Property insurance

Over the past few years, businesses in the Southeast have learned the value of having proper commercial property insurance and what it does and doesn’t cover. Increased deductibles and premiums have made it tough to continue that coverage.

Gary Reshefsky, an attorney and director of risk management services for USI Southeast, says the solution could be Alternative Risk Transfer, where premiums are set based on the probability of loss, not by supply and demand in the marketplace.

Smart Business spoke with Reshefsky about what Alternative Risk Transfer involves and what other alternatives businesses can pursue to insure themselves in a property insurance market that has changed drastically.

Why has the property insurance market in Florida become so bad?
It’s no secret that Florida is experiencing a windstorm property insurance crisis as the result of two very active hurricane seasons. Before this crisis, property owners had some choice of insurance companies. Today, the choice is between buying windstorm property insurance versus going bare. For many businesses, increased deductibles and premiums have caused them to self-insure their windstorm exposure. At this time, it’s more important than ever to work with a sophisticated insurance broker that can present the property owner with alternative methods of transferring risk.

What is alternative risk transfer and how might it help those businesses faced with a daunting property insurance market in Florida?
Alternative Risk Transfer, or ART, is a method of transferring risk to another entity. Insurance is the traditional and most common form of risk transfer. An insured pays a premium to an insurance company, which assumes most or all of the insured’s risk. When the insurance market begins to charge a premium that’s very close to the amount of risk being transferred, insureds are less likely to purchase the policy and instead are more likely to seek alternative methods to fund the risk. For many years, large corporations have used ART to cover exposures that are difficult to insure in the commercial marketplace.

A common form of ART is the captive insurance company. Under the captive concept, the insured transfers risk to an insurance company owned by the insured. The captive insurance company charges a premium that’s set by the actuarial probability of a loss. This is unlike the commercial marketplace that sets prices based on supply and demand in the marketplace as well as actuarial projections. A captive is not a panacea nor is it a solution for an entire property portfolio. However, it is a viable option for the most expensive portion of property exposures like windstorm deductibles.

How might this strategy affect employee benefits?
Alternative Risk Transfer theories apply to all forms of business risks. The captive mechanism can be used to transfer risks including health insurance, disability and long term care. There are also other insurance coverages that a business needs such as workers’ compensation and professional liability that should be considered for alternative risk transfer.

Are there any other alternative strategies for dealing with this tough market? What else can a business do?
There are other alternatives for property insurance that businesses should be considering when the commercial marketplace isn’t offering adequate terms and conditions to meet exposures. This is a situation where geographic spread and quality of construction really matter. Some of the insurance companies are offering credits for hardened buildings, and many property owners are taking steps to install impact glass, shutters and other improvements to make buildings compliant with current building code.

Second, our clients with property portfolios spread around the state are insuring property for less than 100 percent of the total value of all their property combined. We work with our clients to create a computer model that predicts the probable maximum loss that could be sustained in one policy year. Our clients present these studies to lenders and seek approval to insure for less than the total value.

It’s important that business owners work with an insurance broker that is consultative and identifies alternatives to traditional insurance. At the end of the day in this insurance market, the business owner needs the best advice before making a difficult decision.

GARY RESHEFSKY is an attorney and director of risk management services for USI Southeast. Reach him at (305) 357-2219.

Prescreening tools


The recruiting and hiring process is an expensive one, and the stakes are high — especially as the labor pool continues to shrink in this job seekers’ market. Making a poor hiring decision can be even more costly in the wake of employee training and ramp-up expenses. As a result, many companies are increasing their use of prescreening tools in an effort to improve the hiring process, according to Andy Pober, regional managing director for Dade, Broward and Palm Beach counties for Spherion Professional Services.

Smart Business spoke with Pober about the challenges of hiring qualified candidates and some of the popular prescreening tools in use today.

What are the primary concerns voiced by human resources executives these days, as the job market continues to tighten up?
Almost three-quarters of human resources executives have defined recruiting issues as their top concern over the next few years. More than one-third indicate that keeping employment costs under control is their primary focus, according to the Spherion Emerging Workforce Study, which is conducted by Harris Interactive.

What can companies do to address recruiting issues and manage these costs?
One way to help avoid costly mistakes is to leverage prescreening and assessment tools during the hiring process. The use of these tools is becoming more routine with nearly half the companies indicating their use of screening methods have increased over the past five years.

What prescreening tools have you seen used more often?
I have noticed two particular tools that have had a dramatic rise in popularity in recent years: the behavioral assessment and the credit check.

Behavioral assessments help to reveal how prospective employees might react in certain business situations. They also help to determine how a person will fit inside an organization and if their skills will complement others around them.

More employers, especially in a very tight labor market such as South Florida, are taking the time to incorporate behavioral assessments into the interview process to showcase potential hires’ reaction to different events. Most managers tend to hire people like themselves, when in fact they may need to hire someone who can do the things that they don’t particularly like to do.

Interestingly, credit checks have become popular even among nonfinancial companies and for jobs that are not traditional money-handling positions. The credit check can tell you a lot about how responsible a person is. For example, if you cannot organize your finances, how are you going to responsibly organize yourself for a company?

In addition to background and credit checks, other tools in use during the hiring process today include skills testing, behavioral interviewing and drug testing. Use of these tools in some combination can save a recruiter or hiring manager time by helping to screen out less qualified candidates and streamline the selection process.

Is there a message here for job candidates as well?
Absolutely. Job seekers should be aware of the variety of prescreening tools that may be used by a prospective employer and have some idea of what facts they might reveal. For example, candidates may want to become familiar with their own credit reports. They might want to conduct an online search of their own names to see what information comes up. It’s always a good idea to have done your homework when you’re looking for new employment.

What’s your advice for recruiting and hiring managers?
Employing a combination of these tools as a consistent component in your human resource program can help reduce costly selection mistakes, which can streamline the hiring process and significantly improve your ability to make a great choice the first time.

ANDY POBER has been with Spherion for 20 years. He is the regional managing director for Spherion Professional Services in Dade, Broward and Palm Beach counties. Reach him at (561) 487-4800 in Palm Beach; (954) 462-6979 in Broward; (305) 265-5300 in Dade or at [email protected].

Property insurance

We are often told to prepare for the worst, but we rarely if ever heed the advice. Hindsight is 20/20, so when the worst does occur and we are not prepared, we vow to be ready the next time.

When hurricanes rocked Florida and the Southeast over the last couple years, some businesses were prepared by having property insurance, and not only having it but having the right coverage amount. Others either didn’t have it or didn’t have adequate coverage. Still others had coverage — but that coverage didn’t include some natural disasters like windstorms, for instance. Damage was so extensive that property insurance rates have now skyrocketed and hit businesses’ bottom line.

According to Norbert Fernandez, senior marketing specialist with USI Southeast, carriers are now either not able to offer full windstorm limits or are providing overly expensive quotes.

Smart Business spoke with Fernandez about the state of the property insurance market in Florida and what a business can do to protect itself against future natural disasters and ensure that it can continue to provide for its clients and employees.

How has the property insurance market suffered after Florida was devastated over the past two years by hurricanes?
The property market for windstorm coverage is in a state of crisis. Some carriers are either not able to offer full windstorm limits or are providing quotes that are unreasonable for the clients to purchase.

A perfect example is an account that might have an insurable value of $5 million for property. The carriers will offer windstorm terms with a 7.5 percent deductible or $375,000 and will charge a premium of $200,000. Besides the premiums, we then must add the state taxes/surcharges that total 12.4 percent (5 percent surplus lines tax; 0.20 percent for the service office; 6.84 percent citizens assessment tax).

What is being done about it? Is any legislation in the works to ease the crisis?
The state-run insurance pool is going to provide hurricane coverage for small-business and commercial-property owners, and this might have been available as early as last month. We are being told that the pool will provide $1 million for buildings but not more than $2 million of total coverage. This will include contents and business-interruption insurance. Indications are that the rate will be $1.49 per $100 of coverage. If an insured wants to purchase a policy with a limit of $1 million, the annual premium will be about $14,900. Windstorm and hail deductibles will range from 5 percent to 15 percent of the total insurable value.

Has the loss been mostly residential or commercial? On the commercial end, how have businesses suffered?
The recent hurricanes have not discriminated against commercial or residential properties. Businesses have suffered greatly due to the hurricane losses. Many have suffered income losses that take a number of months to resolve, but mostly they have suffered losses to buildings and contents (merchandise/stock). Many businesses were unable to open until repairs were made, and some had to wait until they were able to obtain new merchandise/stock.

What can businesses do in the future to protect themselves better?
All businesses should have an action plan in place for any type of a disaster. They should plan for the worst, think of the worst scenario, and work on how they are going to be able to resume business.

What do you think is the key to insurance reform in Florida?
We feel that the government should make windstorm, tornado and earthquake coverage available to be purchased through a national program, just as flood coverage is. This will spread the cost throughout the nation and make coverage available to everyone for natural disasters.

NORBERT FERNANDEZ is a senior marketing specialist with USI Southeast in Fort Lauderdale. The company is a retail office of USI Holdings Corp., a diversified insurance and financial services firm focused on providing fully integrated distribution of general and specialty property and casualty insurance and financial services. Reach Fernandez at (954) 607-4055.

Lending limits on the rise?

The time is right for businesses to apply for Small Business Administration (SBA) loans. Proponents of SBA lending programs are presently trying to increase lending limits, which can only be a good thing for companies looking for the opportunity to grow.

The SBA 504 Loan Program is a prime example of one of these programs. It is a long-term financing mechanism whereby businesses can obtain permanent working capital funds for the acquisition of major fixed assets.

Smart Business spoke with William Ekback, a vice president at CU Business Capital, LLC, about what exactly an SBA 504 loan is, who can apply for it and how it can help a business.

What is an SBA 504 loan, and what are the qualifications for a business to apply for one?
The SBA 504 Loan Program (Certified Development Company Loan Program) is a long-term financing mechanism whereby businesses can obtain permanent working capital funds for the acquisition of major fixed assets. It is one of the very few, if not the only, SBA program where the SBA actually makes a loan. Just about any business can apply for a SBA 504 loan. However, the SBA does have size standards that limit the businesses that can qualify for this program based on revenues and number of employees. These standards vary from one industry to another. The SBA 504 loan can only be used for the acquisition of long term, major fixed assets such as land, building and certain equipment.

What is the maximum amount available for this loan, and what are the financing terms?
In order to answer this question, I need to fill in a little background. The SBA 504 program allows a small business owner to purchase a long-term fixed asset (for example, land and building to be 51 percent or greater occupied by the business) with as little as 10 percent down. The credit union will lend 50 percent and the SBA will lend 40 percent. The Maximum SBA 504 loan is $1.5 million. Therefore, you could be looking at a transaction as high as $3.75 million. If certain criteria is met (see www.sba.gov), the transaction amount could be even greater. The borrower enjoys long-term, fixed-rate financing, and the interest rates tend to be very competitive.

What are some examples of fixed-asset projects that the loan may be used for?
Typically, the SBA 504 program is used to help a small business owner go from being a renter to an owner of the facility from which he or she runs the business. However, it can also be used for long-term purchases of machinery and equipment.

What is the SBA lending atmosphere or climate like today? Is it generally easier, harder or the same to get a 504 loan today?
The SBA lending environment is great. It is a very steady lending environment, and proponents of SBA lending programs are presently trying to increase its lending limits. For more information about all of the SBA programs, I urge you to check out the SBA’s Web site at www.sba.gov.

How does a business owner go about obtaining an SBA 504 loan?
He goes to his local bank or credit union and makes a request. Depending on the financial institution’s experience as an SBA lender, it may be designated CLP (Certified Lender Program) or PLP (Preferred Lender Program). Generally, the primary difference from one designation to the other has to do largely with turnaround time between the decision to borrow and the loan closing. Often, but not always, the PLP SBA lender will be able to deliver a quicker loan decision and loan closing. However, there may be instances where a SBA lender, with no regard to experience, simply prefers the CLP designation and is equally capable as a SBA PLP designated financial institution.

Does it matter whether a small business owner goes to a credit union or a bank?
No. You can get a SBA loan at any financial institution that is approved by the Small Business Administration to service an SBA loan. However, credit unions are not-for-profit organizations and strive to provide better service, lower interest rates on loans and higher interest rates on deposits for its members.

WILLIAM EKBACK is a vice president of commercial lending for Miramar-based CU Business Capital, LLC, a subsidiary division of Eastern Financial Credit Union. Reach him at (954) 704-5414. For more information on SBA loans, visit www.sba.gov.

Finding skilled talent


The United States currently finds itself in one of the tightest labor markets ever, with the unemployment rate hovering at around 5 percent. There is a much greater number of job openings now than there are workers to fill those jobs. Workers are the engine that make companies go, so without them they essentially stand still.

Dawn Gill, district director of staffing services for the South Florida district of Spherion Corp., says that if companies want top talent, they need to offer better pay and speed up their recruiting and offer processes.

Smart Business spoke with Gill about finding skilled talent and what companies need to do to beat out their competitors and fill their employment needs.

What are the primary indicators that the search for skilled talent is becoming more difficult? What signs are you seeing?
First, more clients are calling us for help. Second, there are more jobs open and fewer available workers to fill them.

Why do you think skilled talent, or quality workers, are getting harder to find?
The unemployment rate in South Florida is 3.0 percent (in June, seasonally adjusted), which is one of our lowest unemployment rates in decades. Compare this to the U.S. rate of 4.8 percent. So it’s very tough trying to find top talent when 97 percent of the work force is working.

Are there trends or contributing factors that are unique to South Florida, that maybe aren’t true in many other job markets?
Seasonality is definitely a factor. The hospitality industry re-energizes after Labor Day and the market gets even tighter because everyone who wants to work in that business will have landed a job by then. Even suppliers feel the up-tick — soft drink companies have to supply more drinks, food service vendors’ volumes go up, and so on. Although it’s challenging now to find qualified workers, it’s about to get tougher as even more people will be working by September.

The softening real estate market has had the expected ripple effect throughout the area economy. Mortgage lending has slowed down, banks aren’t as busy, and title companies, construction and all those related businesses aren’t seeing the action they saw a year ago. We’re seeing an explosion in the call center industry and all customer service-type businesses. We get calls from companies needing to staff up new call centers 100 people at a time.

Are there particular industries, or jobs, that are harder to recruit good workers for than others?
In this tight labor market, it’s even more difficult to recruit good workers if your compensation package is not competitive or realistic. In the industries requiring lighter skill sets, which pay hourly wages, $6 per hour is no longer a feasible wage. We’re finding it takes a minimum of $8 per hour to attract reliable workers.

We’re in a cycle now where there is much more demand for workers — more job openings — than there are workers to fill those jobs. This is particularly true in the administrative and clerical positions, accounts payable and receivable, and customer service.

What can employers do to gain a competitive edge in recruiting and hiring?
Companies are making packages sweeter to entice top talent by offering signing bonuses and better pay. They’re getting creative and offering better working conditions, accommodating talented workers who want a better balance between their work life and personal life. Corporate cultures are shifting.

Employers need to speed up their recruiting and offer processes. The candidate interviewing with you today will have an offer from someone else by the end of the week, so you can’t drag your feet. Some companies are conducting ‘panel’ or serial interviews so the candidate can meet with all the decision-makers in one day.

If you’re serious about needing a good candidate to fill a job, you have to move quickly and decisively in this market. My best advice is to engage an expert to help you recruit and hire, a company that has been in business for a long time and has a broad reach and a proven track record. Also, a company that can fill any type of position, from part-time and full-time temporary, to contract and project-based, to permanent full-time placement.

DAWN GILL is district director of staffing services for the South Florida district of Spherion Corp. Reach her at (561) 686-0011 or [email protected].

Getting an SBA loan

The climate is great for obtaining a Small Business Administration (SBA) loan right now. In fact, the U.S. Congress is currently considering an increase in the maximum SBA 7(a) loan amount. At present, the maximum SBA 7(a) loan amount is $2 million ($1.5 million SBA guarantee). SBA lenders are hopeful that the loan limit will be increased to $3 million ($2.25 million SBA guarantee). This would make an excellent SBA lending environment even better.

SBA lending programs help small businesses keep more cash in the business so they can expand, says William Ekback, vice president of commercial lending for Miramar-based CU Business Capital LLC, a subsidiary of Eastern Financial Florida Credit Union. How? By requiring less of an equity injection (down payment), providing longer loan terms, and financing certain loan closing costs.

Smart Business spoke with Ekback about how small businesses can navigate the SBA program and what the advantage is in doing so.

What is the SBA, and what is its main purpose?
One of the SBA’s functions is to help small businesses obtain financing from financial institutions. By providing a 75 percent loan guarantee to the commercial lending institution, via the SBA 7(a) program, the SBA helps a small business obtain financing that would otherwise be unavailable to it.

Additionally, certain closing costs may be financed. Less cash out of the business provides greater company liquidity, which can be used for working capital needs and/or other expansion projects.

Via its many different programs, the SBA, an agency of the U.S. government, helps to stimulate the U.S. economy through job creation and small business expansion. As the company grows, it often requires additional human resource.

What are the kinds of loans the SBA offers?
SBA Express — The SBA Express is for loans up to $350,000. There is a lesser amount of paperwork to complete for this SBA loan, and the lender enjoys a 50 percent SBA guarantee. A small business may wish to obtain an SBA Express Loan if time in business is less than the lender’s requirement, a lack of collateral, and/or the applicant needs a longer loan term.

SBA 7(a) — Under the SBA 7(a) Program (currently), a small business can apply for a loan amount up to $2 million. There is a moderate amount of additional paperwork required under this program and the lender receives a 75 percent loan guarantee. Some examples of why a small business may wish to obtain an SBA 7(a) Loan are: time in business is less than the lender’s requirement, business start-up, business acquisition, business expansion, lack of collateral, and/or the applicant needs a longer loan term.

SBA 504 Program — Here is an SBA program where instead of providing a loan guarantee, the SBA actually makes a loan. Typically, the SBA 504 loan is used to finance the acquisition of commercial real estate from which to run a small business. However, the SBA 504 loan program can also be used to acquire long-term fixed (business purpose) assets. Under the SBA 504 loan program, the minimum down payment can be as low as 10 percent. In this case, the financial institution finances 50 percent and the SBA finances 40 percent (of the total project cost). Certain closing costs may be financed. The applicant’s financial institution is still the primary point of contact for loan application.

How does a business owner go about obtaining an SBA loan?
He goes to his local bank or credit union and makes a request. Depending on the financial institution’s experience as an SBA lender, it may be designated CLP (Certified Lender Program) or PLP (Preferred Lender Program). Generally, the primary difference of the designations has to do largely with loan decision/loan closing turnaround time.

Often the PLP SBA lender will be able to deliver a quicker loan decision and loan closing. However, there may be instances where an SBA lender, with no regard to experience, simply prefers the CLP designation and is equally capable as an SBA PLP designated financial institution.

Does it matter whether a small business owner goes to a credit union or a bank?
No. You can get an SBA loan at any financial institution that is approved (by the Small Business Administration) to service an SBA loan. However, credit unions are not-for-profit organizations and strive to provide better service, lower interest rates on loans and higher interest rates on deposits for its members.

WILLIAM EKBACK is a vice president of commercial lending for Miramar-based CU Business Capital LLC, a subsidiary division of Eastern Financial Credit Union. Reach Ekback at (954) 704-5414. For more information on SBA loans, visit www.sba.gov.