One of the things I don't blog about often enough are the challenges and joys of running a small business.
Until I launched the Daily News four years ago, I'd never hired someone, never fired someone, and never had to meet a payroll.
Now I understand all about liquidity, and about how businesses need ready access to cash and credit, and how the recession has impacted that. I can't say we've been helped much by the federal stimulus bill. But I certainly have an idea for another piece of legislation that would dramatically ease the availability of cash for businesses.
Here's the great thing: It doesn't involve loans, or federal spending.
It involves doing away with the utterly insane laws and regulations that allow banks to hold on to other people's money for days, and weeks -- thereby depriving them of the ability to use it to pay employees, buy goods, and otherwise grow the economy.
It's a setup that verges on legalized theft, and it's caused our business untold dollars and hours over the last week.
Here's how it played out in our case.
Last Monday, June 29, we deposited a $45,000 check with Bank of America. It was drawn on one of the country's largest foundations -- one that has billions of dollars in assets. Not a check that's likely to bounce.
I figured the bank would probably hang onto $5,000 for a few days, or even $25k, just to make sure it cleared.
I was pleasantly surprised when the teller told me they'd be holding $4,900 of the money.
That nice feeling lasted for about 24 hours, until I realized the bank had actually placed a $45,000 hold on our account, and I launched into a mad dash to make sure our payroll cleared.
I called Bank of America's business support line and let them know that they'd made a mistake, and asked that they kindly release our funds as the teller had promised.
No dice. Talking with this guy was an experience that would ring familiar to anyone who's ever called Earthlink about their janky DSL. Except it involved $45,000 of money that we need to make our next payroll, and the guy seemed even less interested in helping than your typical Earthlink lackey.
No, he could not lift the hold. No, he could not connect me with his supervisor. No, he wasn't concerned that Bank of America told us one thing, then did another with our money.
He said that $4,900 of the funds would be released July 6 (today), and the remainder July 13.
He did mention that I could go to the bank branch to discuss having the hold released. Which I did the following morning.
Of course, the branch manager there immediately told me that he had no authority to release the hold, and that I'd have to call customer service.
I groaned, and let the manager know about the truly awful problems that a $45,000 shortfall might cause our business (annual expenditures: $320,000). And I left with a promise that the manager would "escalate" the problem and call me the following day.
He forgot to call that day. He forgot to call the following day.
I tracked him down yesterday upon noticing that the bank had neglected to free up $4,900.
Ah, he said. Perfectly understandable.
After telling us that most of the funds would be available immediately, and then advising that some of them would be available after July 6, Bank of America had decided the check (again, drawn on a foundation with billions in assets) was "high-risk." They'd be keeping all $45,000 until July 13.
Meanwhile, thanks to the miracle of the Internets and digital imaging, the check probably crossed the country the night it was deposited, and was paid the following day. The money -- our money -- is sitting in Bank of America's coffers. We can't use it to pay rent, or staff, and we've spent dozens of hours dealing with the resulting mess, which has meant fewer volunteers trained and fewer stories reported and edited.
As a business manager, it's tough to operate when your bank keeps changing its mind about when you can have your money. Especially when that same digital-imaging magic ensures that checks we wrote with the expectation that funds would be available July 6 are clearing with lightening speed. That'll cost us $35 a pop.
The truly scary thing is that while we're a small nonprofit, we're financially better of than most businesses -- nonprofit and for-profit alike.
We'll be fine, assuming I don't get arrested this week for backing a dumptruck into the nearest Bank of America lobby and depositing a steaming load of alpaca dung.
But most businesses in this country aren't in a position to withstand an unexpected $45,000 hit to their cash flow. It won't sink us, but I'm guessing it's already sunk lots of others.
In addition to our $45,000, Bank of America is sitting on $52 billion in federal bailout money. Money which was, ironically, provided by Congress to ensure the continued liquidity of U.S. businesses.
In our case, it most assuredly is not helping.
Some of Bank of America's actions clearly run afoul of the rules. The bank has to inform you of how much money they'll be holding and when it'll be released. Bank of America fell down on the job. We'll be filing complaints with every regulator we can think of to make sure this is just as painful for Bank of America as it is for us.
But more importantly, much of this is standard practice at banks across the country. According to the Federal Reserve's Regulation CC, banks can hold funds for up to 11 days in some circumstances -- even when the check's already cleared and in their pocket.
If anyone out there can tell me the difference between Bank of America and highway robbery on this one, let me know.
Anyone been similarly burned by Bank of America or another bank?
Anyone want to write their congressman and post the letter here?