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The biggest banks in the U.S. are making far fewer loans to small businesses than they did a decade ago, ceding market share to alternative lenders that charge significantly higher rates, the Wall Street Journal reported today. Together, 10 of the largest banks issuing small loans to business lent $44.7 billion in 2014, down 38 percent from a peak of $72.5 billion in 2006, according to an analysis of the banks’ federal regulatory filings. Through August, banks this year originated 43 percent of business loans of up to $1 million, down from 58 percent for all of 2009, according to PayNet Inc., a tracker of small business credit. The change has opened the door to higher-cost alternatives: Nonbank lenders increased their market share to 26 percent from 10 percent, with corporations that lend to their business customers or suppliers making up the balance.

Tracking with a recent decision in Colorado, the U.S. Bankruptcy Court for the District of Arizona recently held that the debtor’s operation of a business that is illegal under federal law mandates dismissal of an involuntary bankruptcy petition filed against the debtor, the National Law Review reported yesterday. Medpoint Management managed the operations of Arizona Nature’s Wellness (ANW), which held an Arizona Department of Health Services-issued Dispensary Certificate allowing it to operate a branded medical marijuana dispensary under the Arizona Medical Marijuana Act. In its capacity as manager, Medpoint owned ANW’s name and trademark under which ANW sold its marijuana products. When several of its creditors filed an involuntary bankruptcy petition against it Medpoint filed a motion to dismiss the petition. In the context of the motion to dismiss, the court analyzed the issue as “whether [the court] can or should enter an involuntary order for relief against Medpoint despite the fact that Medpoint’s current and former business affairs are illegal under applicable federal criminal statutes.”

Planning for a pickup in sales, some small manufacturers borrowed money from their larger counterparts to ramp up production, Bloomberg reported yesterday. Now, a growing number can't pay for the investments as their forecasts aren't panning out, with energy-related companies being among the hardest hit. Credit managers for the manufacturers who are owed the money are reporting that more of their clients are so far behind in their bills that the "act of last resort" is being taken: hiring a collection agency to recoup money owed, said Chris Kuehl, an economic adviser for the National Association of Credit Management. The main culprits of this financial distress are small energy companies who supply large oil firms. When planning for this year, many of these companies expected the price of oil to rebound. This "unjustified optimism" has left many of these companies in bad shape, Kuehl said. There may be more strain ahead because credit managers “live in the future,” forecasting whether customers can pay invoices as many as four months from now, and evidence is building that more energy companies are finding it increasingly difficult to make good on their debts.

Securities regulators have launched a broad investigation into whether hedge funds and other investors are improperly selling hot private technology stocks amid a boom in the trading of such shares, the Wall Street Journal reported today. The investigation, by the Securities and Exchange Commission, is focused on a burst of new activity recently by people selling pre-IPO shares as valuations of private tech companies have exploded and companies have opted to remain private for longer. The SEC also is examining a recent increase in firms selling employee-owned shares of private companies through derivative transactions. In some cases, the sale of employee shares through such derivative transactions is prohibited by the companies. The SEC is looking into whether such derivative transactions represent possible violations of the Dodd-Frank Act of 2010, which makes it unlawful for most individual investors to trade swaps unless the transaction takes place on a national securities exchange with a registration statement from the SEC.

Revised rules set to take effect on Friday will make it easier for some U.S. and Canadian companies to sell securities with reduced fees, limited regulatory reporting and less legal liability, the Wall Street Journal reported today. The U.S. Securities and Exchange Commission’s updated Regulation A rules will allow U.S. and Canadian companies that are not SEC reporting issuers to sell up to $50 million of their U.S. securities annually, and will permit their shareholders to sell up to $15 million in any 12-month period, with immediate public trading in the U.S. of the purchased securities. The previous version of the rules had set the cap at $5 million, which made it infrequently used, said Spencer Feldman, a partner at law firm Olshan Frome Wolosky LLP. The changes make it easier for smaller issuers to access capital on U.S. trading markets, and will offer lower initial and ongoing expenses, reduced legal liability, potentially higher valuations, limited SEC reporting and no ongoing Sarbanes-Oxley compliance, said Guy Lander, a partner at law firm Carter Ledyard & Milburn.