.

How can your business not be personal? How can it not be a reflection of who you are, what you represent and believe? When -- at what point exactly please -- is the enterprise created and shaped by your personal initiative and vision, nurtured by family financial resources and sustained by individual drive, separate from "you"? How could it be any different for your customers, clients and competitors?

Imagine if a separation between what is enterprise and what is personal were simply an illusion. And what if by 'enterprise' we also include professions, careers and vocations regardless of ownership or corporate structure? Has our thinking been poisoned by a piece of cultural mythology? Is it wrong to think that part of who we are is tied to what we do and, more importantly, how we do it?

As some form of economic recovery unfolds, let's be conscious of the personal nature of enterprise. How we interact with our clients and colleagues may mean more than the immediate success of a particular transaction. Let's be aware of our impact on individuals and families through the services we offer. It's time to engage a new ethic.

Seeking Stimulus: Where is the Support for Small & Medium Enterprises?

2009-07-07T09:08:00.011-06:00

Even well established companies are seeing a rapid decline in their borrowing capacity due to the downturn over the last 9 months. As earnings disappear and/or losses mount, balance sheets -- and retained earnings specifically -- erode, destroying the ratios on which bank lending decisions are made.

The rapid erosion of financial statements means many prospective borrowers no longer meet bank lending criteria. Unfortunately, our federal government has funnelled most "stimulus" capital through banking channels (with the exception of BCD and EDC, who with limited additional resources, simply cannot respond in a timely manner): http://www.fin.gc.ca/bcap-pce/participants-eng.asp

To my knowledge, there has been no stimulus support at all for the 'B' and 'C' credit markets that accommodate earlier stage companies or enterprises with weaker financial results. These companies are a substantial component of the overall economy and also tend to be drivers of innovation and job creation. Besides the higher risk leasing funds we offer, broader scale funding support and incentives need to be made available to the companies still willing to move forward in this environment; there is an urgent need to find higher risk funds for promising ventures -- before they fade away.

Another concern, based on what we are seeing in the leasing industry -- primarily through the resolutions of principal underwriter Sun Life -- is a virtual moratorium on equipment refinancing. This restriction on lending means equity in equipment cannot be freed up to help operators with current liquidity challenges (including paying taxes). The freeze on refinancing is across the board, regardless of corporate or personal financial strength, or the verifiable equity levels in the equipment. Supporting refinancing of working assets (based on readily available, published liquidation values) would be an easy way to create real stimulus with limited cost and government involvement.

Have you seen any evidence of government stimulus in the small to medium enterprise market? Please let me know -- perhaps I am missing something.

Is it a Sucker's Recovery?

2009-05-12T10:58:00.003-06:00

Almost as quickly as value was destroyed in the crash it has come back in an impressive 'bounce'. Beyond just a Sucker's Rally in the stock market will this be a Sucker's Recovery faking out manufacturers and producers who may be starting to consider ramping up operations?

Money "evaporated" during the crash. The objective measure of value of companies and commodities was 'disappeared' by the market. Sure, some of the re-pricing was in real dollars as there were timely counter-trades -- some clever and/or lucky people had options or sold short to protect themselves. The vast majority of value, however, just went 'poof': A complete pricing reset.

A smart government might recognize that to get away with printing money to provide stimulus, it might be prudent to replace the money that was 'disappeared' with fresh, newly minted currency. That is, the government needed to buy into the store of value in the economy (companies & commodities) in such a way as to not create inflation. How? Slowly put a floor under the markets, quietly buying up everything and anything that resembles value. (Markets up 30%, Oil up 80%, etc, etc) A floor needed to be established to enable pricing to come back over the cost of replacement / production. We're close to that now I think.

Short term, is the market over-cooked? Probably... But watch for huge profits at Goldman Sachs and similar gov't instruments over the next few quarters -- they'll always know first which way the breeze is blowing and act in advance of the general market and Joe-the-Sucker. Government is not just supporting the banks as Kessler suggests below. They are using the big bank brokerages to re-establish value platforms in the markets.

Long term, despite likely dips and cooling periods, this may be some smart government coordination that was possibly the only way out of a complete system failure. Another guess? The Harper Crew completely missed the opportunity.

(thanks Peter)

Was It a Sucker's Rally?
You can have a jobless recovery but you can't have a profitless one.
THE WALL STREET JOURNAL
May 12, 2009
By ANDY KESSLER

The Dow Jones Industrial Average has bounced an astounding 30% from its March 9 low of 6547. Is this the dawn of a new era? Are we off to the races again?

I'm not so sure. Only a fool predicts the stock market, so here I go. This sure smells to me like a sucker's rally. That's because there aren't sustainable, fundamental reasons for the market's continued rise. Here are three explanations for the short-term upswing:

- Armageddon is off the table. It has been clear for some time that the funds available from the federal government's Troubled Asset Relief Program (TARP) were not going to be enough to shore up bank balance sheets laced with toxic assets.

On Feb. 10, Treasury Secretary Timothy Geithner rolled out another, much hyped bank rescue plan. It was judged incomplete -- and the market sold off 382 points in disgust.
Citigroup stock flirted with $1 on March 9. Nationalizations seemed inevitable as bears had their day.

Still, the Treasury bought time by announcing on the same day as Mr. Geithner's underwhelming rescue plan that it would conduct "stress tests" of 19 large U.S. banks. It also implied, over time, that no bank would fail the test (which was more a negotiation than an audit). And when White House Chief of Staff Rahm Emanuel clearly stated on April 19 that nationalization was "not the goal" of the administration, it became safe to own financial stocks again.

It doesn't matter if financial institution losses are $2 trillion or the pessimists' $3.6 trillion. "No more failures" is policy. While the U.S. government may end up owning maybe a third of the equity of Citi and Bank of America and a few others, none will be nationalized. And even though future bank profits will be held back by constant write downs of "legacy" assets (we don't call them toxic anymore), the bears have backed off and the market rallied -- Citi is now $4.

- Zero yields. The Federal Reserve, by driving short-term rates to almost zero, has messed up asset allocation formulas. Money always seeks its highest risk-adjusted return. Thus in normal markets if bond yields rise they become more attractive than risky stocks, so money shifts. And vice versa. Well, have you looked at your bank statement lately?

Savings accounts pay a whopping 0.2% interest rate -- 20 basis points. Even seven-day commercial paper money-market funds are paying under 50 basis points. So money has shifted to stocks, some of it automatically, as bond returns are puny compared to potential stock returns. Meanwhile, both mutual funds and hedge funds that missed the market pop are playing catch-up -- rushing to buy stocks.

- Bernanke's printing press. On March 18, the Federal Reserve announced it would purchase up to $300 billion of long-term bonds as well as $750 billion of mortgage-backed securities. Of all the Fed's moves, this "quantitative easing" gets money into the economy the fastest -- basically by cranking the handle of the printing press and flooding the market with dollars (in reality, with additional bank credit). Since these dollars are not going into home building, coal-fired electric plants or auto factories, they end up in the stock market.

A rising market means that banks are able to raise much-needed equity from private money funds instead of from the feds. And last Thursday, accompanying this flood of new money, came the reassuring results of the bank stress tests.

The next day Morgan Stanley raised $4 billion by selling stock at $24 in an oversubscribed deal. Wells Fargo also raised $8.6 billion that day by selling stock at $22 a share, up from $8 two months ago. And Bank of America registered 1.25 billion shares to sell this week. Citi is next. It's almost as if someone engineered a stock-market rally to entice private investors to fund the banks rather than taxpayers.

Can you see why I believe this is a sucker's rally?

The stock market still has big hurdles to clear. You can have a jobless recovery, but you can't have a profitless recovery. Consider: Earnings are subpar, Treasury's last auction was a bust because of weak demand, the dollar is suspect, the stimulus is pork, the latest budget projects a $1.84 trillion deficit, the administration is berating investment firms and hedge funds saying "I don't stand with them," California is dead broke, health care may be nationalized, cap and trade will bump electric bills by 30% . . . Shall I go on?

Until these issues are resolved, I don't see the stock market going much higher. I'm not disagreeing with the Fed's policies -- but I won't buy into a rising stock market based on them. I'm bullish when I see productivity driving wealth.

For now, the market appears dependent on a hand cranking out dollars to help fund banks. I'd rather see rising expectations for corporate profits.

Mr. Kessler, a former hedge-fund manager, is the author of "How We Got Here" (Collins, 2005).

Income Trusts: A Better Business Model

2009-04-27T08:53:00.010-06:00

Income trusts have served Canadian investors, particularly pensioners, extremely well over the years. The Conservative government's policy reversal and betrayal, mostly of its own base of support in the west and among investing seniors, will not be forgotten by the next election. My prediction is the Liberals will recognize and seize the opportunity, especially given that PM Harper and Finance Minister Flaherty are fairly stubborn (some might say pig-headed) in following through on earlier decisions, despite the dire change in economic circumstances.

Refusing to acknowledge and reverse this particular mistake may very well determine the outcome of the next election. Besides their own embarrassment over the collossal blunder, Harper and Flaherty would be sensitive to undermining former Goldman Sachs and finance ministry golden-boy and now Governor of the Bank of Canada, Mark Carney, who was the architect of the income trust policy reversal.

The Conservative leadership ego inflation and policy intransigence is a huge gift to the Liberals. Prepare to welcome the return of a better business model led by (the soon to be) Prime Minister Michael Ignatieff. Sad that we conservatives will likely be relegated to the shrill side-lines again, but in their flexibility and leadership maturity the Liberals show again why they are Canada's 'natural ruling party'.

Income trust fiasco should be reversed
Posted: April 25, 2009, 8:19 AM
by Diane Francis, National Post

It’s been 2.5 years, and a Great Recession, since the income trust tax of 31.5% was announced by Finance Minister Jim Flaherty and the Prime Minister.

At the time, I said: prove the case that trusts should be shut down with this tax because they are a tax drain or drop the tax.

Today we know that the tax, to start in 2010, has not prevented leakage but has caused it as income trust values collapsed by $35 billion. Foreigners bought nearly C$100-billion worth of trusts with large bank loans. The interest on these loans is written off against profits allowing them to duck taxes altogether. This has been, and will be, a drain to taxpayers of
billions and was predictable.

It’s been a huge mistake so what should be done? Scrap the tax immediately to correct the situation as well as to help the country get through this economic collapse. In fact, I believe that income trusts are a superior model to other corporate structures for many companies:

 The income trust is more accountable because up to 95% of profits flow through to unitholders, preventing inept managements and boards from indulging in excessive bonuses, stock options and stupid takeovers.

 Income trusts are also a superior because they provide Canadian corporations (big or small) with a capital advantage, thus enhancing the possibility they will survive now and thrive later on.

 Income trusts provide a superior investment vehicle for investors, both retail and institutional, big and small which has been missing since they were attacked. Scrapping the tax is also a form of stimulus, which is badly needed as a result of the market meltdown worldwide, because it will:

 Stimulate the stock markets by bringing investors back into the fold by not sandbagging the popular and profitable income trust sector.

 Restore the integrity of investment rules in Canada which were applied retroactively to attack income trusts.

 Restore the Prime Minister’s reputation which was sullied after he broke his promise in 2006 to leave income trusts alone. Demonstrate a flexibility and wisdom that he realizes that being correct outweighs defensiveness or merely being tied to consistency.

 Remove the advantage foreigners have enjoyed by picking off the income trusts which lost $35 billion in value after the tax was announced.

 Reverse the Harper/Flaherty income trust tax leakage problem caused by leveraged buyouts of trusts.

 Provide or restore an important investment vehicle for 75% of Canadian seniors and
investors who do not have a company or public sector pension.

 Eliminate over-reliance on derivative or synthetic type products that were billed as “retirement safe” or equities paying dividends but which have been clobbered more than the existing income trusts by the way.

 Level the playing field with American trusts (called MLPs and REITs) by letting Canadian real estate and energy trusts continue under the old rules. As anyone who understands business realizes, the Tories made a mistake with their income trust taxation and there’s no time like the present emergency to correct the situation to help Canadian companies and investors.

http://network.nationalpost.com/np/blogs/francis/archive/2009/04/25/income-trust-analysis-says-it-all-again.aspx

Supporting the Home Renovation & Improvement Sector

2009-04-13T12:24:00.005-06:00

One area where government stimulus seems to be helping drive demand is in the home improvement and renovation market. With up to 15% tax credit from the feds on the value of a project, homeowners are lining up to find good contractors. The better firms are already booked up into the fall.

Some deals we've done in the home improvement sector are not so typical:

A siding contractor acquired a Bandit wood chipper to process waste panels into recyclable sized chips. This reduced his waste bin removal and dumping charges by multiple factors while also keeping the worksite tidy.
Including a dump box on a medium duty truck allows a landscaper to haul smaller loads of top soil, gravel or mulch to residential projects without incurring extra expense to bring in full loads by dump truck on contract.
A start-up flooring contractor acquired good used equipment through a private sale instead of purchasing new.
An established floor covering sales company expanded into refurbishing old floors by acquiring new floor fininshing machinery. The new service offering opens the door to future sales of carpets, lino and wood flooring.
Adding a narrow skid steer to their fleet allowed a landscaper to move soil and mulch into client's back yards without removing fencing or gates, cutting down the time to finish most smaller jobs. This also worked well in new residential areas where the houses are very close together... (hauling sod & fencing).
Good used pickup and utility trucks are available at maybe the lowest prices in decades. General contractors, carpenters, plumbers and electricians could save a bundle. We have financed a variety of privately acquired, wholesale and dealer units with very reasonable monthly payments.

Sale-Leaseback Restructuring of Cashflow: Old Assets, New Reality

2009-02-10T22:12:00.005-07:00

Dear Chuck,

Yes, agree that our offer to restructure your company's debt is unique -- and flexible. I understand your objections and would guess that you have previously leased new (or nearly new) cars and trucks, and probably not 14 - 15 year old used equipment that is subject to instant devaluation with an engine, transmission or differential failure.

Why would our investors buy 1990's equipment without a guarantee of 1) a much higher rate of return, and 2) a hope of recovering their investment if your public company defaults on payments or goes into bankruptcy?

For arguments sake I've run your scenario past my credit analyst and it raised all kinds of red flags for him: Sale-leaseback of old assets for a money losing public company (with shares trading at 5 cents), in a high risk industry in a failing economy... Short of being on the verge of bankruptcy there is probably no higher risk credit profile.

The only way through this is to provide as much good information as may be available (including appraisals), understanding that our investors are looking for a substantial return and expecting that their perceived risk is at least somewhat mitigated through additional collateral security and/or personal guarantees.

Trust this makes some sense? I always ask my salespeople to think of it as their own money that is being invested. What would you need to feel comfortable with the transaction? What would a smart business decision today look like to you 6 months out?

Hope this bit of context helps.

Regards,

Frank

Don't Quit and Never Retire

2009-01-25T10:31:00.017-07:00

Remembering Jim Illingworth

Before his son scattered Jim Illingworth's ashes into Frahling Creek near Spillimacheen, I managed to choke out a few words about Jim, his life and the resilience and determination he showed in his fight with prostate cancer.

Jim was a man who never quit, I reminded his six grandchildren, he fought a good fight and did "not go gentle into that good night". Despite his illness, Jim still handily whipped us at golf. He did not stop learning, nor did he give up on using the skills and talents he developed over many years of building custom homes. Jim just kept on puttering, renovating a historic cabin and helping son Mike with other projects in Wilmer, BC.

Known as a patient man, in the 1960's and 70's Jim would spend hours teaching kids to water ski on Lake Windermere, calmly circling his boat back to floundered and frustrated beginners for as long as it took to get them back up and eventually skiing. Jim retired from the building industry in his early 50's and enjoyed more than a decade of freedom in retirement before a 'terminal' prognosis slammed our realities in late 1995.

Six years later, in August 2001, with recorded bag pipes playing a haunting Scottish lament, we, as a family, said good-bye and set Jim's ashes free for a long journey towards the ocean.

Over the years, Jim had occasionally remarked on an acquaintance from the Mess at the Mawata Armoury named 'Doc' Seaman, who despite great wealth and personal success remained completely grounded and unaffected. Doc passed away this January at the age of 86, also from prostate cancer. I could not help but admire the story of a man whose motto was "never retire". While scaling back from his many enterprises he remained focused on distributing his wealth to numerous charitable causes. An original franchise owner, Doc was also rumoured to have been at a Flames hockey game just a few days prior to his death. Paraphrasing from his obituary:

Doc "urged everyone to stay active and devote their time to helping others... as expressed in his recent biography 'Staying in the Game'."

Developing an attitude that we should never retire does not arise only out of necessity during challenging economic times. It should be a conscious choice and philosopy instilling the idea that our work does not end at a pre-determined age, nor retirement begin with sufficient savings. No amount of money can replace the sense of achievement and fulfillment offered by work we care about and would choose to do, with skills and experience gathered throughout a lifetime.

There may be times we want to throw in the towel, sidelining dreams and possibilities of greater achievements. Rather, let's think about building a "never quit" work ethic. By sharing the ideals of these two men, who stuck it out and lived their visions, perhaps our beliefs may be reinforced and those of others challenged.

Within the business community, we should look closely at not carelessly discarding the valuable resources offered by people with lifetimes of experience. Let's also remember that in the end we are here to serve others, and money is only a means to serve more people in better ways. Quitting is not an option and the notion of retirement need not be self-evident.

Ideas for Local Initiatives

2009-01-02T12:14:00.009-07:00

With small business getting hammered on the sales front and through the credit pinch (see John Robb's nice summary, including links to Wall Street Journal article), it is time to start thinking about local initiatives to kick-start some kind of a recovery. It's not that we don't trust the feds...

Certainly no federal or provincial trickle-down relief seen by small business yet (at only 23% or so of economic GDP maybe there's no rush to support companies employing less than 50 people each?). I think we're on our own here folks. Besides a few mega-projects and infrastructure initiatives for media optics and to keep the unions pacified, it will be up to the little guys to generate real job creation.

So here are a few areas to kick around, for the sake of some concrete examples:

Digital Kiosks

interactive web based kiosks in mall locations
established technologies integrated to offer massive selection, custom ordering, instant payment, direct shipping options; greater security and more simple than web based purchasing (though the kiosk interface really is a website and follow on orders could be placed from home...)
benefits are low start up costs, no inventory, drop shipping

Community Radio

FM radio stations built on an internet broadcasting backbone
multiple input sources (from home) offering low overhead, highly original content
affordable local advertising by local merchants to the immediate community
barter for services for events exclusive to radio/internet community members (thx John Robb)

Managed Enterprise Services

trucking, landscaping, renovation construction type companies focusing on what they do best while employing a common "back office" to handle the functions they do not do well.
keep the accountants & bookkeepers more actively involved in the day-to-day
core sales & marketing crew promotes multiple enterprises to keep all engaged and active

The Sharks are Circling

2008-12-31T13:49:00.002-07:00

The predatory nature of Canadian banks is starting to emerge, and no surprise that the Royal Bank of Canada (RBC) is the leader of the pack. For RBC it's always been about more than "lending".

In the Alberta oil industry crash of 1982 RBC was the chief plunderer, arbitrarily pulling credit lines from established clients due to a change in "industry priorities" -- 30 days to make other arrangements or RBC seizes pledged assets -- nice. This for companies that never missed a payment, had strong financials and a history of outstanding credit (one geophysical consulting firm of over 150 employees comes to mind -- wiped out). Beware of the 'demand' loan...

Now there is a tasty little Canadian manufacturer of "roadside bomb jammers, blast suits and other extreme hazard equipment" on the block: Allen-Vanguard Corp. Gee, wonder if RBC might just have a buyer in the wings for those 21 cent shares (the stock traded around $11 in late 2007). Article.

The products are clearly in high demand and the company is at a critical turning point. Meanwhile, business as usual? Article.

BOHICA - bend over, here it comes again. If you are with RBC (in particular) and business in your industry sector is slowing, start looking at financing alternatives pretty soon -- especially if you have co-signed financing agreements personally behind your business or have collateral security agreements in place. The sharks are circling and your assets are in the bait sling.

Getting Started

2008-12-28T12:08:00.001-07:00

So here we are, collectively numbed out with those bewildered deer-in-the-headlights, pit-of-the-gut stomach churning feelings. Investment portfolios down 30-40% on average, business in the dumpster and the Christmas bills rolling in any day now. Grump.

We'll soon see if we get an opportunity to witness some real entrepreneurs in action. Who will be the ones to overcome "Entrepreneurial Inertia", stepping up to the edge of a never previously imagined black hole of a collapsing economy and having a good belly laugh. Old saw about the 'opportunity in crisis' remains to be seen while just about everyone is still paralysed, either by denial, naivete or shock (the latter group being the realists in the crowd).

Part of what I can offer is some insight into how the credit system works and how business owners can work within the credit granting framework (gosh, wouldn't want to say "game it") to maximize the opportunity to borrow in these interesting times. Based on my experience, one of the key factors will be to get financial records current, ensuring -- even guaranteeing -- their accuracy, and then keeping them that way for management purposes, to the extent that the information is available on a daily basis. Call it a real-time post, audit and reporting financial system.

Of course, such a system is still in the dream stage, and would come as a shock to many accounting firms --who typically are still labouring away to produce financial statements for most companies three to six months after a fiscal year-end. Oh, that's really helpful info -- watch the credit guys get all giddy about that kind of reporting... happy squealing at the other end of the phone. Ok, not so much. How can the credit folks realistically assess current business risks with financial statements that reflect history? Now, anything past the last three months is considered ancient history, as in "useless". Without at least fresh interim statements one big leg of the tripod of the credit decision making process is missing.

So, Rule #1: When you go to borrow have your financial statements up to date. Beat on your accountant to ensure timeliness and accuracy, and spend the money to have him prepare interim statements for your current results, especially if your annual statements are more than 2-3 months old.