Small biz lender Valley Bank raises cash before relief measures wind down - Crain's New York Business

Small biz lender Valley Bank raises cash before relief measures wind down - Crain's New York Business


Small biz lender Valley Bank raises cash before relief measures wind down - Crain's New York Business

Posted: 03 Jun 2020 08:47 AM PDT

The stock market's surprising rebound demonstrates that Wall Street expects the economy to snap back strongly. Valley Bank Chief Executive Ira Robbins isn't so sure.

Not all small businesses have received Paycheck Protection Program loans, and soon thousands may be forced to throw in the towel. To shore up its defenses against the expected wave of defaults, New Jersey-based Valley, which specializes in lending to small and midsize firms, raised $115 million in new capital this week.

Robbins described the cash infusion as "an insurance policy at a rate that makes sense." He wants his bank prepared for when the government's emergency relief measures wind down and loan forbearance programs expire in the summer.

"That's when we'll find out which borrowers have a viable business model," he said.

No one knows how many businesses will be swept away by the coronavirus crisis, but banks and their investors are bracing for big casualties. That's why the KBW Bank Index remains down by 30% this year while the S&P 500 is just 8% off its high.

The disconnect illustrates how banks are exposed to every part of an economy in which 40 million people have lost their jobs. The stock market's ebbs and flows, however, are determined to a large extent by the price movements of Facebook, Amazon, Apple, Microsoft, Netflix and Google, which collectively employ about 1 million people.

Bank stocks typically trade at or above book value, or net worth, but the group now trades at a 12% discount, RBC Capital Markets said. Citigroup trades around a 40% discount.

"The price-to-book level is based on the inability to gauge what real asset values are in the loan portfolio," said Dick Bove, an Odeon Capital banking analyst.

Loan-loss provisions for the second quarter "are likely to equal or exceed" the dramatic increases banks recorded in April, RBC Capital analyst Gerard Cassidy said Wednesday in a report. Millions of unemployed or furloughed consumers are struggling with their credit card bills, rent or mortgages, he said, and widespread defaults among small-business borrowers seem inevitable.

At Valley Bank the $115 million in new cash at a cost of 5.25% lifts the bank's risk-based capital ratio to 11.9% from 11.5%. Banks with ratios of 10% or more are considered to be well capitalized, so Valley didn't need the money to satisfy regulators. But it's prudent to invest in sandbags before the flood strikes.

"This is a smart move for Valley," analysts at Keefe Bruyette & Woods said.

"It's always better to raise money when the market is open," Valley Bank's Robbins said, "rather than when you need it."  

$900 for a glass door? Small businesses face costly repairs and cleanup when looters strike - The Eastsider LA

Posted: 03 Jun 2020 05:15 AM PDT

Welcome to Biz Buzz!

Thanks to a generous grant from Facebook, Biz Buzz is back to cover Eastside small business and business-related issues, challenges and successes. Biz Buzz Editor Brenda Rees will be in charge. Do you have a story idea, issue or resource we should spread the word about, please send an email to hello@TheEastsiderLA.com or submit it here.

-- Jesús Sanchez, Publisher

Small businesses add up the cost of L.A. vandalism and social unrest 

plywood at beagle highland park katrina alexy.jpg

Store owners preparing for the worst on Figueroa Street in Highland Park.

Burnt cars, buildings still smoldering from fire, windows shattered, merchandise strewn on the sidewalks and streets – business owners have been surveying the damage done to their stores, shops and restaurants across numerous communities in the Greater Los Angeles area after ongoing days of vandalism and looting.

In Downtown Los Angeles' Broadway corridor, many immigrant-owned mom-and-pop stores – that have been struggling for two months under the coronavirus restrictions – were ransacked and damaged Friday night. A peaceful afternoon protest in the Fairfax district on Saturday turned violent later in the day with looters targeting trendy design and clothing stores along Melrose Avenue. 

Likewise, upscale businesses in Santa Monica were hit hard by looters on Sunday; outlet mall stores and downtown shops in Long Beach also witnessed crowds smashing through windows and starting fires. 

Costly Damage & Repairs

Aside from the emotional toll from the weekend events, business owners are now adding up clean-up costs from the vandalism as well as income lost from stolen merchandise and additional days closed.

One of the first clean-up steps usually is boarding up broken glass doors and windows with plywood, a job that typically comes with a starting price tag of about $225 but can run up to $2,000 for multiple damaged areas, says Robert Gavidia of Monrovia-based Gavidia Glass Services.

Replacing commercial glass doors runs a price range of $900 - $1,500 depending on glass type and size. "Large window pane pieces can be about $1,500 all the way up to $3,000 per piece," says Gavidia adding that for multiple panes, there is often an additional charge for removing the plywood prior to glass installation.

Additionally, some small businesses will have to call on graffiti removal services and maybe even companies that assist with mopping up from water damage.

Some Relief in the Works

Los Angeles Mayor Eric Garcetti said that Los Angeles business operators can contact the city for a free building inspection and have debris removed at no charge due to looting. 

LA Sanitation will also provide roll-off dumpster services for debris if needed. If businesses received minimal damage, they can reopen as soon as repairs are made (without permits), but those with heavier damage (such as fire) will have to apply for permits.

Garcetti will be proposing additional financial assistance directly to businesses so they can bring employees back and return to normal operations.

Am I Covered?

Faced with looming repair and clean-up costs, owners are reviewing their business insurance policies which typically protect from vandalism and looting. "Business owner policies cover against property loss, loss of income and business interruptions because of vandalism and civil unrest," says Tim Carruth, a commercial insurance broker based in Pasadena.

How much coverage, however, depends on each individual business owner's estimation on how much insurance they chose to purchase to cover the potential loss of inventory, equipment and income along with property damage.

Low end premium business policies usually are office spaces that usually only need general liability. Retailers who sell jewelry or liquor usually merit more insurance than a clothing boutique. On the high end? Restaurants and bars.

"The first thing that business owners who have experience damage is to file a claim and protect their stores from further damage," says Carruth.

Insurance costs have been modest for many years, says Carruth, but premiums are on the rise since the 2018 wildfires. "After the fires, carriers were non-renewing policies in high-fire hazard zones until the California Department of Insurance stepped in and issued a temporary moratorium to stop," he says.

Will the scenario replay for insurances and small businesses? Watch this space.


More Small Biz Loans Announced

If you own a small business near a major transit stop in LA County, you could be eligible for a new loan program funded by LA Metro.

The Los Angeles County Development Authority (LACDA) announced the Transit Oriented Communities Small Business Recovery Loan Program to help small businesses that have been impacted by COVID-19. The program offers up to $20,000 in loan funds to cover operating expenses for eligible LA County small businesses located within a ¼-mile of a major transit stop.

Loans will be made on a first come, first served basis – so time is of the essence. Loan applications can be completed directly on TOCloans.lacda.org from Thursday, June 4 at 12 pm to Thursday, June 11 at 5pm.

Update: A second round of applications will also be taken from 12pm on Monday, June 8 until 5pm on Friday, June 19.

To learn about the program – and to find out if your business is eligible – visit TOCloans.lacda.org, or email TOCloans@lacda.org or phone (626) 943-3818.


LADWP to Biz Owners: Flush Those Pipes!

As Los Angeles businesses begin to reopen, the LA Department of Water and Power (LADWP) reminds business owners of the importance of flushing pipes and faucets before throwing open the doors to the public. After weeks or months of underuse, a good flushing will remove sitting water and ensure water quality.

The Center for Disease Control has official "All You Need to Know" water system guidelines for reopening buildings after a prolonged or reduced shutdown. Click or tap here for info.


Re-Opening Restaurants with New Guidelines

Before throwing open their doors to eager and hungry customers, L.A. restaurants are now required to follow an extensive updated set of guidelines as set down by the L.A. County Department of Health to protect workers and diners from catching coronavirs. Last week, restaurateurs studied the 10 pages of rules and diagrams that outlined safe practices and procedures. Among them include: reducing seating capacity, 6-foot tall barriers, plexiglass dividers, have single-use or posted menu available and everyone wears masks (except, of course when diners are eating and drinking).

Other guidelines suggest eateries enact a phone reservation system so folks can wait and be alerted in their cars when their table is ready. While food can come out of the kitchen and alcohol can flow, restaurant bars remain closed for the time being.

That's it for this issue!

We will be back next week with more Biz Buzz.

-- Brenda Rees


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