Chicagoland Economic Development Programs

For a thorough and well-organized directory of resources for businesses seeking information on grants and economic development loans, grants and programs run by Illinois and local government entities, go to: http://www.ecodevdirectory.com/illinois.htm

____________________________________________________________

For information on how the business lawyers at Griffith & Jacobson, LLC can help your business grow, contact Arieh M. Flemenbaum at 312-236-8110 or by email at Contact Us (http://www.gjlaw.com/contact).

Griffith & Jacobson, LLC – We know business – Chicago’s Business Lawyers.

To 5 Business Tips to Creatively Search for Funding

With the economy still sputtering, your business needs to take advantage of the resources available to them. SCORE (http://www.score.org) offers useful, free resources, business counseling and business tools to small businesses.

One of SCORE’s great resources is its lists of “Top 5 Business Tips.” My pick for this week is SCORE’s 5 Tips to Creatively Search for Funding  - check it out at: http://www.score.org/5_tips_fc_9.html.

SCORE is a partner with the Small Business Administration (SBA) and is a national association dedicated to helping small business owners form and grow their businesses. SCORE offers terrific free resources, business counseling and business tools for small businesses.

____________________________________________________________

For information on how the business lawyers at Griffith & Jacobson, LLC can help your business grow, contact Arieh M. Flemenbaum at 312-236-8110 or by email at Contact Us (http://www.gjlaw.com/contact).

Griffith & Jacobson, LLC – We know business – Chicago’s Business Lawyers.

Top 5 Business Tips - Approaching Your Bank

With the economy still sputtering, your business needs to take advantage of the resources available to them. SCORE (http://www.score.org) offers useful, free resources, business counseling and business tools to small businesses.

One of SCORE’s great resources is its lists of “Top 5 Business Tips.” My pick for this week is SCORE’s 5 Tips on Finance & Capital: Approaching your Bank - check it out at: http://www.score.org/5_tips_fc_2.html

SCORE is a partner with the Small Business Administration (SBA) and is a national association dedicated to helping small business owners form and grow their businesses. SCORE offers terrific free resources, business counseling and business tools for small businesses.

____________________________________________________________

For information on how the business lawyers at Griffith & Jacobson, LLC can help your business grow, contact Arieh M. Flemenbaum at 312-236-8110 or by email at Contact Us (http://www.gjlaw.com/contact).

Griffith & Jacobson, LLC – We know business – Chicago’s Business Lawyers.

Business in Need of Cash? Royalty-based Financing & Other Options

Your business needs cash to grow, but finding financing is still very challenging. Banks are still slow to fund new business loans and venture capitalists have been very selective.  There are several options and alternatives out there, but you have to be a bit creative (and careful to ensure there is a "right" fit).  Below are but a few of the many innovative alternatives to traditional financing and venture capital that are available.

One creative alternative is factoring or invoice/account receivables financing.  While this type of financing is not new, the industries targeted by the factoring companies has expanded and the factoring terms have changed dramatically (making them more accessible and affordable). One example is factoring for the construction industry. Factoring companies have traditionally not served this industry, but we have seen factoring companies offer non-recourse account receivables financing and other credit services to contractors and suppliers (at reasonable rates).

Another option that has seen increased attention lately is royalty-based financing. VentureBeat has a fascinating article on royalty-based financing. The article does a very good job of  reviewing the pros and cons of this type of financing and identifies several of the types of businesses that have successfully used royalty-based financing. To read the full article go to VentureBeat's Entrepreneur's Corner at: http://wp.me/pPijr-1ber

We have also seen an uptick in the leveraging of internal capital resources and self-financing. At times it is easier for a shareholder to obtain financing than his/her business. In these cases, it may be possible to obtain a "personal" loan and structure a shareholder loan to the company.  Many clients have raised capital by selling a minority stake in their business or selling options to employees.  The business can benefit not only from the needed capital, but these transactions are an opportunity to secure the loyalty of key employees.  Also, with a stake in the company, the employees have more of an incentive to help the business succeed.

Having experienced, knowledgeable  and creative professionals (i.e., a good business lawyer and accountant)  may help you explore these alternatives and help you find other options that fit your business needs. For information on how the business lawyers at Griffith & Jacobson, LLC can help your business find financing, contact Arieh M. Flemenbaum (312-236-8110 or at amf@gjlaw.com).

There's life in Business loans

We have heard from several contacts in commercial banking that their banks have money to lend and are looking to make loans. With the Obama administration actively trying to stimulate the business finance sector, the SBA has been revamping its loan programs. For a primer on how the recent changes in the SBA can help your business get a loan read the recent article in Businessweek http://twurl.nl/ttgqtb.


For additional useful resources for business loans & commercial mortgages go to http://www.credentrust.com/.


___________________________________________________________

For more information please contact Arieh M. Flemenbaum ( 312-236-8110 or at amf@gjlaw.com) at Griffith & Jacobson, LLC.

Griffith & Jacobson, LLC - We know your business!
Check us out at http://www.gjlaw.com/

Avoiding the “Kotecki Gap”

Have you signed contracts that increase your liability without insurance coverage? There are traps here that you will need your attorney’s knowledge of the law to avoid.

Suppose you buy or lease some heavy equipment for use in your business. Often your seller or lessor will require — in the purchase contract, lease or maintenance contract — that you assume any liability it may have if your employee is injured while using the machine.

Ordinarily, your liability for any claim by your employee against you is limited by workers’ compensation laws. But the employee may sue the manufacturer or your seller or lessor — the “supplier” --- based on defects in the product or its maintenance. Under Illinois law, the supplier can sue you for contribution — paying part of a judgment awarded to the employee — to the extent you are also responsible for the injury. However, under the Kotecki case,(1) your total liability would be limited to the maximum amount under the workers’ compensation law.

Your supplier will want more protection from this liability. At the least, it will require that you accept responsibility for your full contributory share of the judgment, waiving the protection of Kotecki. But it will often require more, that you indemnify it against all losses resulting from your use of the equipment. Your supplier will not want any liability, whether or not you failed to maintain or use the equipment properly or to provide adequate safety precautions for your employees or otherwise.

You may think that your insurance covers the additional liability when you waive Kotecki protection and/or indemnify your supplier. But a "general liability" policy usually excludes from its coverage damages for bodily injury or property damage that you are obligated to pay because you assumed the liability in a contract or agreement.(2) So by signing a contract with such a waiver and/or indemnification, you may lose insurance coverage for the additional liability you assume under those provisions.

This loss of coverage can occur in other indemnification situations as well. The Illinois Supreme Court just last year held that a construction subcontractor whose employee suffered injury had no coverage for indemnification liability it undertook in its contract with the general contractor.(3)

Whenever you are asked to sign a contract requiring waiver or indemnification of losses by your vendor, your carrier or customer, you should have an attorney look carefully at both the proposed waiver and indemnification provisions of the contract and your general liability policy. There are usually ways to modify the protection you are to provide to the other party in the contract in order to avoid falling into the exclusion from insurance coverage.

The legal fees will be well-spent if they avoid your ending up with a significant uninsured liability!

______________________________________________________________________________
At Griffith & Jacobson, LLC, we can help you address the “Kotecki Gap” and help you identify many other similar issues in your every day business dealings that can be a trap for the unwary.
For more information please contact Louis Michael Bell ( 312-236-8110 or at lmb@gjlaw.com) at Griffith & Jacobson, LLC.
Griffith & Jacobson, LLC - We know your business!

Check us out at www.GJlaw.com

* * * * * *

1. Kotecki v. Cyclops Welding Corp., 146 Ill.2d 155, 585 N.E.2d 1023 (1991). Other states will have similar decisions.
2. In Illinois this uninsured liability can be referred to as the “Kotecki gap.”
3. Virginia Surety Company, Inc. v. Northern Ins. Co. of New York, 224 Ill.2d 550, 866 N.E.2d 149 (2007).
   

Beware of form bank resolutions!

It’s not smart to trust anyone’s standard documents. Your vendor or your bank may tell you that its documents are safe because so many of their customers (buyers, borrowers, users, etc.) use them. And you may think that you can save hundreds or thousands in legal costs by not having your attorney review "standard form documents" or negotiate with the other side (especially when the other side is a bank and will charge you for the fees and expenses of its own attorneys). This can be penny-wise, but pound-foolish.

Banks often offer to save legal expenses for our small and mid-sized clients by using standard documents from their word-processing and/or in-house legal departments. Bankers often refer to these as "LaserPro® documents," using the trade mark of a well-known bank document package. We have found that these bank documents are drafted to only protect the interests of the bank and ensure that the bank has no liability. These form documents usually do not address a borrower's concerns or issues. So, accepting these standard form documents (without an attorney's review) can put your company at risk be and can lead to unintended consequences.

In the case Dalton Point, L.P. v. Regions Bank, Inc.1, a bank customer signed the bank-supplied form resolutions. These resolutions contained a limitation of liability that protected the bank when it honored Dalton Point's checks. Apparently, Dalton Point’s owners did not think they needed outside review of form documents for a loan transaction of more than $1 million and a new operating account with the bank.

The court records indicate that the bookkeeper was embezzling money by using Dalton Point's checks to pay her own personal loan from the bank. Dalton Point sued the bank, claiming the bank should have realized the bookkeeper was commiting fraud. The bank argued that the terms of the form resolution protected it from liability and the court agreed. So, Dalton Point ended up with an unrecovered loss of almost $67,000.

We understand that the expense of custom-tailored documents may not seem justified for small credit transactions. But for a borrower’s protection, those documents do need to be reviewed and appropriate changes negotiated with the bank, and in some cases replaced by documents drafted by the borrower’s attorney.

Over the years, the attorneys at Griffith & Jacobson, LLC have represented both borrowers and banks in a great many loan transactions. With this experience we are able to efficiently identify and address the substantive legal issues that are important to both parties. Banks are generally willing to negotiate many of the terms and conditions contained in their documents (even their standard form documents) - but you have to ask. Generally, banks have been very receptive to our revisions and suggestions. We credit this positive response to the fact that we strive to be fair and balanced while protecting our client's best interests.

So at Griffith & Jacobson, LLC, we advise our clients that — even if the bank will use its standard form documents — we should review all of the documents, including the bank-supplied account resolutions. We also suggest drafting at least the approving resolutions for the transactions, rather than adopting the bank resolutions wholesale.

Our advice to our clients and our readers is a slight twist of an old saying:

"Trust, but double check with your lawyers!"

Louis Michael Bell
Griffith & Jacobson, LLC - a Chicago business law firm
- We know your business.

Contact me at 312-236-8110 or lmb@gjlaw.com
or check us out at http://www.gjlaw.com/.


Read more details on the Dalton Point case below....


* * * * * * * * * * ** * * * * * * * * * * ** * ** * * * * * * * * *
In the Dalton Point case, Dalton Point had an account and a loan with Regions Bank. When Dalton Point opened the account, the signatory card was signed by a limited partner and by Dalton Point’s bookkeeper. The documents they signed and delivered to the Bank for the account included a Certificate of Resolution, which included the following:

"RESOLVED, that all drafts and other items for the payment of money from the accounts identified shall be signed by any 1 of the following: Ronald G. Ralston, Limited Partner; Patricia H. Page, Bookkeeper."

….

"RESOLVED, that the Bank is authorized to honor all drafts, checks, or other items or instructions for payment or transfer from a deposit account even though drawn, endorsed or otherwise payable to a person identified above, and whether presented for cash or for credit to the account of that person or another person, or in payment of an individual obligation of that person or another person, and the Bank need make no inquiry concerning such withdrawals or disposition of the money, items or credit given therefor."

Over the next 48 months, Ms. Page allegedly embezzled a substantial amount of money. Accordingly to the court records, Ms. Page used company checks to pay down a personal loan from Regions Bank. She was able to do this becuase Dalton Point also had a business loan from the bank. Rather than write a company check directly to the bank in the amount of Dalton Point's monthly payment (approximately $23,100 per month), each month she wrote a company check for almost $24,000. She took this check to the bank to have it cashed and she instructed the bank teller to apply approximately $23,100 of the check towards the monthly payment due from Dalton Point and requested a check or cash for the remaining $900. The court records state that she used these funds to pay the $900 she owed on a personal loan from Regions Bank.

When Dalton Point discovered this some time later, it sued Regions Bank for the embezzled money and interest (almost $67,000), claiming that the Bank should have noticed the fraud committed by Ms. Page. Regions Bank argued that it was protected, among other things, by the quoted language in the Certificate of Resolution. The trial court ruled in favor of Regions Bank and rejected Dalton Point’s claim, and the Georgia Court of Appeals upheld the result.

The report of the case does not say who drafted the Certificate of Resolution, but it is similar to a number of "standard form" bank resolutions that we see from time to time. We doubt that any borrower’s lawyer would have read and accepted those resolutions, much less drafted them for a client. Dalton Point seems indeed to have been "penny-wise and pound-foolish."

Louis Michael Bell
Griffith & Jacobson, LLC - a Chicago business law firm
- We know your business.

Contact me at 312-236-8110 or lmb@gjlaw.com
or check us out at http://www.GJlaw.com.
____________________________________________________ 1. Dalton Point, L.P. v. Regions Bank, Inc., 287 Ga.App. 468, 651 S.E.2d 549, decided on September 10, 2007 by the Georgia Court of Appeals.