Better Banking Begins with Digital Lending

Society is in the midst of the digital age, also known as the information age, where technological advancements are becoming second nature in personal and professional settings. People want things done faster and easier, all while maintaining the same level of efficiency as the more “outdated” processes. Digital lending, in particular, is an untapped market for many small- to medium-sized businesses (SMBs) that currently use third-party processors, leaving a window of opportunity for banking providers to step up.

Financial services company FIS explored exactly what SMBs are looking for in the banking relationship in its 4th annual FIS Performance Against Customer Expectations (PACE) report. To little surprise, digital payments were SMBs’ No. 1 priority. About 320 U.S. SMBs, earning up to $500 million in revenue, participated in the 2018 survey, with an additional input from 253 SMBs in the U.K. Similar to their expectations for technology, the findings cited that SMBs want “simple, responsive banking relationships,” with providers varying from the top 50 global banks to regional and community banks.

GfK Customer Research, which was behind the report, based its results on FIS’ Run-Connect-Grow model. The “run” component analyzes a bank’s foundation, followed by its abilities to “connect” with customers and expand, or “grow,” its offerings through investment. Approximately eight out of 10 SMBs said they were “satisfied” with their banks, the report states; the majority of providers being community banks at 84%. However, community banks showed room for improvement regarding their payments processing—this was defined as “a weak spot.”

“SMBs are adopting digital payments at a breakneck pace but are not yet demanding such capabilities from their banking providers, instead relying on third-party processors,” the study explains, adding that one-quarter of their SMB customers work with third parties. “This presents banks, especially smaller ones, with a clear opportunity to lock in customers and processing-fee income by adding merchant services and digital payment functionality.” Among the top 50 global banks, digital self-service is one of their top three attributes, yet falls short in regional and community banks.

Although digital payments were low in the FIS report, an American Bankers Association (ABA) study earlier this year found that smaller banks are willing to expand into the unfamiliar territory that is digital lending. For example, according to ABA’s The State of Digital Lending, only 13% of small banks (those earning less $1 billion) currently provide instant credit decisions using online platforms, and a little more than half use digital documentation that aren’t applications. In response, the study states, some banks create their own online lending platforms or buy others to appeal to customers. Another possibility is to form a partnership with a fintech firm.

ABA also reviewed the two-year plans for banks, large and small, to which 54% said they anticipate moderate growth in small business lending of loans between $3 million and $100 million. A fragment of responding banks (7%) said they expect aggressive growth, with about 29% growing slowly and 10% remaining steady.

“Digital is no longer a nice-to-have, a ‘maybe we’ll get there someday.’ Digitalization is a must-have requirement,” said Founder and CEO Chris Rentner, of digital lending platform Akouba, in the study. “There’s no reason that you shouldn’t have something today.”

—Andrew Michaels, editorial associate

 

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Nevada Court Reaffirms Attorneys’ Fees and Costs in Actions to Release Mechanic’s Liens Only Available in Limited Circumstances

Nevada Revised Statutes (NRS) Section 108.2275 allows parties to, among other things, recover attorneys’ fees and costs associated with seeking relief from frivolous or excessive mechanic’s liens. The Nevada Court of Appeals recently examined NRS 108.2275—and specifically the attorneys’ fees issue—in Tiburon Construction of Nevada v. Abrams.[1]

As background, Nevada’s mechanic’s lien statutes provide contractors with a powerful tool to ensure they get paid. These statutes allow contractors to record a lien against a property for their unpaid work, materials, or equipment used for construction, alteration, or repair on that property. See NRS 108.222. Conversely, NRS 108.2275 protects property owners against frivolous or excessive liens. Under the statute, if the debtor or property owner can show that the notice of lien is frivolous and was made without reasonable cause, the court shall issue an order releasing the lien and awarding costs and reasonable attorneys’ fees to the applicant for bringing the motion. See NRS 108.2275(6)(a). Or alternatively, if the debtor or property owner can show that the amount of the notice of lien is excessive, the court may, in its discretion, issue an order reducing the lien to an appropriate amount and awarding costs and reasonable attorneys’ fees to the applicant. See NRS 108.2275(6)(b). However, if the debtor or property owner brings such a motion under NRS 108.2275 and the court ultimately finds that the notice of lien was not frivolous and made with reasonable cause or that the amount was not excessive, the court shall award attorneys’ fees and costs to the party forced to defend against the motion. See NRS 108.2275(6)(c).

In Tiburon, contractor Tiburon Construction had recorded a notice of lien against property owned by Abrams following a dispute the parties had regarding payment for Tiburon’s work on that property. Despite the statutory expiration of the lien, Abrams filed a motion with the district court under NRS 108.2275, alleging that the lien was frivolous, and asked the district court to release the lien and award attorneys’ fees and costs. After Abrams served Tiburon with the motion to release, Tiburon recorded a discharge and release of the lien, and then filed an opposition to the motion. The district court declared the request to release the lien moot but granted the motion with respect to the request for fees and costs. The Nevada Court of Appeals reversed on the fee award aspect, holding that the district court never determined that the lien was frivolous or excessive. Instead, the district court only noted that Tiburon voluntarily released the lien after Adams filed his motion. This alone did not satisfy the requirements of NRS 108.2275.

In short, contractors should note that the voluntary release of a mechanic’s lien does not by itself expose them to a fee award under NRS 108.2275. The debtor or property owner seeking fees under the statute are required to show that the notice of lien was frivolous and made without reasonable cause or was excessive in amount. Therefore, contractors may want to consider utilizing the robust protections of Nevada’s mechanic’s lien statutes to ensure they are properly paid for their work, and utilize the additional protections of NRS 108.2275(6)(c) when forced to defend their properly attached mechanic’s liens. Conversely, property owners looking to ensure that their fee awards under NRS 108.2275(6)(a)–(b) are not overturned on appeal may want to consider making sure the district court finds sufficient facts to conclude that the lien was either frivolous and made without reasonable cause or was excessive in amount, and that these facts are sufficiently detailed in the court’s order.

Reprinted with permission.

Aleem Dhalla focuses his practice in business and commercial litigation, as well as labor and employment. Justin L. Carley's practice is concentrated in commercial litigation with an emphasis on construction, property, company ownership, franchise and other disputes. Both attorneys are based in the Las Vegas office of the law firm Snell & Wilmer LLP.

[1] Tiburon Constr. of Nevada v. Abrams for Robert A. Abrams Family Tr., Dated Nov. 20, 1997, No. 73358, 2018 WL 3873419, at *1 (Nev. App. July 27, 2018).

 

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The New NAFTA: Certainty in Trade at Last?

The United States, Mexico and Canada reached a trade agreement Sept. 30 after 13 months of tense negotiations and economic uncertainty. The new agreement, entitled United States–Mexico–Canada Agreement (USMCA), still needs to be approved by the U.S. Congress. The process of approval, however, may not take place until the incoming 2019 Congress takes office. Should USMCA pass, the auto and dairy industries will be affected the most, with a significant change in the sunset clause.

USMCA, like the original motivation behind most tariffs and trade agreements, revolves around keeping work local. With the rise of nationalism in the U.S. government, the fear of overseas labor and imports considerably influenced the new trade deal, leaving the North American Free Trade Agreement (NAFTA) to rest.

Most economic uncertainty revolved around Canada’s dairy industry, the U.S. auto industry and the increasing disdain toward Mexico by the U.S. USMCA, as some Canadian and Mexican news publications have argued, lacks a sense of collaboration between the three countries that was at the very least attempted in NAFTA. The Mexican publication Milenio claims a sense of camaraderie between the three countries “hacía tiempo que había dejado de existir,” or “had long ceased to exist.”

“USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region,” Foreign Affairs Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer said in a joint statement.

For the auto industry, 75% of the components must be manufactured in Mexico, the U.S. or Canada to qualify for zero tariffs (up from 62.5% under NAFTA). Additionally, 30% of cars (rising to 40% by 2023) must be made by workers earning $16 an hour, minimum. Another part of the deal touches on tariffs, and Canadian companies will still be able to export 2.6 million passenger vehicles to the U.S. tariff free, regardless of any tariffs the U.S. may impose otherwise. According to Canadian publication Maclean's, this change to NAFTA will “discourage imports from overseas and the use of low-cost Mexican labour.”

The dairy industry will also see a big change, with the U.S. now having tariff-free access to 3.6% of Canada’s dairy market. Dairy was the U.S.’ biggest complaint with Canada, but this new stipulation is expected to send hundreds of millions of dollars more of dairy products into Canada, deepening a co-dependent relationship between the two countries.

The biggest change to the trade agreement manifests in the new sunset clause. NAFTA had no expiration date, but USMCA will cease in 16 years and after six years, it will have to be reviewed once more with an option to extend beyond the 16 years. This new clause does allow for more stability in the future, and within six years from now, there could be new leadership between these three countries.

The USMCA has diverted from the trilateral trade days of NAFTA, instead focusing on smaller bits and pieces where each country seeks to benefit. For the first time in more than a year, the trade forecast is even somewhat predictable between the three countries, allowing more stability for credit managers across different industries. But USMCA isn’t final yet: Each country has its issues with the new agreement, and with the 2018 midterm elections in the U.S. and a new incoming president in Mexico, it’s unclear if these countries will reach the same agreement in 2019.

“In some ways, the hard part now begins. … The Canadian dairy farmers are not happy and neither are those in the auto sector,” said NACM Economist Chris Kuehl, Ph.D. “Mexico has a new president from the left (Andrés Manuel López Obrador) who has made a lot of promises and will be hard pressed to deliver on them. The U.S., in general, is not all that popular in either Canada or Mexico these days. President Trump is extremely unpopular, so there will be opposition to anything that looks like a concession.”

—Christie Citranglo, editorial associate

 

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You Have 90 Days From Your Last Date of Work to File a Mechanic’s Lien in Connecticut, Part I

What Does “Last Date of Work” Mean? In order to be valid in Connecticut, a mechanic’s lien must be filed within 90 days of the lienor’s last date of work on a construction project. Any lien that is filed after that time period is invalid and is subject to discharge by the court. It is therefore critically important for anyone who provides labor, materials or services on lienable projects in the state to understand what is meant by the “last date of work.” Does the last date of work include warranty work? Punch list work? Repair work performed at the owner’s request? Work performed offsite? Trivial work performed at the contractor’s initiative for the purpose of extending the limitation period? Extra work that was not agreed to by the project owner? What happens when the 90th day falls on a weekend or a holiday?

Use it or lose it: Lien rights expire after 90 days per Connecticut statute. The time period for filing a mechanic’s lien is set by Connecticut statute. Specifically, Connecticut General Statutes §49-34 provides in relevant part: “A mechanic’s lien is not valid unless the person performing the services or furnishing the materials … within ninety days after he has ceased to do so, lodges with the town clerk of the town in which the building, lot or plot of land is situated a certificate in writing, which shall be recorded by the town clerk. …” Connecticut courts typically interpret this statute very strictly; indeed, more liens are discharged because they were filed late than for any other reason.

Trivial or minor work, performed unilaterally by a contractor after he has delayed the project, does not extend the period for filing a lien. Although typically the time period for filing a mechanic’s lien commences on the last date on which services were performed or materials were furnished, when work has been substantially completed and the contractor performs trivial or very minor work, or unreasonably delays final completion, the time for filing a lien is computed from the date of substantial completion. The date of substantial completion is used as the starting date for the 90-day limitation period when the following occurs: (1) the contractor must have unreasonably delayed final completion, and (2) any services or materials provided by the contractor subsequent to the date of final completion must have been furnished at the contractor’s initiative, rather than at the owner’s request. The substantial completion rule prevents contractors and suppliers from performing trivial work in order to extend their lien rights.

Repair work typically does not extend the 90-day period for filing a lien, unless the repair work is performed at the owner’s request. Typically, when the only work performed within the last 90 days is minor corrective work to repair defects, the substantial completion rule applies and will prevent the filing of a mechanic’s lien. However, some courts will uphold the validity of the lien—particularly when the work was necessary to repair the work of someone other than the lienor and/or was performed at the owner’s request.

Reprinted with permission. Part II of this article will appear in next week’s eNews.

If you have any questions about the time period for filing a mechanic’s lien, or would like to file a lien to secure a claim for unpaid work, please call MKRB at 860-522-1243.

Paul R. Fitzgerald of Michelson, Kane, Royster & Barger PC in Hartford, Connecticut, practices in the areas of construction and surety Law, where he handles a broad range of construction-related matters on behalf of subcontractors, contractors, public and private owners, and sureties. Paul has extensive experience litigating cases in state and federal court, and has resolved many disputes in arbitration and mediation. Paul frequently drafts, reviews and negotiates construction contracts.

 

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European Industries Show Moderate Credit Risk

Europe is expected to see solid economic growth the rest of 2018 and 2019; however, some nations will see their gross domestic product (GDP) growth slow in the months ahead due to outside factors and sector performance. Credit insurer Atradius reviewed eight countries in its latest run of country reports, highlighting industry performance credit risks along with other economic outlooks, such as GDP growth, unemployment and inflation.

Atradius studied 15 industries, ranging from agriculture to textiles, grading them on a scale of excellent to bleak. However, no industry in Bulgaria, the Czech Republic, Hungary, Poland, Romania, Russia, Slovakia or Turkey received an excellent rating on any of its industries. Most sector credit risks were good, fair and poor, with several bleak ratings scattered throughout.

Slovakia is highly dependent on automotive-related exports to the eurozone, which faces a potential impact from U.S. tariffs on car and car part imports from the European Union, noted Atradius. This, in turn, increases credit risk on Slovakian businesses within that value chain. The country’s automotive/transport performance outlook was rated good.

Turkey showed the most concern—construction, construction materials and metals each with a bleak credit risk situation. The country’s monetary supply was tightened in August, and the Central Bank increased its benchmark interest rate one month later after a sharp decline in the lira’s value against the dollar began in January. The 625-basis-point hike from the Central Bank “will have an adverse effect on economic growth in 2018 and 2019,” states Atradius. “In combination with a sudden stop in capital inflows, this could result in a credit crunch.”

Industry performances in the Czech Republic, Hungary and Romania were among the most moderate credit risk outlooks, with only a few slipping into the poor rating. The chemicals/pharma industry was among those with a good credit risk outlook in all three countries.

Like Slovakia, the Czech Republic is reliant on exporting to the EU, having one of the highest export-to-GDP ratios in the bloc. This is among the factors that impact the country’s vulnerability to foreign trade losses. Political uncertainly, like Brexit, and international trade disputes are also items the Czech economy should watch for.

Hungarian businesses with loans denominated in foreign currencies also face risks due to the country’s high level of external debt despite its forecast of a decrease this year and next. Other risks to the economy include lower eurozone demand and a world trade slowdown.

As with many other countries, Poland is not immune to external factors, such as U.S. tariffs and the U.K.’s decision to leave the EU. The U.K. is No. 2 after Germany for Polish exports.

—Michael Miller, managing editor

 

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