She's been a pretty good buy signal for the past few months. Can a Mike Mayo bank downgrade be far behind? Perhaps the tides have turned ... http://online.wsj.com/article/SB10001424052748704471504574445470989162030.html The Credit Crunch Continues Taxpayer dollars have supported institutions that are 'too big to fail.' Small business has been left out in the cold. By MEREDITH WHITNEY Anyone counting on a meaningful economic recovery will be greatly disappointed. How do I know? I follow credit, and credit is contracting. Access to credit is being denied at an accelerating pace. Large, well-capitalized companies have no problem finding credit. Small businesses, on the other hand, have never had a harder time getting a loan. Since the onset of the credit crisis over two years ago, available credit to small businesses and consumers has contracted by trillions of dollars, and that phenomenon is reflected in dismal consumer spending trends. Equally worrisome are the trends in small-business credit, which has contracted at one of the fastest paces of any lending category. Small business loans are hard to find, and credit-card lines (a critical funding source to small businesses) have been cut by 25% since last year. Unfortunately for small businesses, credit-line cuts are only about half way through. Home equity loans, also historically a key funding source for start-up small businesses, are not a source of liquidity anymore because more than 32% of U.S. homes are worth less than their mortgages. Why do small businesses matter so much? In the U.S., small businesses employ 50% of the country's workforce and contribute 38% of GDP. Without access to credit, small businesses can't grow, can't hire, and too often end up going out of business. What's more, small businesses are often the primary source of this country's innovation. Apple, Dell, McDonald's, Starbucks were all started as small businesses. What's especially disturbing is how taxpayer dollars have supported "too big to fail" businesses yet left small businesses unassisted and at a significant disadvantage. Small businesses do not have the same access to government guarantees on their debt. After all, most of these small businesses don't issue public debt. As is true in most recessions, banks' commercial lending portfolios shrink as creditworthy customers pay down their debts and the less-worthy borrowers are simply denied loans. Banks, in other words, want to lend only to those that don't want to borrow. Challenging as that may be, in the last cycle small businesses at least had access to their credit cards. Click to link for the whole article. ...
The government should loan directly to businesses for now, small and otherwise. Banks have never been enthusiastic supporters of small business. That is why the SBA was created The Small Business Administration was reduced to a shadow of it's former self during the Bush years. 95% of small businesses fail within the first 3 years, but that does not have to happen. I have been through the SBA seminars and they leave a lot to be desired. I believe that it would be helpful to offer "starting a business" as a University and community collage course. Even if one has a pretty good concept, and some money, where to access good but affordable market research, writing a business plan, choosing a business structure, setting up bookkeeping, how to do payroll and monthly payroll tax submissions and file quartly 940s all have their pitfalls that I mostly learned by nearly falling into them..
Very easy to solve : higher business risk = higher interest payments low business risk = lower risk premiums There is enough risk capital out there but it needs to yield more interest...
I would be more comfortable having my money in a bank that makes judicious loans to small business right now than I would in a bank that has a lot of fantasy paper as its assets. Small banks with that outlook ought to align and market themselves as a group.
"The government should loan directly to businesses for now, small and otherwise. " spoken like a true capitalist
Isn't that when you glue magazine pictures, macaroni and popsicle sticks to a piece of foamboard for an elementary school book report project? It's been awhile for me.