Small Business–Caught in the Middle

I posted about this subject before, but I thought it would be a good idea to see if anything has changed since then. Apparently it has, but not for the good of small business.

“…community banks have plenty of money to loan, but thanks to increased regulatory scrutiny, all banks–even those that had no part in the subprime mess–are being forced to tighten their lending standards and are therefore narrowing the range of acceptable borrowers.”
–Paul Merski, Chief economist, and Director of federal tax policy for Independent Community Bankers of America

“We want to lend, but the regulators are flat-out telling us, ‘Get your capital up.’ Then there’s Congress telling you to, ‘lend it all out.”
–Greg Melvin, Board member of FNBCorp, a PA based bank that received $100 million in federal bailout funds.

“The left hand has the banker by the throat, saying ‘We want your ratios adjusted to compensate for diminishing assets,’ while the other hand is saying ‘we need you to start lending.’ They’re coming from different directions.”
–Curtis Cummings, CEO of Alan Jeskey Builders of Las Vegas

Well, as is typical of anything the U.S. government is involved in, the left hand doesn’t know what the right hand is doing–and small business is caught in the middle.

Hundreds (thousands?) of small businesses are closing every day–putting more and more people out of work–because they do not have the financial resources to see them through this recession.

Putting cash in the hands of consumers who are supposed to spend it in businesses that no longer exist doesn’t make much sense.

Small businesses need access to operating capital to keep their business viable until the economy turns around. The banks have the money to loan to deserving businesses, and the willingness to loan it, but the federal government is telling them they cannot loan the money out.

Doesn’t make much sense to me–does it to you?

6 thoughts on “Small Business–Caught in the Middle”

  1. This makes me wonder now – with all the smaller retail businesses closing their doors, who then benefits from the customers who used to give them their business, once they do have the money to spend.

    Yup – WalMart, Target, HomeDepot, etc…

    And those customers will have to drive farther to get to the big super stores as well… which means using more fuel.

    So who really gets it in the end, no matter how you look at it?

  2. Judith – Good point! I saw on the news last night that the 19 largest banks are still in trouble, and will likely need more bailout money. Breaking up big business, including banks, has always been seen as anti-capitalism, but perhaps now is a good time to closely examine the real cost of allowing these giants to live off of taxpayer money…with no consequences.

    Maybe, since small business provides almost all of the new net jobs in the U.S., we should have more small businesses and fewer giant businesses. Interesting thought.

    Bob Foster’s last blog post..Small Business–Caught in the Middle

  3. Jeff – You’re absolutely right, and it is happening already. Some of the big box stores are showing increases in sales while small stores are closing down.

    The only thing we can hope for, is that the feds make money available to small businesses, so they can either stay in business, or quickly start up when the turnaround begins. It doesn’t have to be government money (although a little of the stimulus money would have helped), but they do need to allow private money to flow again.

    Thanks for the comment–this is an aspect of small business closings that we don’t hear much about.

    Bob Foster’s last blog post..Small Business–Caught in the Middle

  4. “Maybe, since small business provides almost all of the new net jobs in the U.S., we should have more small businesses and fewer giant businesses. Interesting thought.”

    I think this is a good idea; there is also an element of needed community to consider, not to mention globalization and it myriad of practices heraled as capitalism. Some of these things I’m not too sure about.

    All practices should always be looked at anew, especially when taxpayers are required to bail these companies out to the tune of hundreds of billions. But I must also say that I’m more partial to companies that produce things than those who shuffle paper. Accountability is necessary for all.

    Judith Ellis’s last blog post..Being Bobby Jindal II

  5. Judith – I too, am partial to companies that produce things, although I’m not too happy with the U.S. auto makers right now. Unfortunately, insurance companies, banks, investment companies, and the like, are still necessary in our economy.

    However, I think they have proven that they need to be better regulated. I understand the President is working on this issue as a top priority.

    Bob Foster’s last blog post..Small Business–Caught in the Middle

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