VideoKate Plourd, CFO.com | US
November 21, 2008
- Fact Check
A $675 million bank with 3,500 branches?
Posted by mark thompson | Dec 4, 2008 1:30 AM ET
- Lack of demand for credit?
I think there are a lot of reasons why lending volumes are down. I work with small businesses every day and I can tell you they are either looking at standing pat or trying to deleverage not add debt.
But I would be interested in seeing some hard data regarding bank loan applications submitted vs. approved going back a few years. The banks have definitely tightened up their lending standards (not really a bad thing considering where they were) which has had an effect on the over all numbers as well.Posted by James Farnum | Dec 3, 2008 3:30 PM ET
- Small Business Credit
I think the problem goes a little deeper than "not willing to take a chance." The point about "credit-worthy" in the previous comment gets closer to the point.
But it goes even deeper than that. For a small business - and in particular a start-up - to get money from a bank they need collateral. For established businesses, there might be collateral in company assets. For start-ups and non-manufacturing businesses, there are no assets - or at least none bankers are willing to take as collateral.
In recent years entrepreneurs were willing to use their homes as collateral. That was in times of continually rising home values. The idea was that, even if the business went bust, the collateral would cover all existing debt as well as provide the owner something to move on with.
That sense is no longer out there. With home values continuing to decline, there is every possibility that the entrepreneur will lose not just his business to failure but also his home and potentiually other assets as well.
That stark reality has dampened the willingness of many entrepreneurs to take the big plunge. Until there is more upside on taking such a huge risk, entrepreneurs will continue to be risk averse.Posted by Tom Lieven | Nov 22, 2008 2:12 AM ET
- The dirty secret.....
This is the reality, nothing is wrong with the economy for small business and consumer credit. Anyone can get the money they need, IF they have the credit worthiness! Big banks are refusing to lend to firms that invest in esoteric "financial products" and government and the drive-by media is shouting there is a "crisis". This results in uncertainty and fear which CREATES THE ILLUSION of a financial crisis.
If everyone would turn off their TV's and use their NYT paper as dog cage liner for 2 weeks, the "crisis" would melt away and we would be out spending and investing as we did until June '07 once again. this is a scare tactic recession instituted by the democrats, and media, pure and simple.Posted by GARY CADEMARTORI | Nov 21, 2008 8:31 PM ET
