In 19th century New Bedford, the well-to-do lived in comfortable homes uphill from the harbor’s hustle and bustle. This house was built in a well-kept neighborhood of wood frame homes in 1855, when the city was at the height of its whaling industry wealth.
The house is all angles and wings with gabled roofs, porches and trim. Inside is a light-filled solarium, a skylight kitchen, parquet floors and pocket doors. There’s an attached guest house, as well as a lush private garden with a brick patio, flower beds and shade trees.
It’s in excellent shape, according to real estate agent Collette Lester, and priced at a fraction of what the house would cost to reproduce today.
During the recent recession, many traditional financing options for small businesses dried up. Even when the economy started to rebound, banks increased loans to large businesses while scaling back financing for smaller firms.
Today, the odds of a small business actually receiving a bank loan are about 50-50, according to a recent survey by Pepperdine Private Capital Access Index and Dun & Bradstreet Credibility Corp.
This has opened doors for alternative lenders, which don’t require business owners to have flawless credit or go through months of red tape. They often look beyond credit history and factor in other indicators of business health, like transactions and revenue.
While they still provide just a fraction of the funds of traditional lenders — several billion compared to hundreds of billions — non-bank financial providers have grown 100% since last year, according to Bill Phelan, president of PayNet, a small business credit ratings company.
Alternative lenders offer quicker turnarounds and more personalization, but they also come with significantly higher interest rates. And because financing amounts tend to be much smaller than those offered by traditional banks — and for shorter terms — it can lead to an endless cycle of loans.
“Small business owners need to carefully evaluate lending options and understand that not all lenders are created equal,” said small business adviser Mike Periu. “It’s up to the borrower to do their homework.”
Alternative lenders fall into three main categories:
Working capital loans: Short-term loans for day-to-day financing needs. Interest rates tend to fluctuate depending on the term length and one’s business risk. But experts warn that the annual percentage rate canrun as high as 170%.
Manny Skevofilax of Portal CFO Consulting said if a company needs temporary funds, the first question to ask is “why”?
“You have to be looking at [options] before the jam happens,” Skevofilax said. “If you know ahead of time what’s causing the problems in your business, it would mitigate you having to go out and take a loan.”
Skevofilax said seasonality could be a legitimate reason, but with high interest rates, this should still be a last resort.
Peer-to-peer lending: Virtual marketplaces where individuals or companies invest in small businesses.
A platform like Lending Club ranks small businesses ‘A’ (low-risk) through ‘G’ (high risk). Many investors choose to auto-invest their dollars in businesses with the lowest risk.
These options tend to be transparent about fees and interest rates, but Mitchell D. Weiss, adjunct finance professor at the University of Hartford, said borrowers need to be fully aware of all terms and conditions.
“Focus on the default and remedies clauses,” advised Weiss. “If you miss a payment, do you have an opportunity to remedy it?”
Merchant cash advance: Business owners essentially borrow money from themselves (from revenue they’ve yet to receive) and pay it back in small daily remittances, plus a flat fee.Companies like Square offer these to merchants that use their payment systems.
Unless businesses are rapidly growing or use the cash advance to increase revenue, experts say it can be difficult to ever get out of the red.
“Merchant advance is the financial equivalent of crack,” said Weiss. “When used repeatedly, these arrangements can seriously erode profitability. It’s important for business owners to determine why this type of financing has become necessary.”
The advances are typically smaller than a bank loan (CAN Capital, for instance, offers anywhere from $5,000 to $150,000), so business owners take them out more frequently, tacking on an additional fee each time. Weiss recommends calculating the annual percentage rate using a calculator like eFunda’s.
“The first choice would be to see if you can find some bank financing — that tends to be the cheapest,” said Skevofilax. “But you need to be in business for at least two years.”
Is peer-to-peer lending online the future?
Despite the risks, alternative lenders can be vital for helping some small firms grow their business.
Marlon Davis, who owns Nesberrys in Hempstead, N.Y., needed a loan in order to increase storage space for his ice cream business.
He didn’t even attempt the bank. Instead, he turned to Lendio, a broker between loan providers and small business owners, which helped him get a $12,000 working capital loan from OnDeck. He’s been paying back daily amounts of about $75. By September, he will have successfully paid back a total of $14,250.
He paid a 19% markup for the funds. For some owners, that wouldn’t be worth it if future sales don’t increase. But for Davis, getting the funding in May enabled him to purchase more freezers and add more storage space. He estimates a 40% increase in sales at his two store locations and a 20% increase in his wholesale sales.
“Prior to this, we would probably [have] run out of the product to sell,” he said.
Valero Energy(VLO) may be the cheapest stock in the S&P 500.
Investors like to value stocks based on their projected profits, or forward price-to-earnings (P/E). Based on that measure, Valero’s price tag is the least expensive among S&P 500 companies with a market value of at least $15 billion.
Why? The market is clearly spooked by America’s decision to allow some ultra-light crude oil to be exported. The fear is the move could boost domestic oil prices and raise costs on American refiners like Valero, which tumbled about 10% on the June 25 export announcement.
Yet Wall Street is signaling the selling may be overdone.
A lofty 71% of analysts who cover Valero have a “buy” rating on the stock, up from 61% in April. And the average price target of nearly $64 is well above the current price of around $50.
That means either Wall Street needs to ratchet its targets down, or the market may be undervaluing Valero shares.
Flyers hate paying those bag-check and cup-of-coffee fees. But airlines love collecting them.
Airlines worldwide brought in $31.5 billion in revenue from fees last year, according to a new survey. That’s more than 11 times their non-ticket revenue just six years earlier, adjusted for inflation.
Fees grew far faster than ticket prices, and helped airlines stay profitable. Including a 10% decline in 2009 amid the economic downturn, airline ticket prices climbed only 4% in the same period, according to federal data.
The income from fees was collected and analyzed by CarTrawler, a rental car services company, and IdeaWorksCompany, which helps airlines build these non-traditional revenue streams.
Part of the increase is due to awareness — more airlines are breaking out non-ticket revenue in their financial reports. The 2013 data includes 59 airlines, while the 2007 snapshot counted only 23.
Less than half of those fees are paid directly from customers’ pockets to the airline. For a typical U.S. airline, about 25% of the revenue comes from baggage fees and 10% come from other a la carte services, such as early boarding and the sales of soft drinks. About 5% comes from package deals, such as hotels, rental cars and insurance programs.
The largest share — 60% or such revenue — comes from selling frequent-flier program miles to credit card companies and others, who pass out the miles to reward their own customers.
Three leading U.S. carriers — United Airlines(UAL), Delta Air Lines(DAL) and American Airlines(AAL) — topped the list for the most non-ticket revenue last year. United, for example, brought in $5.7 billion.
But it was a discount airline that has made fees the largest share of its business. Over 38% of Spirit Airlines(SAVE)‘ revenue came from fees — such as the fee for printing your boarding pass at the airport or for a drink (even water) mid-flight.
Plane tickets ain’t what they used to be
And this isn’t the peak of airline fees. “We have a fair amount of room to grow yet,” says Jay Sorensen, the president of IdeaWorksCompany. He expects to see baggage fees become even more widespread, especially among European airlines.
A growing number of cities across the country are making it “illegal to be homeless,” according to a new report.
Despite a lack of affordable housing and emergency shelter, many of these communities are implementing laws that ban homeless residents from sitting or lying down in public, loitering, sleeping in vehicles, and begging for money or food.
“More cities are choosing to turn the necessary conduct of homeless people into criminal activity,” said Maria Foscarinis, executive director of the National Law Center on Homelessness & Poverty (NLCHP).
The law center has tracked homelessness criminalization laws in 187 cities small and large since 2011.
During that time, city-wide bans on camping in public — which can include sleeping outside on the streets or in a tent — have increased 60%.
The number of cities with laws prohibiting or restricting people from sitting or lying down in public has jumped by 43%, and bans on sleeping in vehicles have surged 119%. Meanwhile, laws prohibiting people from begging in public and loitering have climbed more than 20%.
And these laws are popping up even when people have few other options for survival, the NLCHP argues.
In Santa Cruz, Calif., for example, sleeping in vehicles and camping, sitting or lying down in public, is criminalized — even though a local survey found that 83% of homeless people don’t have access to housing or shelter.
A spokesman for the city said that attorneys are required to dismiss any citations issued to homeless people who camp outside on nights that shelters in the area are full. Otherwise, the fine for violating the no-camping law is $20 or 8 hours of community service, and the offense is not punishable by jail time.
“The law does not criminalize homeless status, only conduct which is detrimental to community health and environment, i.e. lack of sanitation and degradation of City streets, open space and beaches,” the Santa Cruz spokesman said in an email.
Homeless valedictorian moves to college
Violations do result in arrest in many cities, however. And the NLCHP points to a number of reports finding that the cost of enforcing these laws greatly exceeds the amount it would cost to provide people with options like affordable housing or shelter.
The Utah Housing and Community Development Division found that emergency room visits and jail stays end up costing nearly $17,000 per year for the average homeless person — versus the $11,000 it would cost to provide that same person with an apartment and a social worker.
Other analysis from Creative Housing Solutions estimates that providing permanent housing and case managers to Central Florida’s chronically homeless would save taxpayers $149 million over the next decade that they would otherwise spend on law enforcement and medical care.
“Criminalization laws are the least effective and most expensive way for cities to address homelessness in their communities,” said Tristia Bauman, a senior attorney at NLCHP.
And such laws only perpetuate the cycle of homelessness because they don’t get to the root of the problem, the group argues.
“Arrested homeless people return to their communities, still with nowhere to live,” the report states. “Moreover, criminal convictions — even for minor crimes — can create barriers to obtaining critical public benefits, employment, or housing, thus making homelessness more difficult to escape.”
Mistakes happen most often to people who have the same or very similar names as an actual terrorist, the San Francisco-based group found, and it obtained more than 100 records from people asking the Treasury to remove them from its list of terrorists.
The Treasury Department didn’t say whether anyone has been erroneously investigated or added to its list, and said it has never lost a court case where a specific designation was challenged.
But in its report, the LCCR highlights multiple lawsuits that have ended in settlements in which names were removed from the list.
The group also pointed to two court cases where the terrorist designation process itself was found to be unfair — with a district court in one case ruling that the Treasury Department’s seizure of assets without warning or reason was a violation of the Fourth Amendment.
And the records the group obtained from the Treasury Department show just how stressful being on this list can be.
One person requesting removal said being flagged as a terrorist caused “hefty damages and harm not only to my family, but emotionally, morally and also economically since this situation led to the closing of my company and to fire personnel.”
Why the TSA wants cellphones turned ‘on’
People aren’t even notified that they’re a suspected terrorist — they find out only when they go to the ATM or at a store checkout. Then they often have no idea what they did to warrant suspicion, and “can be forced to wait years until a determination is made, during which time their assets remain frozen,” the report states.
“I have never understood why my name was put on this list. I was never interviewed by you or had any communication from you or any of your officers or representatives,” another person wrote to the Treasury. “I have no doubt that had you chosen to interview me . . . you would have not taken the decision you did at the time.”
The Treasury Department told CNNMoney that it doesn’t tell people that they are suspected of being a terrorist because that would give them the opportunity to hide their money before the government is able to freeze it. But it said it makes a public statement once someone is officially added to the list, and that it goes through many efforts to ensure that the designation is deserved — including conducting an “extensive investigation” and a “rigorous review” of any evidence.
Once you’re on the list, it’s a battle to get off — the process is murky and not having access to funds makes it that much harder to hire legal counsel or other assistance, according to the LCCR report.
The Treasury Department said that people are able to contact it immediately if they believe they should be removed from the list. If that doesn’t work, they can challenge the designation in a U.S. district court.
There are currently more than 800 people, organizations and companies on the list, which also includes drug traffickers. The full list is public here.
Route 191 runs through some of the great landscapes of the Southwest
Trip length: 197 miles from Moab, UT, to Chinle, AZ
The scenery along Route 191 is spectacular any time of year. This red-rock country is a geological fairyland of arches, slot canyons, natural bridges and balancing rocks.
The road bisects the Colorado Plateau, which boasts one of the highest concentrations of national parks, monuments and recreational areas in the country. Just off 191 are Arches and Canyonlands National Parks; a short drive away are natural bridges, Grand Staircase-Escalante National Monument and Glen Canyon.
Outside Chinle, Ariz., lies Canyon de Chelly (pronounced “shay”) National Monument. This Navajo land features old cliff dwellings and Spider Rock, a thin sandstone spire that soars 750 feet from the canyon bed.
The scenic trails in Utah’s national parks lure many hikers. Be sure to wear some red to attract hummingbirds. There’s also whitewater rafting, kayaking, rock climbing and mountain biking.
Running one of the hottest startups in Silicon Valley, Lyft co-founder and CEO Logan Green is never actually off duty.
Over the last couple years, ride-sharing platform Lyft — recognizable by its pink mustache logo — has quickly transformed from a scrappy startup to a full-fledged company.
The service uses a mobile app to connect people looking for a ride with drivers — who can be anyone wanting to make a little extra money by picking people up. Based in San Francisco, it’s now available in 31 states and most recently launched in New York.
With 300 employees and $330 million in funding from prominent Silicon Valley investors, Green, 31, is constantly on the move. And when he’s not running the company, he’s moonlighting as a Lyft driver, picking up passengers on the go.
Here are journal entries from a day in his life:
<!–Translated from Spanish by the fast food employees’ union she is part of, Workers Organizing Committee of Chicago–>
I wake up and walk down the street to the gym. I typically work out 20-30 minutes every morning to get the day started.
Grab a Lyft and head into the office. To get to the office every day, I either take a Lyft or have my wife drop me off. It’s about a 15-minute drive from my house to the office.
Today we’re moving from our temporary office in SoMa into our new long-term home in the Mission. The team is meeting at the SoMa office and walking together across town to our new space. This walk allows us to close one chapter as a team, and transition together to the next.
First day in the new office. Everyone is excited and settling in — it feels a bit like the first day of a new school year. We have an open office layout and I love that you can feel everyone’s energy almost immediately.
We decorated the entry and front desk area with pool noodles wrapped in pink fabric to make it feel as though you are walking through the pink mustache upon entering the office.
Sync with Peter, my Chief of Staff. I start every day reviewing priorities, prepping for meetings, and getting updated on key projects.
Weekly 1:1 with Krish, our VP of Finance. Krish is building up his team and today we’re discussing a couple of candidates.
My weekly market review meeting with the data team. Last week we launched 24 cities in a single day, so there are a lot of new markets to check in on. This data team is responsible for market health across all of Lyft’s 60 cities.
Lunch with the team. Everyone eats together in a communal area – it’s a tradition we’ve had since our early days. I’ve always been impressed with how something as simple as group lunch brings the team together, even as we’re quickly approaching 300 employees. The company offers lunch each day, and it’s served buffet style in the open eating area.
I try to block a couple of hours of unscheduled time every day, so that I can work on the day’s most important projects. Today, I’m using this time to work with a small group from the engineering team on a stealth, long-term project that will have a big impact on the company down the road.
Final stage interview with a senior engineering candidate. Hiring senior engineers is a top priority as the company grows.
Reviewing operations and product details for a new offering — Lyft’s modern take on a premium ride experience. It’s something several of the teams have been working hard on for months, and we’re opening up a waitlist to passengers who want to try the new service this week.
My co-founder John and I quickly review notes for the All-Hands, our bi-weekly meeting with the whole team.
John and I speak at our first All-Hands in the new office. The meetings, which serve to update the entire team on our most important metrics and announcements, usually open with Paul, one of our earliest team members who has done a great job as unofficial driver of team culture, introducing — and roasting — each new team member.
Today’s transition was a great opportunity to talk about company history. In the last year the team has grown from 50 to 250, so most people on the team haven’t heard the history of how we started out in the “Apartffice” in Palo Alto (our old apartment that doubled as the company’s first office).
Ordering dinner from Sprig, a new on-demand food delivery service, for myself, John, and other team members staying late to work on projects.
Continue replying to emails. I receive a couple hundred every day, so this is my time to get caught up after the day’s meetings.
If golf is your game, Haines City is a great affordable second home market.
Place: Haines City, Fla.
Median home value: $123,000
There are two big advantages to vacation life in Haines City, according to city administrator Jonathan Evans. The first is that several of the best golf courses in the nation are 30 minutes or less away.
Many residents, like Evans himself, live right on a golf course.
The second is home prices. “You can build a new home here for $50 to $60 a square foot,” he said. “It’s very affordable.”
Existing home prices are also low. At a median of $123,000, they’re about two-thirds of the price of a typical U.S. home.
Getting to Haines is easy. Vacationers can fly into either Tampa or Orlando international airports and be less than an hour from their second home. And with both the Atlantic and Gulf coasts within a 90-minute drive, there’s plenty to do, even for non-golfers.
After a long day of trading, Wall Street hot shots are known to enjoy a fine beverage or two. But when it comes to liquid alternative investments, they’re darn near drunk.
Liquid alternative funds are akin to hedge funds for mom and pop investors. Instead of simply investing in stocks or bonds, these special funds use sophisticated techniques to bet on whether equities and bonds will move up or down. They also use borrowed money to amplify returns.
The idea is to generate steady, positive returns.
These funds have exploded in recent years. There are currently 455 liquid alternative funds with about $154 billion in assets, more than double the 217 funds that managed a mere $38 billion in 2008, according to data from Morningstar.
Benefits of liquid alternatives: Brian Kloss, who manages a $126 million bond-focused liquid alternative fund for Brandywine Global, believes that investors have flocked to these kinds of investments since the financial crisis because they aim to guard against the ups and downs of the broader market.
“When market valuations go to extremes, it’s important to protect yourself,” he says.
For example, unlike a conventional bond fund that will typically bet on rising bond prices, Kloss has the ability wager that they will fall. That approach, known in Wall Street parlance as “going short,” served him particularly well during the European debt crisis, when he made a profit by shorting bonds of major U.S. investment banks that had significant exposure to Europe.
Perhaps the most attractive aspect of liquid alternatives is that they are after all, liquid. That means investors can pull their money out at any time. That’s in contrast to many high octane hedge funds and private equity firms that require so-called lockup periods in which investors can’t redeem their money for a set period of time.
Higher fees: Still, there are many things to consider before diving into liquid alternatives. For one, they’re more expensive than your classic mutual fund or ETF. The average minimum investment is around $6,000, Morningstar data shows. Of course, that’s far less than the $500,000 that hedge funds with similar investment strategies often require investors to pony up.
Then there are the fees. The average expense ratio for a liquid alternative fund is about 1.8%, but some go as high as 2.5%, according to Josh Charlson, director of alternatives strategy for Morningstar. That’s compared to 1.31% for the average stock-focused mutual fund and 0.97% for the average bond fund.
The average ETF, which tracks an index or basket of stocks, has an equally weighted expense ratio of just .6%.
Performance should also be taken into account: While the S&P 500 has gained over 6% so far this year, liquid alternatives have returned a paltry 1.4%. In theory, liquid alternatives should do better when the market hits a snag.
“When markets are struggling, that’s when you really want to outperform,” Kloss asserts.
Charlson echoed that sentiment, and believes that record stock prices have actually had the effect of driving more investors into liquid alternatives.
“With the market having gone straight up for the last few years, there’s more anxiety right now and I think investors are looking for ways to put protection into their portfolio,” he says.
Running of the bull markets
SEC concern: But while liquid alternatives have been successful in drawing interest from investors, they’ve also caught the attention of the Securities and Exchange Commission.
The agency lists alternative investment companies under its “heightened risk” examination priorities for this year. Specifically, it’s looking at the funds’ trading techniques, compliance staff, and marketing practices.
Charlson says it’s not surprising that the SEC wants to take a closer look into liquid alternatives, but he doesn’t foresee them finding any major widespread problems. He did however say that there could be instances in which start-up funds get in trouble for not having the right risk management systems in place.
He also warns that some fund managers are using the asset class’ newfound popularity as a way to charge higher fees and increase revenue. Investors need to do their homework before dipping into the liquid alternative pool.