Bank Failures Threaten Small-Business Lending

This is a telling article about how tough it is for small and mid-sized businesses out there, but it goes to what I have been presenting for about two years now. It is possible, because I do it all the time with clients, to manage a business without the need for loans or accessing credit cards. I teach clients and have made presentations to many business groups on how this is possible. My clients are much more successful today using my processes.

By this article, lending is becoming increasingly difficult and it is not going to get better. Sure, the economy is changing, slowly, but it is not going to change overnight where managing and actually finding working capital in our businesses now has become very important. Buisness owners cannot go to the bank as some think they can.

If you own or operate a small to mid-sized business ($5mm-$300mm) you simply will not be able to access working capital via a bank loan.

Sure, some of you think you’re bank will give you $$ based on inventory or assets and they will but note that the bank will now own your business via that agreement. Trust me, I see it all the time. Banks want tow things from us; 1) interest payments 2) capital assets to sell at a later date.

It’s true.

By DARRELL A. HUGHES, Wall Street Journal
The U.S. Treasury Department is concerned the steady pace of bank failures could keep many small businesses from gaining access to new credit as the economy rebounds and companies seek to expand.

Assistant Treasury Secretary Alan Krueger said small and medium bank failures are disrupting long-standing business relationships that drive lending to small businesses.

“We’ve been concerned that small businesses, which are particularly dependent on bank financing because they typically don’t access corporate bond markets, will face and have been facing difficulty getting credit,” Treasury’s chief economist said.

Since the beginning of 2008, 192 banks have failed, with 27 coming so far this year. Total lending by U.S. banks fell 7.4%, the steepest drop since 1942.

According to Raj Date, executive director of Cambridge Winter Center for Financial Institutions Policy, there will be a lending shortfall for small businesses of as much as $250 billion to $500 billion as the economy recovers.


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