| Show BABSON'S SMALL LOAN COMPANIES By Babson's Reports Incorporated Wellesley Hills Mass The The most ImPortant important important im Im- recent developments in the fi finance finance fl fi- nance industry have been mergers and the increased emphasis on cation In 1968 1966 several finance companies compan compan- ies les were taken over by large unrelated ed cd firms Fer For example Corp acquired acquired ac ac- Seaboard Finance and Gulf Western took control of Associates In In- vestment The finance companies themselves of course have not been Ignoring the benefits benefits benefits bene bene- fits of diversification For instance Beneficial Beneficial Be Be- Finance in recent years acquired ed both Western Auto and Spiegel thereby thereby there there- by broadening its earnings earnings' base Household Household House House- hold Finance plans to acquire National Car Rental and Von's Groceries to go along with previous diversification in manufacturing and leisure time indus indus- tries Term Near earTer l Obstacles s. v Although Although Although- mergers and acquisitions have proven to be favorable developments developments developments develop develop- ments for many many finance companies Inthe in inthe inthe the past there may be some slowdown in this area at least temporarily due to current pressures from the Federal Government and the SEC But we expect expect ex ex- finance companies will still continue their diversification efforts both through internal means and by acquiring acquiring ing unrelated firms At the moment the biggest drawbacks would appear to be the inflation anti ary forces now at work This includes especially the current soaring Interest rates and high taxes Small loan companies companies com com- panics particularly are feeling the squeeze on profits a profits a situation which is likely to continue at least over the near term Whether the small loan companies Use bank borrowings or float bonds Interest interest In in- terest rates which are highest in a century century cen cen- tury make their product money very expensive However there are some Indications that interest rates have reached their peak and may soon begin begina a downward movement The proposed new tax legislation will place an added burden on earnings because because because be be- cause It will eliminate the multiple corporate corporate cor cor- structure that the finance companies companies com com- p presently use for for tax purposes The truth lending regulations thus far have had a very limited impact on the small loan companies People are still basically interested in how much it is going to cost them in installment payments pay payments pay pay- ments each month and not what their total interest charges will be Small Loans Big Competition In Tn recent years vears the competition In the field of IdnE money has been increasingly increasingly ra ral Ul td Much of this has been coming com com- coming ing from banks which have been greatly great great- ly expanding their activities particularly particular particular- ly Iy In the small loan field Banks having having hav hav- ing learned from previous mistakes have hired competent people oftentimes from finance companies who have the know-how know in this field As a result they are now getting more and more of the better loans leaving the poorer risks for the finance companies In the future we expect the banks will continue to expand expand ex ex- aggressively in the lucrative small loan field Favorable Aspects Despite the aforementioned negative elements in the area of sm small all loans there are still plenty of bright spots Personal income has been growing at atan an extremely rapid pace and should continue at a high level for the foreseeable foreseeable fore fore- se seeable able future Statistics prove that when the consumer I is affluent the level of borrowing Is U high Population trends and family formations formations forma forma- are two very important plus factors factors fac fac- tors as far as small loan companies are concerned The use of credit is a away away away way of life with the bulk of the lation The loan companies are developing developing develop develop- ing new forms and methods of consumer consumer con con- sumer lending also they are using electronic elec Ironic data processing for more efficiency effic effie thereby reducing costs and Jiu- Jiu M proving profit margins The Research Staff of Babson's Baboons Reports Reports Re Re- ports currently recommends purchase of Beneficial Finance common and 5 50 convertible preferred for growth For those investors who are arc concentrating on income we recommend the Beneficial Finance 8 3 3 of 1971 and of 1977 the General Acceptance now GAC 4 3 of 1971 and CIT Financial 5 l of 1980 |
