One of the things I have seen personally is that some small businesses are actively shying away from borrowing. As one owner told me: “If I don’t owe the bank any money and I hit a hard patch, not having to make a monthly loan payment may just save me and my business.”
The Romney Administration can give an immediate boost to the economy by firing all the incompetents at the SBA and opening the floodgate to small biz loans especially manufacturing equipment.
To regain our manufacturing sector we need automated and high tech machinery not thirty-cent-per-hour workers.
posted on 05/03/2012 6:40:41 AM PDT
On March 29, at a lecture at George Washington University, Federal Reserve Chairman Ben Bernanke innocuously remarked that lately small businesses have
found it difficult to get credit.
BB's statement is anecdotal; it's not really the point. It is merely a statement that sounds good that gives cover to the Federal Reserve and primary brokers continuing to facilitate the sale of U.S. Treasury bonds when the marketplace does not have the money or the desire to do so at the interest rates that the Fed is setting.
If one keeps track of what one sees and hears, one will come up with a very long list of instances where the Fed, large financial firms and governments harp on the idea of "liquidity" and "credit" not being available to this or that industry or segment of the population. Which is quite insane in a world that is literally drowning in debt.
If debt is not repaid, the lender can sue the debtor. To small businesss, therefore, where Revenue numbers are small and they typically have little pricing power, debt represents substantial risk. Also, for small business, owners must personally accept the risk for the small business's debts - this is not the case with large, publicly-held corporations, where the management and shareholders are not required to personally sign for loans. Consequently, small business owners who succeed are careful to take on debt only in situations where the future business prospects clearly present a profitable situation that has a high probability of coming to fruition.
While a few small business owners here and there are in businesses that actually are benefitting from the bad economic situation, most will report that their sales over the past few years have been somewhere between slow and disastrous.
The risks from prosecution or fines or lawsuits from local, county, State governments and the Federal government, as well as lawsuits by employees, customers, neighbors, etc., continue to ratchet up, as every passing years sees more and more laws passed. Once again, all the risk of these situations make the "corporate veil" of only limited protection for the small business owner, since, in practice, lawsuits and legal problems that bankrupt the small business very often will also wind up in the owner being bankrupted as well.
posted on 05/03/2012 7:40:10 AM PDT
(We have to fix things ourselves.)
Fear of mega inflation prohibits lending.
You go borrow 100k and invest/spend it. Mega inflation hits and 100k will only buy you a coke. The bank only gets a coke for its original investment.
posted on 05/03/2012 8:12:10 AM PDT
("Behold, I am against you, O arrogant one," Jeremiah 50:31)
Handing WallStreet banks a trillion dollars to park at the fed in the form of “excess reserves” and collect interest on (which we pay for) can’t possibly be helping the situation.
Small businesses will not take on debt when the fedgov is targeting them for destruction.
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