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Startups

The Covid-19 pandemic shifted the stream of capital toward online businesses. As a result, venture capitalists are buying up startup stocks left and right, often at exorbitant prices, to stay in the race for stakes led by large investment companies. February was an excellent month for tech startups, as the total investment in them amounted to a whopping $35 billion. This is just $6 billion short of the record high in January 2021, and it still created 22 startup unicorns. One of the most significant investments was the $500-million stake in Elon Musk’s aerospace company SpaceX. Many incredible listings went public in March, and big investment companies seem to be furthering the overpricing trend. Tiger Global Management and Coatue Management are often named as the mammoths pushing VCs to pay more. The former has led some of the largest deals this year, most notably the $450-million round of funding for Checkout.com, turning it into another startup billionaire. To keep up, VCs halved their investment-decision time. Business software and eCommerce companies have benefited the most from this investment craze, prompted by the overall shift to web-based daily life due to the pandemic. However, many seasoned investors warn against jumping on board and making hasty decisions. While this shift in investment trends is bound to help many new startups, it also increases the risk of failed ventures, as not all companies will live up to these grand expectations. Arun Mathew, a partner at the VC firm Accel, illustrated this danger in the interview he gave the Financial Times: “Not every company can be Zoom or Snowflake.” Whether VCs will learn this harsh truth the hard way remains to be seen.

March 17,2021
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Finance

Highly anticipated changes to Paycheck Protection Program rules set in motion earlier in March and designed to deliver generous relief to the most vulnerable small businesses might be coming too late.With the program set to expire in just a few weeks, lenders say they don’t have enough time to adapt to the changes. As such, newly eligible loan-seekers are having difficulty finding lenders willing to accept applications before the deadline.Under the program’s previous rules, unprofitable businesses weren’t eligible for loans. But the new formula introduced by the Biden administration allows sole proprietors to get loans based on their income before expenses while expanding eligibility to include minority-owned, veteran-owned, and women-owned businesses. This opens the door to small businesses, self-employed people, and non-profit organizations devastated by the coronavirus pandemic.However, the move comes dreadfully close to the March deadline. Major lenders that already have a severe backlog of applications, including JPMorgan Chase and Bank of America, refused to adapt to the changes. The latter has stopped accepting new applications altogether.Bill Halldin, a Bank of America spokesman, justified this by pointing to more than 30.000 applications that need to be processed before the deadline.Meanwhile, the policy changes are only fueling confusion among borrowers who were initially advised by lenders to submit their applications after the new, more lenient standards were set in place.Those who applied as soon as the White House made the overhaul announcement are now either being approved under old requirements or asked to repeat the application process. There is also no route for those already approved to apply again under better terms.Considering that there is still $119 billion left out of $284 billion authorized for the program, both lenders and borrowers are calling for an extension with admirable tenacity. The Biden administration hasn't asked for an extension yet, but key congressional leaders are open to the idea. The P.P.P. status will come under the spotlight during an upcoming hearing at the House Small Business Committee.In the meantime, small businesses across America are hoping for an extended deadline to get much-needed funds to keep their businesses alive during this unprecedented crisis.

March 16,2021
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Finance

The House legislation passed Saturday narrowed the income eligibility for $1,400 stimulus checks. If the changes make it into the final bill, fewer Americans will see the stimulus payments. The newly-set thresholds would leave millions of families without this round of financial relief, the Penn Wharton Budget Model estimates. The decision has come as a result of a compromise between president Joe Biden and moderate democrats, who suggested tightening the income eligibility for the third round of stimulus checks. Most of the Republican members of Congress are against Biden’s relief plan. Even though they recognize the importance these payments have for the recovery of the US economy, they disagree on the eligibility requirements. Biden’s initial proposal was to set the cap at $100,000 for individuals, $150,000 for single parents, and $200,000 for couples. Voicing Republicans’ and some moderate Democrats’ concerns, this new legislation is supposed to make the final bill lower while setting the income thresholds higher.  The proposal suggests lowering income caps to $80,000 for individuals, $120,00 for single parents, and $160,000 for married couples. It is a modest 5% change, as stated by Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, with roughly 12 million adults still without the relief payments. The economy is looking anemic, and the new stimulus package would be more than welcome. However, some seven million upper-middle-class families do not meet the new eligibility requirements and those that do will receive smaller sums, based on the quicker phase-out rate. Those who criticize the proposed legislation suggested that cutting down the $1.9 trillion relief package could have been done differently, by reducing the volume of local and state aid.  Some are skeptical, saying that the Democrats’ proposal was far from a relief effort and that the citizens’ cry for help in these unprecedented times should be addressed more vigorously. Among them, Congresswoman Alexandria Ocasio-Cortez tweeted on Wednesday that working people need “more generous relief checks, $15 min wage, ending the filibuster to protect our democracy”. Some also argue that the phase-out rates are exceedingly steep, resulting in worse low-income households’ situations.  The bill is about to move forward this week. Democrats would need the support of the whole caucus, given the fact that the party has only fifty votes in the Senate and uncertain GOP support.

March 16,2021
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