No More Credit For Small Business?
A few weeks ago, I wrote a post saying there was not a credit crunch for small businesses (businesses under 500 employees), and that in fact, the commercial and industrial loans from banks were up through mid-October. Furthermore, they had been consistently rising since September 2007. This information came from two economists who are consultants to regional Federal Reserve Banks. I think the information was sound.
However, I just read an article in the current issue of Entrepreneur magazine stating that 65% of senior bank loan officers reported that they recently tightened standards for small businesses seeking loans. This did not match what I had previously understood, so I called a banker I know who deals primarily with small businesses, and was told the federal bank regulators were insisting that the bank change the way it does business.
This came from a sound bank that has been dealing primarily with small businesses for decades. In fact, most local and regional banks were not a part of the financial debacle on Wall Street at all. Unfortunately, this banker was telling me that the federal government is now calling the shots on bank lending policy everywhere. No wonder the number of senior loan officers tightening small business loans is at a record level—it’s not the banks, it’s the federal government.
The biggest problem with this is that, it is small business that will lead the U.S. out of recession. Big business has proven many times over that they cannot improve a flagging economy…they are followers, not leaders. During the last downturn when almost 3 million workers were layed off in 2002, small businesses created over a million new jobs in 2003, and had almost all the 3 million unemployed back to work by the end of 2004—while big business was still downsizing. It would be another three years before big business even replaced the jobs lost in 2002 and 2003. We can expect similar (or worse) performance from big business this time around.
Here are my suggestions for stopping rampant unemployment and starting a recovery of our business sector:
- Have the government stop thwarting the growth of small business. It is not the small businesses that created our recession…it was the greed and incompetence of big business. Let the local and regional banks do their jobs just as they always have, so small business can begin to grow again.
- Remove unnecessary government regulations from small businesses. Small businesses spend 67% more per employee on tax compliance than big businesses do. Sarbanes-Oxley was established to avoid another Enron—it also crippled the growth of many small businesses.
- Offer incentives to start and grow small businesses. Small businesses hire 40 percent of high tech workers (scientists, engineers, computer workers), so why not encourage more small businesses.
Letting the federal government control all banking will only lengthen the recession…if not drive our economy into depression. Local and regional banks are what sustain the growth of small businesses…the same small businesses that will lead the U.S. out of its financial crisis. Let us not allow the government to see problems where none existed—they always come in and, “…hunt mice with a cannon.”
Federal Regulations Unfair to Small Business.
American businesses pass on to the American people $1.1 trillion in costs of complying with federal regulations. This is more cost per U.S. household than the cost of health insurance.
Smaller businesses bear the heaviest load of the cost of business regulations. They spend four and a half times as much per employee to comply with environmental regulations, and 67 percent more per employee on tax compliance than big businesses do.
This is data recently released by the Office of Advocacy of the Small Business Administration. The Office of Advocacy has been trying for decades to get many of these regulations modified for small businesses—all to no avail to date.
Yet, small businesses—with fewer than 500 employees—are truly the backbone of U.S. Industry. Here are some little known facts about the importance of small businesses in America:
Small Firms:
- Represent 99.7 percent of all employer firms.
- Employ half of all private sector employees.
- Pay nearly 45 percent of total U.S. private payroll.
- Have generated 60 to 80 percent of net new jobs annually over the past decade.
- Made up 97 percent of all identified exporters.
- Hire 40 percent of high tech workers (scientists, engineers, and computer workers).
- Produce 13 times more patents per employee than large patenting firms, and these patents are twice as likely as large firm patents to be among the one percent most cited.
(The Office of Advocacy of the Small Business Administration also recently published this information.)
So, in spite of all the challenges thrown at small businesses…by government agencies and private institutions alike…small businesses have remained the backbone of America’s Free Enterprise system.
Now, with the economy in the tank, our small businesses are in even greater jeopardy. Let us not allow the politicians to build the barriers any higher.
For Want of a Nail…
Almost every day I encounter another example of what contributes to the failure of small businesses, or at least what makes them miss real success. Today was no exception:
I stopped at a Saxby’s coffee shop that I had been into a few times. During my last visit the clerk at the cash register gave me a plastic “coffee card” and said the next time I came in with my coupon and “loaded” the card with $20 I would get a free cup of coffee.
So, today I gave the card and the coupon to a different clerk and told her to load up $20 and I’d take my free cup of coffee. The clerk informed me they didn’t do that. I said “…one of your clerks gave me this card the other day and said you did do that.” The clerk rudely insinuated that I was lying, but the Barista was standing close by and said, “Yeah, we do that.” That’s when the clerk stomped over to the manager’s closed door and knocked. The manager came to the door and spoke with the clerk, telling her “no deal”—the customer can give us his $20 to load the card, but no free coffee. I paid for my cup of coffee and left. Will I ever return? Not likely, at least not until they advertise “under new management.”
Obviously, considering my penchant for coffee, a free cup of coffee has absolutely no effect on my coffee budget. A free cup of coffee, a “sample,” or a friendly “thank-you” are simply gestures…they tell the customer they are welcome and appreciated and that the business wants them to come back. These kinds of gestures are inexpensive and much more effective than hundreds of dollars worth of advertising.
What was wrong here?
- The manager of this small business stays holed-up in her office instead of spending time out on the floor with her employees and customers. The few times I was there, I never saw the manager come out of her office.
- The manager obviously had not adequately trained her staff. Each clerk had a different understanding of the store policy—not to mention the rude approach of the last clerk involved.
- The manager missed a great chance to make a long-term loyal customer, and she blew it—she missed the importance of the “gesture.” She made me think she didn’t care if I every returned or not. Success does not come from taking your customers or clients for granted, or treating them with disdain.
If this were an isolated incident, it would be ridiculous to even mention it, but, unfortunately, disdain for customers seems to be the norm—it happens to all of us way too often. If you have a small business, you cannot afford to treat your customers with disdain. Show your appreciation for their business with an occasional “gesture.” Sometimes a friendly smile, or a pat on the back and a “thank you” is all it takes.
“In this age of email, supercomputer power on the desktop, the Internet, and the raucous global village, attentiveness—a token of human kindness—is the greatest gift we can give someone.”
—Tom Peters
Each of us is only one customer or client, but remember the old rhyme: For want of a nail, a shoe was lost, for want of a shoe, a horse was lost, for want of a horse, a battle was lost, for want of a battle, a kingdom was lost?
So, for want of a customer…..
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