How to Deal With Winter Downtime

You worked hard all summer and made a lot of money. But now summer is over and winter is quickly approaching. With winter comes downtime.

When you’re young, temporary lay-offs can be fun: Parties, travel, music and sporting events make layoffs easier to handle. When you’re older, with bills to pay and mouths to feed, layoffs can be very worrisome. There are a few basic steps you can take to help deal with temporary layoffs.

If you’ve been laid off, you should file for unemployment insurance as soon as possible. The sooner you file, the sooner you can be deemed eligible and the sooner you can start receiving funds. The unemployment agency will verify with your employer the reason for you losing your job.

If you are not happy in the roofing industry you might be interested in retraining, not only to learn new job skills but also to keep your mind sharp. Consider the following:

  • Take some community college courses. Community colleges are relatively inexpensive and offer a wide variety of courses to improve work skills while earning valuable college credits that may lead to a possible degree.
  • Visit your local unemployment office. It will have lists of apprenticeship and training opportunities that can lead to a more secure position.
  • Select courses at a location vocational/technical school. These schools offer a wide variety of hands-on training at reasonable costs.
  • Purchase books or software to use on your own. There are many free and reasonably priced online training and education classes available.

See “Training Resources” below for some additional ideas.

If you love roofing and want to remain in the trade, there are steps you can take to keep your head above water—financially speaking.

John M. Grohol, Psy.D., writes in “7 Ways to Cope with a Layoff” that you need to take a realistic look at your finances and budget. Do not put this off longer than a week after you are laid off. Although we may not enjoy dealing with our finances, failure to do so could result in a far worse situation down the road (which always arrives sooner than you think). Dr. Grohol suggests: “Be creative in analyzing your budget for places to cut.” Most of us assume we need things like digital television and unlimited mobile calling plans. But most of us don’t. He adds, “Now’s the time to put aside your wants temporarily and focus exclusively on your and your family’s needs.”

Your savings, rainy-day fund and even your 401(k) may offer you some temporary financial relief. Borrowing from your 401(k), for instance, is usually less expensive than adding to your credit-card debt because you are paying back the loan with interest to yourself (not a credit card company). However, borrowing from your 401(k) and other retirement accounts is usually recommended only as a last resort.

Take care of your insurance. We often don’t think about insurance until we’re faced with a layoff and find out just how expensive insurance really is. Your employer will likely offer you COBRA, which allows you to continue your employer’s health benefits with one catch: You now have to pay what your employer was paying for your benefits. Be prepared for sticker shock. Most people are amazed that a family of four’s health insurance on COBRA might be as high as $1,000 or even $1,500 a month; for a single person or couple, it can be anywhere from $500 to $800 per month. When paying bills is already going to be a challenge, COBRA might be out of reach.

Shop around. With the Affordable Care Act, there are a lot more health-insurance plans available at a wide range of costs. You may find other health insurance coverage for your family that is less expensive and won’t cut your benefits in any significant way. Weigh the costs with what you can afford. For example, you may have to pay a higher deductible for inpatient hospital stays to achieve a lower monthly premium.

If you want or need to keep working, hit the classifieds. Nearly all classified sections now are online, so searching through them is far easier than it was 10 years ago. Although it might seem like nobody is hiring (and in the construction profession, that may very well be true), you should keep an eye out anyway. Jobs sometimes become available as people retire or a company’s focus changes. Extend your search somewhat outside your trade, as well, just to see what else might be available. Check out your “dream job”, too. Some people use a layoff as an opening for a new opportunity.

Use the unemployment resources available to you, whether through your ex-employer or through your local government. Libraries, too, often offer a great set of employment and career resources (such as résumé writing services). Don’t be afraid to network. Make your situation known, build connections and, soon, unemployment will be a thing of the past!

Training Resources

The following are examples of free or low-cost training opportunities you may want to consider when you are laid off:
Free
College courses from American Standard University
Solar training in New Jersey from Information & Technology Management
Your state may offer free training, like New York

Low Cost
Penn Foster Career School

More Ideas
The U.S. Department of Labor’s Employment and Training Administration provides information and services to assist workers who have been or will be laid off.

Search for apprenticeships and youth education/training programs, like one in New York.

Interested in the safety profession? Check out Free-Training.com/osha/soshamenu.htm and Free-Training.com.

Preferential Payments and Their Impact on Your Business

For a roofing contractor, there is perhaps no better feeling than receiving that last payment draw or retainage check at the end of a long project. Issues with the general contractor, concerns over change orders and pesky building inspections seem to disappear along with the check as it slides into the ATM. You breathe another sigh of relief when the check clears and the funds hit your account. You quickly pay your crew and suppliers and cross your fingers that you turned a profit. Just as quickly, you close your file and move onto the next job.

Months or years later, you receive an ominous letter in the mail bearing a green certified sticker. Peeling open the envelope, you find a letter, advising you that the contractor or developer you worked for 10 jobs back has filed bankruptcy. Not your problem, right? You read on and see the bankruptcy trustee is demanding you return the last payments that contractor made to you or risk being sued in federal court. Assuming you even made money on the job, those dollars are long since spent. What now?

This situation is all too real for thousands of roofing contractors around the country. How can a bankruptcy trustee take your hard-earned money or, worse, require you to pay back money on a job where you didn’t even make a profit? It all comes down to Section 547 of the Bankruptcy Code. When a company files for bankruptcy, a trustee is often assigned to administer that company’s assets and liabilities. In certain circumstances, the code allows a bankruptcy trustee to seek return of “Preferential” payments made to creditors within the 90-day period before the date the bankruptcy petition was filed (the “Preferential period”). This is also known as “clawing back”; the bankruptcy trustee is essentially attempting to take back payments made during the Preferential period while the company was insolvent. As unfair as this may seem, bankruptcy trustees in many instances are entitled to pursue these payments and commonly institute federal lawsuits against their claw-back targets

Your Defense

What can the target of a claw back demand do? Fortunately, the code provides several defenses to these actions. For the purpose of this article, I’ll focus on the most common, the “ordinary course of business” defense. In effect, the bankruptcy trustee may not claw back payments made in the ordinary course of business or financial affairs of the debtor (the company in bankruptcy) or made according to business terms (often a written contract). While it seems simple enough, the manner in which the court determines the normal course of business is something all contractors should be aware of.

To determine if a payment was Preferential and can be clawed back, the court may look at whether the parties’ business dealings changed during the Preferential period as compared to before the Preferential period. Here, seemingly innocuous changes in the parties’ behavior can often be all it takes for the court to mark a payment as Preferential and require the creditor to return it to the bankruptcy trustee.

One of the most common scenarios occurs when the debtor (typically the owner or general contractor or whoever owes you the money) makes late payments. For example, consider a situation where the contract between the parties called for payments to be made within 30 days and in fact all pre-Preferential period payments were received within the allowable timeframe. The debtor then begins making late payments, 35 days, 45 days, etc., and shortly thereafter files for bankruptcy. Under this scenario, the court may determine these late payments were made outside the normal course of business and thus you as the creditor would be forced to pay the bankruptcy trustee back for each such payment. However, if you could perhaps show you previously worked on other jobs with this debtor and late payments were not uncommon, you may succeed in defeating the attempted claw back.

Another typical scenario deals with unusual debt-collection efforts by a creditor. In this situation, if the court determines that you as the creditor undertook atypical debt-collection practices (for example, refusing to deliver supplies until payment of outstanding invoices is made), it may consider it evidence that the Preferential period payments made in response to the collection efforts were made outside the ordinary course of business. Once again, if you could show the court that this scenario typically occurred on other jobs with this debtor you may still defeat the claw back.

Protect Yourself

So what can we learn? Claw back situations should be a very real concern for roofing contractors as they often do not manifest themselves until months or years after a particular job or contract was completed. Although there is no fail-safe mechanism to prevent claw back scenarios, roofing contractors can protect themselves in several ways, including continually monitoring the financial condition of those they contract with, requiring payment on delivery of service or materials, keeping detailed records, strictly adhering to the ordinary course of business, and requiring a letter of credit when the entity with whom they contract is utilizing a bank or financier.

WalletHub Small Business Study: Best and Worst Cities to Work

The personal finance social network WalletHub conducted an in-depth analysis of 2015’s Best & Worst Cities to Work for a Small Business.

In order to help job seekers consider small businesses as attractive employment prospects, WalletHub examined the small business environment within 100 of the largest U.S. metro areas across 11 key metrics. Our data set includes such metrics as net small business job growth, industry variety and earnings for small business employees.


    Best Metro Areas to Work for a Small Business      Worst Metro Areas to Work for a Small Business 
 
1
 
 
Charlotte, N.C.
 
 
91
 
 
Springfield, Mass.
 
 
2
 
 
Raleigh, N.C.
 
 
92
 
 
Tucson, Ariz.
 
 
3
 
 
Oklahoma City, Okla.
 
 
93
 
 
Augusta, Ga.
 
 
4
 
 
Austin, Texas
 
 
94
 
 
New Haven, Conn.
 
 
5
 
 
Omaha, Neb.
 
 
95
 
 
Bakersfield, Calif.
 
 
6
 
 
Nashville, Tenn.
 
 
96
 
 
Fresno, Calif.
 
 
7
 
 
Salt Lake City
 
 
97
 
 
Scranton, Penn.
 
 
8
 
 
Dallas
 
 
98
 
 
Toledo, Ohio
 
 
9
 
 
Houston
 
 
99
 
 
Stockton, Calif.
 
 
10
 
 
Boston
 
 
100
 
 
Youngstown, Ohio
 


Key stats:

  • The number of small businesses per 1,000 inhabitants is two times higher in the Miami metro area than in the Bakersfield, Calif., metro area.
  • The earnings for small business employees adjusted for cost of living are three times higher in the Houston metro area than in the Honolulu metro area.
  • The median annual income adjusted for cost of living is two times higher in the Ogden, Utah, metro area than in the McAllen, Texas, metro area.
  • The unemployment rate is four times higher in the Fresno, Calif., metro area than in the Provo, Utah, metro area.

By 2042, the Cape Coral, Fla., metro area is projected to experience the highest population increase, at 103.4 percent, and the Youngstown metro area the highest population decrease, at 11.1 percent.

The Foundation Releases MCI-EFI Regarding Business Conditions and Expectations

The Equipment Leasing & Finance Foundation (the Foundation) released the February 2015 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Designed to collect leadership data, the index reports a qualitative assessment of the prevailing business conditions and expectations for the future as reported by key executives from the $903 billion equipment finance sector. Overall, confidence in the equipment finance market is 66.3, a slight increase from the three-year high level reached by the January index of 66.1.

When asked about the outlook for the future, MCI-EFI survey respondent William Verhelle, chief executive officer, First American Equipment Finance, a City National Bank company, says, “The economy continues to improve. First American is seeing increased equipment acquisition activity among the large corporate borrowers we serve. We are optimistic that lower energy costs, if they remain at current low levels, will drive increased U.S. economic activity in the second half of 2015. We are more optimistic about the U.S. economy today than we have been at any time during the past six years.”

February 2015 Survey Results:
The overall MCI-EFI is 66.3, a slight increase from the January index of 66.1.

  • When asked to assess their business conditions over the next four months, 30.3 percent of executives responding said they believe business conditions will improve over the next four months, up from 23.3 percent in January. 63.6 percent of respondents believe business conditions will remain the same over the next four months, down from 76.7 percent in January. 6.1 percent believe business conditions will worsen, up from none who believed so the previous month.
  • 42.4 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 20 percent in January. 51.5 percent believe demand will “remain the same” during the same four-month time period, down from 80 percent the previous month. 6.1 percent believe demand will decline, up from none in January.
  • 27.3 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 33.3 percent in January. 72.7 percent of survey respondents indicate they expect the “same” access to capital to fund business, up from 66.7 percent in January. None expect “less” access to capital, unchanged from the previous month.
  • When asked, 39.4 percent of the executives reported they expect to hire more employees over the next four months, a decrease from 50 percent in January. 57.6 percent expect no change in headcount over the next four months, up from 50 percent last month. 3 percent expect to hire fewer employees, up from none who expected fewer in January.
  • 6.1 percent of the leadership evaluate the current U.S. economy as “excellent,” up from 3 percent last month. 90.9 percent of the leadership evaluate the current U.S. economy as “fair,” down from 97 percent in January. 3 percent rate it as “poor,” up from none the previous month.
  • 45.4 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 43.3 percent who believed so in January. 54.6 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 56.7 percent in January. None believe economic conditions in the U.S. will worsen over the next six months, unchanged from last month.
  • In February, 48.5 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 50 percent in January. 51.5 percent believe there will be “no change” in business development spending, an increase from 50 percent last month. None believe there will be a decrease in spending, unchanged from last month.

February 2015 MCI-EFI survey comments from industry executive leadership:

  • Independent, Small Ticket
    “Demand remains moderate and competition is strong. We remain bullish for 2015 as we expand channels and products. We are planning on muted GDP so we are focused on making our own opportunities versus waiting for the general economy to expand.” David Schaefer, CEO, Mintaka Financial LLC

  • Bank, Small Ticket
    “Things just seem to be better. Gas prices and unemployment are headed in the right direction. I am concerned about the negative effect of lower gas prices, such as, higher fail rates of energy loans and energy stock value.” Kenneth Collins, CEO, Susquehanna Commercial Finance Inc.

  • Bank, Middle Ticket
    “I see continued strength in the transportation segment of the economy. That segment of our business will remain strong. The opportunities in oil and gas have substantially declined. I expect the decline to depress the volume of business during 2015. 2015 will be a mixed year with some industries doing well and others in decline.” Elaine Temple, president, BancorpSouth Equipment Finance

  • Bank, Middle Ticket
    “All signs have been pointing to a ‘break-out’ year in 2015. However, investment in capital assets continues to be sporadic. Companies continue to be cautious in expanding their production capacity. Let’s hope the economists are correct in their predictions for 2015.” Thomas Jaschik, president, BB&T Equipment Finance

Why an MCI-EFI?
Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.

Who participates in the MCI-EFI?
The respondents are comprised of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Because the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence.

How is the MCI-EFI designed?
The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:

  • 1. Current business conditions
  • 2. Expected product demand during the next four months
  • 3. Access to capital during the next four months
  • 4. Future employment conditions
  • 5. Evaluation of the current U.S. economy
  • 6. U.S. economic conditions during the next six months
  • 7. Business development spending expectations
  • 8. Open-ended question for comments

How may I access the MCI-EFI?
Survey results are posted on the Foundation website, included in the Foundation Forecast newsletter and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.

ELFA Reveals Top 10 Equipment Acquisition Trends

The Equipment Leasing and Finance Association (ELFA) which represents the $903 billion equipment finance sector, has revealed its Top 10 Equipment Acquisition Trends for 2015. Given U.S. businesses, nonprofits and government agencies will spend nearly $1.5 trillion in capital goods or fixed business investment (including software) this year, financing a majority of those assets, these trends impact a significant portion of the U.S. economy. Businesses will find opportunities presented by a steadily improving economy and favorable credit conditions as they make their decisions for equipment replacement and expansion.

ELFA President and CEO William G. Sutton, CAE, says, “Equipment financing is a critical source of funding for a majority of U.S. businesses, allowing them to acquire the equipment they need to operate and grow. It enables equipment acquisition, which plays a critical role in driving the supply chains across all U.S. manufacturing and service sectors. To assist businesses in planning their acquisition strategies, we have distilled recent research data, including the Equipment Leasing & Finance Foundation’s 2015 Equipment Leasing & Finance U.S. Economic Outlook Report, industry participants’ expertise and member input from ELFA meetings and conferences to provide our best insight for the Top 10 Equipment Acquisition Trends for 2015.”

ELFA forecasts the following Top 10 Equipment Acquisition Trends for 2015:

  • 1. Investment in equipment and software will reach an all-time high in 2015. As the U.S. economy continues to improve, business investment is forecast to reach a record $1.484 trillion in 2015. As business investment grows, demand for equipment financing will increase.
  • 2. Businesses will invest in equipment not just to replace aging assets, but also to aid in expansion. The pent-up replacement demand that has driven equipment investment in previous years may be supplemented by long-awaited expansion investment as capacity utilization rates in some industries reach or surpass levels historically known to spur business investment. Industries poised for investment growth include oil and gas extraction and transportation equipment manufacturing.
  • 3. While some equipment types will see strong growth, others will moderate. In 2014, equipment and software investment increased 9.6 percent in Q2 and 9.3 percent in Q3. Looking ahead, growth in equipment and software investment is expected to moderate somewhat, as it is unlikely to keep up the strong pace seen in Q2 and Q3. A still healthy growth rate of 6 percent is forecast for 2015. Aircraft, trucks and other industrial equipment are projected to be among the higher growth types, while agriculture, computers and software are expected to see slower growth.
  • 4. Improving market conditions will continue to increase credit supply and demand for equipment acquisitions. As the economy steadily improves and business confidence continues to increase, credit standards should modestly loosen. The propensity to finance decreased in the wake of the financial crisis as businesses deleveraged and refrained from new business investment. Since bottoming out in 2010, the rate at which businesses finance their capital spending has grown consistently and will continue to increase in 2015 with steady economic recovery and shifts in Federal Reserve policy.
  • 5. Eyes will be on short-term interest rate increases. Expectations for the Federal Reserve to raise short-term interest rates in 2015 should spur equipment investment as businesses seek to lock in equipment financing at lower rates. Despite rate increases, businesses will find that a highly competitive “buyer’s market” will continue to make financing an attractive option for acquiring equipment.
  • 6. Businesses will use financing for a majority of their plant, equipment and software expenditures. In 2015, 62 percent or $922 billion of investment in plant, equipment and software in the United States is expected to be financed through loans, leases and lines of credit. A majority of businesses—seven out of 10—will use at least one form of financing to acquire equipment.
  • 7. Advances in the use of technology will drive innovative financing options. Equipment finance providers are streamlining their business processes and improving customer self-service capabilities using digital technologies. At the same time, some end-users are moving away from traditional equipment consumption models and toward hosted or managed services based on usage rather than total ownership. To meet customer demand and address evolving technology equipment requirements, equipment finance companies will tailor innovative financial offerings.
  • 8. Several “wild cards” could impact equipment acquisition decisions. In what could be a breakout year for the U.S. economy, positive and negative external risks could affect equipment investment. Potential political gridlock, global economic weakness and geopolitical risks could be a drag on investment decisions, but GDP growth from low oil prices, a potential surge in the housing sector and sufficient capacity utilization could have firms ramping up capital expenditures.
  • 9. Nontraditional financing will continue to grow and play a larger role in the equipment finance industry. As regulatory scrutiny increases and some banks’ lending standards tighten for certain credits, nontraditional financing sources, such as investment bankers, venture capitalists, insurance companies, crowd funders and others, are exploring opportunities in the equipment finance sector.
  • 10. A final lease accounting standard will be released. The Financial Accounting Standards Board and the International Accounting Standards Board continue to work on the lease accounting project, which will change how leases are accounted for on corporate balance sheets. A final standard is anticipated in 2015, with a possible effective date of 2018 or later. The good news is that the benefits of leasing equipment will remain intact despite the lease accounting proposal.