Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Thanks for documenting the point...each of these circumstances has something in common, an increase in demand.
You still haven't addressed the point that Obama said this:
:Let me put it this way. Most small businesses right now, if they've got enough customers to make a profit and they can get the bank loans required to boost their payroll, boost their inventory and sell to those customers, they will do so."
Instead you went on some unnecessary tirade about business.
You and all your hyperactive hypercritical pals are making fun of Obama stating quite clearly the crap you've been regurgitating time and again.
Don't make me explain to you 'reasonable expectations' again.
And pardon my bluntness, but no **** demand is part of the profit equation.
That doesn't change the fact that leveraged hiring happens every day of the week.
What happens when one company executes a leveraged acquisition of another?
Does the acquiring company pretend that the employees don't exist? No, they either make a go of it (in debt) hoping to turn a profit or they have a fire sale.
You still haven't addressed the point that Obama said this:
:Let me put it this way. Most small businesses right now, if they've got enough customers to make a profit and they can get the bank loans required to boost their payroll, boost their inventory and sell to those customers, they will do so."
Instead you went on some unnecessary tirade about business.
You and all your hyperactive hypercritical pals are making fun of Obama stating quite clearly the crap you've been regurgitating time and again.
Don't make me explain to you 'reasonable expectations' again.
And pardon my bluntness, but no **** demand is part of the profit equation.
That doesn't change the fact that leveraged hiring happens every day of the week.
What happens when one company executes a leveraged acquisition of another?
Does the acquiring company pretend that the employees don't exist? No, they either make a go of it (in debt) hoping to turn a profit or they have a fire sale.
I've already countered your comment in red multiple times, you keep repeating the same statement as if it were true, with nothing to back it up. Fortunately, there are enough other people here with real business experience that have countered every (or was it just one?) point you have made. I guess you just can't accept that you're wrong with regard to why business exists and why employees are hired. Oh well, we tried to provide a degree of education, some people are just determined to hold on to their dogma and not learn something new.
Many Companies expand their workforce based on reasonable market expectations.
Reasonable market expectations are what now? I would take it at face value, an expectation of the market based on some reasonable, rational input to predict customer purchases. Such as an increase or decrease in orders, an increase or reduction in inventory, perhaps a market survey of potential customers. Did you mean something different?
Now, if that "reasonable market expectation" lead to the conclusion that you're sales are going to decrease, why would you hire more employees that are not needed?
If on the other hand that "reasonable market expectation" leads you to conclude that sales will increase, it may make sense to hire more employees, get them trained and equiped to handle that increase. It's risky to hire before that increase has happened, but not necessarily a bad idea. Just a hint though-that "increase in sales" is what everyone else on here is referring to as demand. And yes, credit can facilitate that hiring.
And coming back to the OP, once again, I suspect Obama does understand the difference and was taken somewhat out of context. At least I hope so.
I've already countered your comment in red multiple times, you keep repeating the same statement as if it were true, with nothing to back it up. Fortunately, there are enough other people here with real business experience that have countered every (or was it just one?) point you have made. I guess you just can't accept that you're wrong with regard to why business exists and why employees are hired. Oh well, we tried to provide a degree of education, some people are just determined to hold on to their dogma and not learn something new.
Obama is clearly saying companies with enough customers to profit can get a governmental loan to boost payroll.
That's pretty much what you and your cohorts are saying.
So where's the controversy?
I pointed out that the starter of this thread was wrong with her claim that leveraged hiring doesn't happen. Apparently you and your sophisticates have never encountered that concept before so you lash out like frankenstein screaming - "it doesn't exist....why you need profit first!"
That's just hogwash. I hate anecdotal evidence but I've done leveraged hirings and I've worked with lawyers on leveraged buyouts.
You guys just don't know what you're talking about.
Here's nice tidbit on leveraging:
What is Leveraged Finance?
Prof. Ian Giddy, New York University
Leveraged Finance
Leveraged finance is funding a company or business unit with more debt than would be considered normal for that company or industry. More-than-normal debt implies that the funding is riskier, and therefore more costly, than normal borrowing. As a result, levered finance is commonly employed to achieve a specific, often temporary, objective: to make an acquisition, to effect a buy-out, to repurchase shares or fund a one-time dividend, or to invest in a self-sustaining cash-generating asset.
Although different banks mean different things when they talk about leveraged finance, it generally includes two main products - leveraged loans and high-yield bonds. Leveraged loans, which are often defined as credits priced 150 basis points or more over the London interbank offered rate, are essentially loans with a high rate of interest to reflect a higher risk posed by the borrower. High-yield or junk bonds are those that are rated below "investment grade," i.e. less than triple-B.
A key instrument in much of leveraged finance, particularly in leveraged buy-outs, is mezzanine or "in between" debt. Mezzanine debt has long been used by mid-cap companies in Europe and the US as a funding alternative to high yield bonds or bank debt. The product ranks between senior bank debt and equity in a company's capital structure, and mezzanine investors take higher risks than bond buyers but are rewarded with equity-like returns averaging between 10 and 20 per cent.
Companies that are too small to tap the bond market have been the traditional users of mezzanine debt, but it is increasingly being used as part of the financing package for larger leveraged acquisition deals. Although mezzanine has been more expensive for companies to use than junk bonds, the low coupons coupled with high returns often makes some sort of mezzanine or hybrid debt an essential buffer between senior lenders and the equity investors.
There are often different layers of finance involved in leveraged financing. These range from a senior secured bank loan or bond to a subordinated loan or bond. A large part of the role of leveraged financiers is to calculate how each type of finance should be raised. If they overestimate the ability of the company to service its debt, they may lend too much at a low margin and be left holding loans or bonds they cannot sell to the market. If the value of the company is underestimated, the deal may be lost.
Leveraged Acquisition Finance
Leveraged acquisition finance is the provision of bank loans and the issue of high yield bonds to fund acquisitions of companies or parts of companies by an existing internal management team (a management buy-out), an external management team (a management buy-in) or a third party (an acquisition).
The leverage of a transaction refers to the ratio of debt capital (bank loans, bonds and subordinated mezzanine instruments) to equity capital (money invested in the shares of the target company). In a leveraged financing, this ratio is unusually high. As a result, the level of debt service (payment of interest and repayment of principal) absorbs a very large part of the cashflow produced by the business. Consequently, the risk of the company not being able to service the debt is higher and thus the position of the lenders is riskier than in a conventional acquisition. The interest rate on the debt will be high.
Leveraged Recapitalizations
A technique whereby a company takes on significant additional debt with the purpose of either paying an extraordinary dividend or repurchasing shares, leaving the remaining shareholders with a continuing interest in a more financially-leveraged company. This is often used as a "shark repellant" to ward off a hostile takeover, or as an interim means of cashing in on the comapny's performance following a leveraged buyout.
Leveraged Asset-Based Finance
Leveraged asset-based finance entails raising debt capital for companies where the physical assets or a defined, contractual cash flow form the basis for highly levered non- or limited-recourse funding of assets or projects. Leasing, project financing and whole business securitization are examples of these techniques.
Leveraged finance, like other parts of structured finance, primarily involves identifying, analysing and solving risks. These risks can be arranged into the following groups
Leveraged Finance Risks
Credit risks are concerned with the business and its market. Financial risks which lie within the economy as a whole, for instance, interest rates, foreign exchange rates and tax rates.
Structural risks are risks created by the actual provision of finance including legal, documentation and settlement risks.
Liquidity risks are those associated with the inability of a leveraged company to refinance itseld in tight credit conditions
Leveraged hiring is risk that may or may not put an entrepeneur ahead of his competition. And don't mention demand b/c the employer already takes that into account with his expectations of demand.
Obama is clearly saying companies with enough customers to profit can get a governmental loan to boost payroll.
That's pretty much what you and your cohorts are saying.
So where's the controversy?
The actual quote per the OP is:
Quote:
Most small businesses right now, if they've got enough customers to make a profit and they can get the bank loans required to boost their payroll, boost their inventory and sell to those customers, they will do so.
The controversy was that the quoted statement is fundimentally wrong. It implies that the only reason profitable businesses are not hiring is they cannot get credit. Is this the your take as well?
The critical part of the quote is
Quote:
and sell to those customers
and perhaps that's what isn't emphasized and is the source of this debate.
Without that caviat, the statement ignores the basic factor of business, namely that without demand a company has no need to hire. The fact that a company makes a profit has no direct impact on if they hire, it's a secondary effect. The question is can they increase profit by hiring additional workers. Or, conversly, do they have more manpower than they actually need, and can they reduce costs (and increase profits) by cutting the workforce.
I (and everyone else) has agreed that the availability of credit can expedite hiring at a time of increasing demand, and it's pretty obvious that everyone understands the concept of leveraged hiring. And I conceed that the statement was probably taken a bit out of context, or at least was poorly worded.
So, I guess, as you say, really no controversy.
Do you conceed that without actual or an anticipated increase in demand that leveraged hiring (or any other kind) makes no sense? If not, could you explain why, I'm missing something?
We are one of those small companies (12 people). We have managed to make a (reduced) profit through this recession without layoffs. We seem to be seeing an uptic in business in the last couple of months, but will not go out and hire until this proves to be a lasting increase in sales, our strategy is to get by and not put ourselves at further risk until there is some proof that the recovery has "legs". We have a ways to go to get back to sales of 2007 levels. During this period we have put a lot of effort into improving processes so that we can meet an increase in production with existing manpower.
Last edited by Toyman at Jewel Lake; 02-16-2010 at 11:59 AM..
I quoted and am referencing the actual quote as presented in the OP. You are not adding anything new.
Quote:
The controversy was that the quoted statement is fundimentally wrong. It implies that the only reason profitable businesses are not hiring is they cannot get credit. Is this the your take as well?
There is no controversy from my point of view. The sentence attributed to the president does not imply that the ONLY reason profitable businesses are not hiring is b/c they can't get credit.
The statement plainly reads that if small businesses are in a position requiring a bank loan to expand capacity, they can do it with his loan program.
Quote:
The critical part of the quote is and perhaps that's what isn't emphasized and is the source of this debate.
Without that caviat, the statement ignores the basic factor of business, namely that without demand a company has no need to hire. The fact that a company makes a profit has no direct impact on if they hire, it's a secondary effect. The question is can they increase profit by hiring additional workers. Or, conversly, do they have more manpower than they actually need, and can they reduce costs (and increase profits) by cutting the workforce.
"Most small businesses right now, if they've got enough customers to make a profit and they can get the bank loans required to boost their payroll, boost their inventory and sell to those customers, they will do so."
Where in that sentence does the idea of increasing profit by hiring workers even remotely appear? I don't see it implied.
Quote:
I (and everyone else) has agreed that the availability of credit can expedite hiring at a time of increasing demand, and it's pretty obvious that everyone understands the concept of leveraged hiring. And I conceed that the statement was probably taken a bit out of context, or at least was poorly worded.
So, I guess, as you say, really no controversy.
Do you conceed that without actual or an anticipated increase in demand that leveraged hiring (or any other kind) makes no sense? If not, could you explain why, I'm missing something?
From the beginning I've stated that I have no opinion on the wisdom of leveraged hiring. It can work where reasonable expectations of demand are justifiable. Of course demand plays a role. I don't see anyone denying that.
Quote:
We are one of those small companies (12 people). We have managed to make a (reduced) profit through this recession without layoffs. We seem to be seeing an uptic in business in the last couple of months, but will not go out and hire until this proves to be a lasting increase in sales, our strategy is to get by and not put ourselves at further risk until there is some proof that the recovery has "legs". We have a ways to go to get back to sales of 2007 levels. During this period we have put a lot of effort into improving processes so that we can meet an increase in production with existing manpower.
Best of luck with your business. I know it's an 18 hour a day job. That's one of the reasons I sold my interest in my business.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
