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RSS FeedLenders in financial trouble: Will small business loans dry up?
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| Yes | 55% | 28 votes | Total: 51 votes | |
| No | 45% | 23 votes |
Yes
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Add to FavoritesThis is nothing new back in the 70s when things got tough the banks did the same thing as they are doing today. The difference was the government was not bailing them out, and the drying up of small business loans where real. The money just was not there as people were getting laid off, and taking money from their savings banks tightened up their loan lending practices.
What we have today is more a greed thing. The big money people have been on such a high for so long that bonuses have become an expectation. This being the case millions of dollars are being spent to pay for those bonuses. The monies available for loans have pretty much dwindled. For a small business person to get a loan today to start a business it seems they need as much in the bank as they want to borrow. The other factor involved here is bad loans given to those seeking the American dream, but not really being able to afford it. It really does not matter who is responsible for such lending practices be it the government or the banks themselves. The point is they have taken such a hit that lending to anyone at this point seems less than desirable to the banks.
Small business loans have always been hard to acquire and the reason for this is that most people trying to start a business finds its a bit demanding applying for such loans and not experienced enough to fill out the paper work. Because of this these entrepreneurs will do one of two things, give up on the loan process and try to find their own financing some place else, or use their own money to start the business putting themselves and their families at risk.
Even when times are good small business loans are not the easiest to obtain because of the hoops one has to go through to gain such a loan. If lenders are truly in trouble, and it would seem there is no doubt about that, small business loans as we know it will indeed dry up. Having said that in the light of the current situation I believe small business loans have pretty much dried up already.
However the good news is this current situation will not last forever, and as we come out of this recession, as they put it the hope is things will get better, small business loans will be easier to obtain and the economy will again begin to grow and gain momentum. Hopefully everyone will learn from this experience and understand that small business is truly the backbone of this country, and never let this sort of thing happen again. However history does tend to repeat itself as we are seeing today.
Learn more about this author, Tom Calhoun.
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No
We all know that lenders are currently in financial trouble. Many banks were already facing bankruptcy and without the government bailing them out, the financial sector would have changed even more than it has in reality.
This causes a great problem for any business - but in particular for small businesses. Lenders had their fingers burnt and are much more careful when deciding who should receive a loan and who shouldn't than they were 2 years ago. Loans that would have been given in the past without a lot of trouble are now withheld due to the risk any lending carries being involved.
When you consider this together with the fact that the difficult economy puts small business at an increased risk of failing you might be quick to say that small business loans will dry up.
However, I don't think this will be the case.
The government is currently exerting a greater power over banks than it has done in many years. It helped the banks - and their managers - to survive the financial crisis most countries in the world were suddenly pulled into. It bought financial institutions with tax payers' money and integrated them into public organizations. It invested money to make sure the banks could keep going.
But our leaders didn't do all of this out of the kindness of their heart - there were conditions linked to those bail-outs. The governments' key challenge is to get the economy going again and small businesses are the foundation of a striving economy. Therefore the government will be keen for loans for small businesses being made available and use their power to make this happen.
With unemployment rates rising many professionals will try to go it alone. And many will struggle getting the finance required to succeed. But banks as well as the government understand that those small businesses - new and existing ones - need funding to get the economy going again, to decrease unemployment rates, increase consumer confidence and spending and ultimately get us out of this recession.
So, do I believe small business loans will dry up due to the financial crisis? No, I believe it will be hard for small business to obtain loans, but I don't think it will become impossible. I rather believe that there will be pressure from the business leaders and government on financial institutions to release funding and loans to the lower risk end of the small business market in order to stimulate our failing economy.
Learn more about this author, Sandra Selley.
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