Monday, December 6, 2010

Business Loans Stuck In A Clogged Pipeline

We all watch the news stories which indicate the economy is improving, but not so much for business loans.  An interesting quandry is developing which leaves small banks and small businesses at an impass. Small Business is the key to creating new jobs, but the small banks are too poor to lend.

Make no mistake, even though there are signs of an improving economy, the FDIC list of troubled banks keeps growing and this puts the squeeze on lending. Most small businesses have some sort of relationship with a smaller bank just so their needs can be met based on that relationship. Big mega banks lose small business owners in the shuffle and give lousy service. But when a business owner turns to his bank for a business loan, the money to lend is simply not there.  Small banks have been pinched by their losses in the credit crunch and have to devote more funds to reserve requirements. 

What does this mean? It simply means that if you have a small business with great business credit and great sales projections, your bank not be able to lend you money.  That's right, the banks wrote bad loans and you are going to suffer for it.

Here is the quandry. Because of economic conditions in general, most small businesses that would love to borrow money to expand are hesitant which lessons the amount banks take in and in turn lend out.  It creates a kind of log jam where the whole systems gets clogged.  Keep in mind that small banks cannot participate in large scale transactions compared to the big banks so most of their profits will come from lending on the local level. So it's just not there to lend.

In general the only way to correct this is to wait until the timid borrowers want to borrow and the banks are strong enough to lend. But we as business owners don't need to wait for the economy to churn. If we want a business loan all we have to do is ask. Well, if you ask the right people.  There are specialists out who deal with this issue and really all it takes to get an unsecured business loan is good credit. Being a principal of a company and having good personal credit can get you quick working capital and help establish your business credit. This is an option many small businesses are happily turning toward for their business loans.

Posted via email from As Seen On TV Stuff

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