We are in almost constant contact with a variety of small business owners at our website http://www.start-a-business-faq.com. The huge problem continues to be a credit drought that has already killed off the weak, the incompetent and the profligate small business. The small businesses that are left standing are the smart and formerly profitable. There needs to be a new program created specifically for this group, especially if this ugly recession we are in turns into a double-dip scenario.
I attended a small business financial seminar on how to secure credit and loans during this crisis. The tin-eared banker who ran the seminar spoke about submitting three years of financial statements that showed a positive cash flow, etc. and personal financial statements that showed money in the bank. The small business owners left the session as downcast as they had come.If a medical doctor had run a seminar at a hospital telling wheel-chair bound patients that what they needed to do was get up and start running it could not have been any more stupid and a waste of time.
There has to be a way to restore small business lines of credit at reasonable rates. I am sure government officials think of such a program and shudder at its cost. But I believe such a program would cost less than doing nothing. Let's take a business that has had a line of credit of $500,000 cut off that the entrepreneur used to finance inventory. As a result, 12 of his 20 employees have been laid off. What would such a guarantee cost to see the business person over this period? Compare that cost to the 12 employees who have been laid off and are collecting extended unemployment benefits, food stamps, Medicaid and are now getting behind on their mortgages and credit card payments.
You make some good points - small businesses - the employers of nearly half of all the working people in this country - need all the help they can get.
The problem here is not the banks. The banks are just doing what they always should have been doing - even though they got away from this during the subprime loan bubble.
Most banks (and my own experiences) are showing that most business borrowers are just not qualified - meaning bad credit histories and low income with high outstanding debt. Banks need to ensure that all borrowers have the ability to repay a loan (if not the loan was made in speculation which is illegal for banks) and they have the willingness to repay - this is shown from a positive credit history.
I feel your pain and whould love to see more small businesses access the credit they need. But, it is not going to happen without high income/low debt and clean credit.
There are other ways (other than tradidional banks) for entrepreneurs to raise funds - this could be using financial assets like credit card reciepts or accounts receivables/purchase orders or other assets like property or equipment. There are even equipment lenders that can get the business financing for equipment even if they are a start-up.
Business owners just have to get creative - I would suggest reading up on how to bootstrap one's business. This has been done for years and may be the only option for many new business owners.
As a last note - there are programs for business owners (start-up or established) from non-profit micro-lenders that work with companies that have been turned down by other banks.
If you beleive in your business and yourself, you have to find a creative way to succeed.
You make some good points - small businesses - the employers of nearly half of all the working people in this country - need all the help they can get.
The problem here is not the banks. The banks are just doing what they always should have been doing - even though they got away from this during the subprime loan bubble.
Most banks (and my own experiences) are showing that most business borrowers are just not qualified - meaning bad credit histories and low income with high outstanding debt. Banks need to ensure that all borrowers have the ability to repay a loan (if not the loan was made in speculation which is illegal for banks) and they have the willingness to repay - this is shown from a positive credit history.
I feel your pain and whould love to see more small businesses access the credit they need. But, it is not going to happen without high income/low debt and clean credit.
There are other ways (other than tradidional banks) for entrepreneurs to raise funds - this could be using financial assets like credit card reciepts or accounts receivables/purchase orders or other assets like property or equipment. There are even equipment lenders that can get the business financing for equipment even if they are a start-up.
Business owners just have to get creative - I would suggest reading up on how to bootstrap one's business. This has been done for years and may be the only option for many new business owners.
As a last note - there are programs for business owners (start-up or established) from non-profit micro-lenders that work with companies that have been turned down by other banks.
If you beleive in your business and yourself, you have to find a creative way to succeed.
phanio | Contributor | 1/18/2011 - 8:45 am
Riprock | Window Shopper | 1/18/2011 - 8:45 am
phanio | Contributor | 3/23/2010 - 10:58 pm
Riprock | Window Shopper | 3/23/2010 - 10:58 pm
Join The Discussion
You must be logged in to join the discussion. If you already have an SBA Community account, Log In to join the discussion.
New users, Register for a new account and join the conversation today!