Small Businesses Need Loans
SMALL BUSINESSES NEED LOANS
SMALL BUSINESSES NEED LOANSBy @800 Words
DR. HAROLD GOLDMEIER
7505 N. Francisco Ave.
Chicago, Ill. 60645 773-764-4357 hgoldmeier@aol.com
It is time for President Obama to save the economy and maybe the country by taking more radical measures to save small businesses. They are, after all, the largest employers of Americans. Small businesses with fewer than 50 employees accounted for 60 percent of the job losses in the U.S. the President is reported to have said recently. Yet, he and Congress are only tinkering like the current proposal to give banks another $30 billion dollars to lend to small businesses. The stimulus program for small businesses to requires major reconstructive surgery. Other Presidents faced with an economy rushing towards free fall have done it before.
Banks are hoarding their cash, because their assets are weak and they need to build their cash reserves. They don't want inventory and receivables as collateral any longer against small business loans. They are exiting the small business commercial lending market, because they can make more money on investments, backroom trading, credit cards and fees than on loans. Asked what the bank is doing with all the TARP money the Federal government gave the bank, the officer said unabashedly, "We're buying other banks."
The top 22 banks that got TARP money drastically decreased their lending the last six months of 2009 to small businesses according to theU. S. Treasury. Three of them made no small business loans between April and the end of the year wiping out $40 billion in loans to small businesses. A new Federal Reserve survey reports that by mid-2010 more than 85% ofbanks have recently tightened loan standards for small businesses, or are keeping their already tight standards in place. Moreover, the banks are going to be holding more cash in reserve to cover the coming pressure of commercial properties foreclosures spreading across the country.
The banks have declared war on small business, and the government response has been weak-kneed. President Obama initiated The American Recovery Capital Loan Program (ARC) that might soon expire. It was funded to the paltry sum of $750 million. The only things smaller than the amount of money are the lack of publicity for ARC, and the number of participating banks. The loans max out at $35,000, while the paperwork is extensive and the waiting time is long. How will $35,000 help a business doing $12 million in sales that carries over $400,000 in receivables and needs $600,000 in inventory to get through the day?
The proposed small business jobs bill the President is just another effort to rearrange the deck chairs on the Titanic. Small businesses must have a steady and reliable source of cash to meet payrolls and cover overhead when sales slow. Banks are just saying NO.
Contrast the current government approach to small business cash crunch, i.e., depending on banks to lend the money, with what happened in the farm sector almost 100 years ago Then, the government was afraid there would not be enough food to feed the country, because banks were not willing to lend money to farmers to buy seed and grain. The banks gave preferential loans and preferred rates to big business and ran from small business lending. President Wilson saw the pigeonholing of capital as a threat to the nation's stability and survival. Congress passed the Federal
Farm Loan Act. The Federal government made loan guarantees and deposits to twelve banks that loaned the money at competitive rates directly to farmers. Wilson fought against monopolies and trusts with tactics that would ensure the survival of these small businesses.
The Farm Credit System today lends more than $150 billion, and accounts for more than one-third of the credit used by farmers, ranchers, rural homeowners, aquatic producers, timber harvesters, agribusiness, and agricultural and rural utility operators, according to their own description. On August 2, 2010, the FCS reported a combined net income of $882 million and $1.684 billion for the three and six months ended June 30, 2010, as compared with combined net income of $682 million and $1.297 billion for the same periods last year. Translate these data into jobs and familybusinesses, and you begin to see a success story not found in too many other government programs. This is a radical proposal, but the times warrant it.
The big banks that control the big dollars are not going to release those funds anytime soon. It is time for a new approach perhaps using the example of another bygone era before it is too late for our economic recovery.
We need the audacity of change now if it's not too late. Small business needs a sound and dependable source of credit and related services across urban and rural America that the banks cannot or will not provide.
END
Small Businesses Need Loans
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