In two past articles; “Small Business Owners take the Hit” – wrote in late November and “3 Items Banks can do to Help US out” – wrote in early December; I mentioned that Banks need to start helping out small businesses stay in business. This is one of the main ways our economy can start moving forward.
A recent article on Bloomberg.com reported a story that President Obama is now pressuring banks to assist small business owners by extending credit. Helping business owners out through loans was eluded in my November article and was specifically stated in my December article. I am glad to witness that some things are moving forward by our government to help out small business owners.
However, one item mentioned on Bloomberg.com was that banks are only making “safe” loans and are contributing the lack of lending because the loan demand is down. I imagine this last statement has some flaws.
While it may be true that loan demand is down it is primarily because of the bank’s non-lending demeanor in the first place. 43,546 business entities filed for bankruptcy in 2008, the numbers will be down in 2009 for requesting loans because of that alone. In addition, 45,510 bankruptcy filings occurred in the first 3 quarters of 2009, where these business owners offered loan assistance?
$700 billion was handed out because of TARP. These funds were meant to help out the U.S. economy, an economy supported mainly by small business. Yet between the 2008 and 2009 year we will witness over 90,000 bankruptcy filings when the 2009 year is over. Obviously something got lost in the communication between the banks receiving the $700 billion in funds and the business owners needing assistance.
Reference:
Runningen, R. (2009, December 14), Obama Prods Banking Executives on Business Lending, Bloomerg.com. Retrieved from http://www.bloomberg.com on December 15, 2009.