Money Buzz 7/01

In Need Of CPR? Despite a tough market, untimely demise isn't the only possible fate for sound companies facing financial trouble. To avoid a sudden end, they can find resuscitative help in the "Emergency Room," a service recently launched by NVST Inc., a firm that provides research data, deal-making assistance and technology to private equity players and helps investors and entrepreneurs hook up via an online network.

The "E.R." was born as a response to requests from entrepreneurs who were having trouble closing financial deals, says NVST President and COO Samantha Wilkinson. Entrepreneurs-and only owners of established, revenue-producing companies need apply-can register for free at the NVST site, where they can explain their crises and why their companies are worth saving. NVST then matches them with investors who've reviewed the information and want in on the deal. "Many are viable companies," she says of the E.R. patients. "They have a good shot with a little help. So we said, 'Let's try to save as many as we can.' "

Out With the Old The repeal of a Depression-era bank law would largely benefit entrepreneurs, say proponents of new legislation already approved by the House and waiting for approval in the Senate (at press time). The bill would abolish a ban prohibiting financial institutions from offering interest on business checking accounts.

Michael Oxley, chair of the House Committee on Financial Services, says the antiquated law has disproportionately harmed entrepreneurs, who typically can't take advantage of more complex financial products. Oxley estimates that the owner of a typical five-employee operation loses about $3,000 each year due to unearned interest. He adds that the measure is good news for small-town bankers as well, because it would allow them to offer more competitive products to their business customers.

The Independent Community Bankers of America (ICBA), though, isn't convinced. It's concerned the law would mandate increased costs for community banks. And once financial institutions are allowed to offer interest on business checking, says ICBA CEO and president Ken Guenther, the feature will quickly become a competitive requirement. "The option of not doing it won't be realistic," he says. "Is this increased cost factor a make-or-break issue? No. But if you get enough increased cost factors, it's a problem."

Yet Peggy Peterson, spokesperson for the House Committee on Financial Services, says the agreed-upon two-year phase-in period for the new law would hopefully give banks enough time to adjust. In fact, the phase-in was the only issue in serious debate in the House. Otherwise, she says, it had very broad support.

No Bond of Contention Like a reliable seesaw, when interest rates come down, bond prices tend to go up. And just as reliably, when stock prices tank or the market becomes unbearably volatile, embattled investors tend to seek shelter in the bond market, where the returns aren't quite so stellar, but movement is steady enough to allow investors to sleep at night.

Many are wondering if right now is the right time to invest. "I'm not sure because it's almost too late," says David Landes, CEO of Bondsonline Group Inc., an online portal for bond market investors, who reports that traffic at his site has been up considerably since the market crisis began. Had people invested in the bond market six months or a year ago, before interest rates came down, Landes says, they might have seen some significant gains.

Then the question is, Is there still room for growth? For those seeking income on a short-term basis-say three years or less-bonds are a great vehicle, says David Elias, president and chief investment officer at Williamsville, New York-based investment firm Elias Asset Management. "But if you have a time horizon of five years or more and are looking for growth, stocks are still the way to go."

Contact Sources

• Bondsonline Group Inc., 7251 West Mercer Wy., Mercer Island, WA 98040, bonds@bondsonline.com
• Elias Asset Management, (716) 633-3800, elias@eliasasset.com
• House Committee on Financial Services, (202) 226-0471
• Independent Community Bankers of America, 1 Thomas Cir. N.W., #400, Washington, DC 20005-5802, ken_guenther@icba.org
• NVST Inc., 14450 29th Pl. N.E., #108, Bellevue, WA 98007, (800) 843-9559

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This article was originally published in the July 2001 print edition of Entrepreneur with the headline: Money Buzz 7/01.