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Subscribe to RSSNew federal data show that the number of small bank loans to business has fallen to the lowest point in more than a decade, cutting the flow of money to a sector that's usually a job-creation powerhouse.
"It's usually the smaller business that is more able to bounce back and take advantage of different opportunities faster than a middle-market company," said Linda O'Connell, manager of small business research at Barlow Research Associates, a Minneapolis market research firm that focuses on the financial industries. "We haven't seen that."
An analysis of recently released Federal Deposit Insurance Corp. data by the Investigative Reporting Workshop shows that overall commercial and industrial lending by banks has increased for five straight quarters, but small loans to business of $1 million or less have been shrinking consistently since June 2008. As of Sept. 30, total outstanding loan volume was down 14.7 percent from its peak.
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The reduction of bank credit has had an even bigger impact on small business than it would on large business, which can borrow money through corporate bonds and "commercial paper." In contrast, small businesses rely almost exclusively on credit provided from banks.
The current situation stands in stark contrast to the recession at the start of the decade, following the dot-com bust. Even though commercial lending dropped severely, small business lending kept chugging upward. In this recession, the number of individual small business loans has fallen even further. Banks reported having just 1.5 million of those loans outstanding on Sept. 30, the smallest number since 1999, according to the FDIC data. Bank regulators define small business lending as loans of $1 million or less, regardless of the size of the business.
The numbers are especially troubling because businesses with fewer than 500 employees created 65 percent of the jobs between 1993 and 2009, according to the Small Business Administration. But in a November survey conducted by the National Federation of Independent Businesses, a small business advocacy group, only 7 percent said the next three months would be a "good time to expand."
Graphic by Jacob Fenton / Investigative Reporting Workshop
While overall commercial lending has rebounded, lending to small businesses has fallen over the past two years. (Source: FDIC Call Reports)
There are many reasons that mom-and-pop businesses have been hit harder than international behemoths, economists say. Local businesses — especially service providers — can't easily tap overseas markets, though small-scale manufacturing firms that can have done slightly better. And construction, which has traditionally driven the local recovery, is expected to linger in the doldrums for years, as it has since the real-estate bubble popped. Finally, the sheer length of the country's economic woes has left small businesses with fewer reserves and hardly ready to jump back up, were conditions to start looking up.
Even successful businesses find it hard to get credit
With annual growth of around 40 percent, David Ehreth's six-person sauerkraut and pickle business in Healdsburg, Calif., had a different problem — he couldn't grow his "Alexander Valley Gourmet" and "Sonoma Brinery" brands fast enough without new machinery. "Everything we were doing, we were doing by hand," he said.
Ehreth's hardly a standard food entrepreneur. He started brining pickles full-time about six years ago, following a lucrative three-decade career in the technology sector. As a tech executive, Ehreth had overseen "hundreds of millions" in sales and peppers his conversation with phrases like "credit facility."
He had reason to be optimistic about borrowing. "I am an individual of relatively high net worth with no debt of any sort. ... When I approached the banks we had about four years' worth of track record of steady growth of about 40 percent year over year."
None of that mattered to the banks, though. "I was just flatly turned down without any discussion," he said. "Just about everyone I know in the food industry has given up on banks."
Instead, Ehreth and his crew kept working by hand, even though that slowed their growth. Finally, he decided to sell a vacation home, even though the price he got for it wasn't great. The investment in his business, he reasoned, was a sound one.
Banks' unwillingness to lend was especially galling to Ehreth because jobs he would create — small-scale, blue-collar manufacturing that's unlikely to go overseas — is the kind of job that's most needed. "For those who are college educated, for those who have engineering degrees, there's plenty of work. But for those who were working in factories, who saw their jobs sent overseas, people like myself create opportunities."
Bank profits reach four-year high
Though small business has suffered, bank results continued to improve in the third quarter of this year. Profits rose to $35.3 billion, the best in more than four years. Most of the improvement came because troubled loans continue to decline. Meanwhile, lending rose for the third straight quarter, though it remains well below pre-recession levels, mostly because of real estate lending remains very sluggish. The number of banks with troubled assets greater than their capital and reserves also declined.
The small-scale, business lending slowdown is all the more remarkable given the federal government's exceptional efforts at reversing it. The 2009 stimulus bill and 2010 Small Business Jobs Act cut fees and included "credit enhancements" that pumped up the Small Business Administration's loan guarantee rate.
The last three months of 2010 was the biggest quarter in the agency's history in terms of total new loan guarantee volume, said spokesman Mike Stamler. Many of those loans are for amounts greater than $1 million, and don't show up in FDIC's statistics. Yet bank lending during the SBA's biggest quarter ever still declined.
The jobs bill set aside $30 billion to buy preferred stock in midsize banks, with those that actually increased small business lending eligible to lower the dividend rate paid back to the government. But just $4 billion of that money was actually lent out.
"The lending program through the federal government certainly didn't do a whole lot. We've heard from many banks that we've talked to that they have enough money to lend, it's just that there aren't enough borrowers out there," said Holly Wade, a senior policy analyst for the NFIB, the small business group.
Bankers say lending standards aren't the issue, and point to research that backs them up. In 2011, 17 percent of businesses with sales between $100,000 and $10 million applied for additional credit, but of those, only 22 percent were denied, according to Barlow Research surveys.
Overall, the number of businesses that haven't sought credit because they don't think they'll get it has been rising. In 2010, 15 percent of the small businesses that didn't apply for credit did so because they thought they wouldn't succeed, according to NFIB surveys. And 24 percent of small businesses that did seek additional credit reduced the amount they sought for fear of being turned down.
"The longer it goes on, the worse the financial condition for those that are just hanging on becomes, so they become less credit-worthy," said Robert Seiwert, director of the American Bankers Association's Center for Commercial Lending and Business Banking.
"Are credit standards tighter today than they were two years ago? Absolutely. But they should be because we're operating in a different economic climate," said the ABA's Seiwert. "The business that was viable in the past may not be viable in the future."
That’s hardly consolation to upstart entrepreneurs trying to launch. Michael Marquess, chief beer officer of Mother Road Brewing Co., in Flagstaff, Ariz., spent six months trying to get financing to open his brewery and taproom. “Borrowing has changed dramatically in the past five years from easy lending to extreme process,” he wrote in an e-mail.
“We had the plans in with the city. The contractor was on board. Everything was just waiting on that funding,” he said. But his SBA loan application for less than $300,000 fell apart, he said, because plans for a small craft brewery didn’t match up to numbers loan examiners expected for an established beer manufacturer.
Marquess’ story turned out well, though, thanks to the persistent bankers at the National Bank of Arizona, who he said helped him cobble together another application that was finally approved in June. Mother Road Brewing Co. opened last month and now has four employees. “We sold our first pallet of beer two weeks ago,” he said.
Some of the information in this story came from interviews with members of American Public Media's Public Insight Network, which the Investigative Reporting Workshop joined earlier this year.
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Of course small business is not borrowing cash. Would you in the politically chaotic environment?
REN
Small business can't borrow the money they need . Most small local banks have plenty of money to lend them . Problem is those banks have little or no bad debt on their books and were told by the fed NOT TO MAKE ANY LOANS !!Banks as we know loan money to make money . The big banks are looking for take over prospects ( place to dump some of their toxic assets ). If a local bank is making money they are harder to take over and growing .
bob
Do you need more proof the administration is squeezing the middle class out of existence? We own two successful UPS Stores in the Albuquerque area and wanted to open third but while our credit was good, better than average, we couldn't get approved by the same bank that financed our first two stores 8 years ago! No missed payments and we even made double payments to accelerate the principle reduction in anticipation of our desire to expand.
It was then we started to become more pro-active politically and noticed that everyone of Obama's Czars comes from an anti-business background or academia. The banks have become an extension of that mind set.
OK thanks vinees. I now understand the reason, and as usual it was not in the story but provided by REAL people. God Bless, ren
REN
Thank you . You're the one that opened the door for our comments.
bob
Given that UPS stores typically upcharge the real shipping costs by 50-100%, it's mighty amazing there are any still in business today, regardless of the severity of the Bush Economy. It's a consumer scam, just like PakMail.
dudo, you obviously don't have a business background, lol. UPS Stores and Post Nets, etc fill an important niche. Who wants to wait 40 minutes at the post office to mail a small package? Most will pay a dollar or two more for the convenience of getting it done in 5 minutes.
Let me see.... it is the Post Office that is in financial trouble, isn't it? Not these little store fronts in thousands of malls!
Today’s math lesson: ONE, Banks are suppose to lend money to small business’s, TWO, Banks are controlled by Republicans, THREE, Republican politicians in Washington are doing everything they can to sabotage an economic recovery, FOUR, Republican bankers will not lend money to small business’s in order to keep unemployment numbers high. The result is 1+2+3+4 = TREASON! Why are the Republican bankers and Republican politicians doing what their doing…….SO THEY CAN BLAME IT ALL ON PRESIDENT OBAMA, do the math people! These GOP ^%&(#$@s make me sick.
Banks hate small business owners.
Of course small business is not borrowing cash. Would you in the politically chaotic environment?
So your argument is that small business don't want to borrow cash because it's 'a politically chaotic environment?'
I think it's more a function that banks aren't loaning to small businesses, not that they're trying so desperately to give money to small business but they're like "No, we don't want to borrow it because of politics."
I mean, if you think about that scenario that doesn't even make any sense. Would you give up the opportunity to grow your business and make more money because of politics? I don't care who is in charge, I'm making money and if you can give me more money to make even more I'm going to take it.
And this is one of the bills that the GOP is blocking!! It was part of the debt ceiling circus, it was part of a few other negotiations. So much for the GOP and Joe America!
Factofthematter. You're a small business owner. You are squeaking by in a down economy. Obama is threatening all kinds of changes in taxes and you know the Healthcare costs because of Obamacare are going to sky rocket. Why wouldn't you wait and see what happens before you take a risk that can go wrong real quick. I didn't agree with everything Clinton did, but one thing he did do was get on TV and assure the American people things were OK. Obama scares people, he's out of control. Taking up Immigration in the first year of his presidency Not, then making sure we get a public option Not, then extending the Bush Tax Cuts into law while he declares class warfare. Having a multi-million dollar program that gives guns to the cartels, all while espousing gun control. I don't believe anything out of the guys mouth, why would a business owner. Saying your deporting more people than your predacessor, then when you look at the detail you see he is now including self deportations (they probably didn't self deport) in the numbers. Remove those inflated numbers and you'll see he's most likely lying on that issue. He's pretty darn crooked. The thing that sticks out the most was the poor woman who said she wouldn't give loans to white farmers (taken completely out of context) and the Obama administration called her while she was driving and told her she will resign. When she said she couldn't because she was driving, they told her to pull over and do it now. What next, a hit on her family if the arm twisting didn't work? Crook, plain and simple.
BigAl-- plenty of big banks are owned by registered democrats. Your partisan hackery is pathetic.
Ren & FactOfTheMatter: I would revise thusly:
"Of course banks are not lending to small businesses. Would you in this politically chaotic environment?"
The bottom line is that our lawmakers have their heads stuffed so thoroughly up each others' asses that they have no concept of the chaos they are sowing in the market. A lot of small businesses are leery to expand and end up in one of Obama's "rich" tax brackets, resulting in their making less money than if they maintain their current profit levels*, while the banks have been given so many contradictory directives that they don't want to lend to anyone anyway.
*small businesses will find that, when expanding, they not only incur all of the normal expenses of that venture--hiring new employees, purchasing new property, plus the loan payments that allow for that kind of expansion, etc-- but if their combined capital exceeds $250,000 (or whatever marker Obama's admin is using to measure "rich" vs "poor") they will have their taxes raised on top of it all. Not much incentive for a small business to expand and hire-- hence the oft-leveled criticism that Obama's admin is anti-business.
A brief note: I am not intentionally being partisan-- I only mention these facts vis a vis the Obama admin because they are currently holding the reigns of our government. If a republican was in office and the same issues were present, I would level the same criticism to them.
"Republicrat, Democran: One Party System!" -- Sage Francis
I know how to fix this! Raise taxes and implement O'bamacare!
It is kind of hard to make loans to small businesses when qualification requirements are so high. Things like high FICO scores, 2 sources of repayment, and high financial statement requirements doesn't result in many applicants 'qualifying' for a loan, which means no loans being written. No loans = no business expansion; no business expansion = no jobs. It isn't rocket science.
"Of course banks are not lending to small businesses. Would you in this politically chaotic environment?"
WMG and True American, that is the correct argument.
I was just saying that small businesses not taking out loans/credit for political reasons is the most absurd argument I have ever heard.
Small Businesses are the de facto Job Creators.
The 1% are Job Destroyers.
Our Plutocracy has seen fit to undermine the Job Creators, thus shifting the greatest amount of wealth in history from the Middle Class to the already rich.
As many have pointed out, the Obama administration is a very business un-friendly administration. The new directives for banks, coming from the bastion of financial integrity, the Federal Reserve, and allowing Timmy 'tax-cheat' Geithner the final word in which bank is 'solvent' and which bank needs its assets sold to mega-banks, is, shall we say, less than helpful.
Then as another poster pointed out, the administration has flip-flopped on agendas, one week its this and next week its that with absolutely no consistency or sense of security for anyone, much less a small business owner. Then, let us not forget the small governments, state and local governments, which are just as obfuscating and controlling as the federal government, and, oftentimes, they are worse than the feds.
New rules and regs are set to take place under Obamacare, there are lots of hidden fees and regulations buried in that tiny bit of legislation, no one is really certain what exactly, and the insecurity of knowing which way to jump vs a vs Obamacare has kept a lot of small businesses less than anxious to commit to expansions or hirings. The overall economic climate also plays a role, no customers for goods and services, no services or good sold, no small business survives.
Neverstopaskingquestions:The 'tax the rich' meme constantly tossed out by the administration and the congressional democrats may be a bigger factor. Define rich. If $250,000 is determeined to be rich then most small businesses will see a rise in their taxes. Most small business owners pay themselves a small amount and put the rest back into the business. They're not rich, they support their business but if the 'tax the rich'narrative persists, you'll see a lot of small businesses toss in the towel.
Of course the political climate is playing a role in small business borrowing decisions. This is the 3rd time this year our government has come right up to the deadline for shut down.
Again they accomplished nothing, a two month extension before it happens again. Nobody has an idea how much the tax rate will be. What's the point of adding more uncertainty to your business in this climate.
So the guy with perfect credit and high net worth can get no loan. Didn't Ron Paul try to tell everyone this is what would happen 4 years ago? Yep. The banks are the problem & the currency is the problem with our job market. So what did Obama do for us? Give bankers a little bail out money? LOL. Start those shovel ready Jobs? Pffff. Take the lobby money to craft a banking reform bill that they wanted and bought? uh-huh. I sure wish this country's people would wake up and maybe just join OWS and redirrect them to the whitehouse.. Look and see how much each bank gave straight to him in the banks financial reports if you want to say it was dod/franks.. You can probably just google it. The report said this started going south for small business in June 2008 so don't blame anyone else. But you probably will while I have to choke another bolognia sandwich down. Obama we trusted now we're busted. I want my shovel ready job. I don't wish to blow people up for a living or rob taxpayers and call it work.
Dr. Ron Paul was right, and Obama again is exposed as the fraud that he is. Mr $800 billion in stimulus was supposed to, among other things, spur small-business loans. Instead, his pet projects and cronies got 1/2 a billion to filter through their green job scams and other government funded frauds.
How about we stop trying to re-engineer the private sector? How about we stop putting professors and community organizers in charge of government and business? How about we return a smidge of sanity to our nation?
This is exactly why the Obama administration is a failure! If instead of giving money to his union pals and failed local government, he should of HELPED small buisness access credit. Note small buisness does not want a hand out, but ACCESS! If instead of wasting 535,000,000 on SOLINDRA, 10,000 small buisnesses received 53,500 a piece do you really think we would be doing better? But alas these are not the 1% that donate to the ever campaning Obama camp. This is why electing a media darling who has accomplished absolutely nothing before becoming president is a JOKE! And by the way big al in las vegas you are ignorant!
Why not start a program to give away small business GRANTS? I wanted to start a small business and get some manufacturing equipment. I was told the equipment I needed would START at $40,000. So, this means that someday, when I pay off my student loans (assuming I will ever be able to) I can EITHER get a home mortgage OR get some equipment to start a business with. Not to mention, manufacturing equipment is very specialized, so if my business failed, I'd have to sell it, but since it's unlikely anyone else would want to buy it-- I'd be stuck with a bunch of machinery nobody would want, with no way to pay the loan-- so I'd probably have to file bankruptcy. Well, that's CRAZY!!! It's no wonder people don't want to start small businesses. It would be one thing if I had 40K to 100K saved up, with which to start the business. At some points in history when wages were higher and cost of living was lower, this was probably a possibility-- people could work for a few years and maybe save up for these kinds of things. But now, I don't see anyone who has that ability. Everyone I know is living paycheck to paycheck, and God forbid disaster strikes-- then they have to pull out the credit cards. That's everyone's "emergency fund" nowadays... a credit card. It would be another thing if I knew some rich investors who had 40K they could afford to lose... But I don't know anyone rich, to tell the truth. Every day I know fewer and fewer people who are even moderately well-off. Since nobody outside the increasingly-better-isolated super-rich social class has any "seed money" to "plant" to create new businesses, surprise surprise, few businesses are being created. That's why I believe the government should create a program to give grants to people with ideas for small businesses. Debt is scary, it terrifies a lot of people. There are probably people who would gladly start a business if they had the capital required to do it without getting into huge debts right from the get-go. People from wealthy families often start life with trust funds, so they can start a business, or even experiment with a couple business ideas, until they hit on one that works. People who were born into non-wealthy families without any capital can't do this. If America wants more business creation and innovation, it has to find ways to minimize the risk to would-be innovators and get start-up capital into the hands of everyday Americans, WITHOUT them having to sign away their souls plus interest to some bank. I think small business grants would be a great way to do this, and to stimulate our economy.
What a laugh Al in Las Vegas. Jamie Dimon the CEO for JP Morgan Chase is a huge supporter of Obama. So much so that Obama put JP Morgans Head Lobbyist in the White House as his Chief of Staff. Don't even get me started on former Goldman Sachs CEO Jon Corzine who hooked Obama up with all his buddies on Wall Street before he fleeced our Nations Farmers. I find it unbelievable that someone from Las Vegas would defend the President after he Publicly Shamed Businesses for holding their Annual Conventions in Las Vegas. Your City is a Mess and only someone that is blindly partisan could support the President after he Flipped your largest industry and source of employment the Bird.
This is exactly why the Obama administration is a failure
I don't think that this is true either. There are some things the administration has done correctly.
Big Al, your comment holds about as much water as a cup without a bottom. Guess your next statement is Warren Buffet who hold $billions in shares of Goldman Sucks and Bank of America is a Republican. Yeah, only Republicans control big banks.
Your favorite President is the one killing small businesses, the middle class and dividing this nation as never before.
When someone quotes heritage foundation for facts about the Obama administration I just have to laugh. I refuse to believe this nonsense. Too many read and believe the talking heads form BOTH sides.
Reading through this thread makes me wonder how many of the posters know anything about bank practices or about Obma Administration policies. Robin in NM says that the bank that loaned money so he/she could open two UPS shops denied a loan for a third because all of the 'czars' in the Obama administration are anti-business. Really? And because of these people sitting somewhere in Washington your local bank in New Mexico won't give you a loan? Is that the reason the bank told you they were denying your loan?
When Glass-Seigal was repealed by the Republicans, banks were free to play investment bankers just like Lehman Bros. and Bear-Stearns. They can make a lot more money with little risk by investing in market securities for hours or maybe months without the burden of a 10-year business loan. Why loan for long term for a fixed rate when they can invest in short term and gamble?
The Obama Administration did not deregulate banks by repealing Glass-Siegal, the Republicans did with the blessings of George Bush and Alan Greenspan!
alwaysanother:
There's no "hope and change" in either political party. Both parties have destroyed America through their cronism, corruption and incompetence. It is unfair to characterize Obama as worst than any of his predecessors or to blame the incumbent president as the cause of America's current misery. Many of the previous administration have created much of today's economic crisis.
If there's anyone to blame for America's demise, it is the American people who repeatedly have voted for incompetent and corrupt leaderships every election year on the basis of Democratic or Republican affiliation. Instead of demanding the political candidates address real issue, the American voters fall head-over-heal for sound-bites and meaningless rhetoric. Even worst, voters sum up a candidate on the basis of Red State, Blue State or Neither. Voters may want " hope and change" but they love to be deceived with the same old 'feel good' speeches.
Meanwhile, the gullible American voters argue among themselves over non-issues served up in their face by both parties to distract them from the real problems facing America. Behind the people's back and while the voters bicker among themselves, both parties have allowed the powerful labor unions and Big Business buy our politicians, create a monsterous government bureaucracy that insulate against the people's will, and pass laws that cause the economic and moral decline of America.
This administration has created the perception that it is hostile toward business. That creates a general reluctance of businesses to spend, invest and hire workers. Obama's incompetent mis-handling of the economy is ruining businesses, families, and everything some people have worked years for. Obama's single term in office will leave an ignominious legacy of economic despair and broken dreams that we have not seen since the great depression of the 1930's.
The guy with the pickle business is right that anybody in the food industry will not get a bank loan. My family is in the food business and so I have walked the walk.
We could never get a 1st loan to open our businesses to begin with even back during the Bush years. The reason being is the failure rate is just so high. If you go to the SBA website and do some research you will see that for as many startups that are created, nearly as many fail within 5 years. Actually the 1st year is pretty bad. Usually the business didn't have pockets deep enough. Second, they never realized how many fees, taxes, assessments are involved with owning a commercial building, or even leasing such a building. Dealing with banks and their fee structure is daunting. Almost all businesses are at least somewhat seasonal and thus money needs to be set aside. But perhaps the main reason businesses fail is utter fatigue. Many are understaff, on a learning curve, and most are poorly managed. There are MANY, MANY days that a business owner feels he is climbing a steep hill and will never see daylight.
What I just wrote Washington does not in any way understand. Neither do state officials. While everybody wants unemployment to be extended for those that need it, nobody is thinking about who is paying for this benefit which is the business owner. For many states, they borrowed from the feds to provide unemployment benefits because their fund ran dry. So now Obama wants that money back. So states are assessing business owners each year a one time fee to pay for the interest on the loan they took to fund the unemployment fund. Starting this year, the minimum wage taxed for unemployment will double over the next couple years. Meanwhile local governments have substantially raised fees, taxes, licenses, assessments on businesses to bring in revenue they are currently not receiving from sales tax. So if you have a business in a town with metered parking for your customers, the parking ticket price has jumped from 20 to 43.
So I am telling you that businesses are being dollared to death.
BTW, since 2000 start-ups have been declining in this country. This is not a good sign since this was before the real estate bubble burst, and now using equity which was the #1 financing vehicle for micro businesses is now a closed door.
The pickle man was right. Banks HATE the food industry.
Bruce, they aren't investing in securities. They are buying T-Bills which are fully backed by the federal government. The Dodd-Frank bill also increase income requirements and increased the down payment required to secure a loan. Add to that the Obama Administration requiring banks to have a much higher asset to loan ratio, banks area going to be real tight about what they do loan.
The number of loans have fallen because the banks, which received millions in bailout money, are refusing to give loans to small businesses. Seriously, why should they help anyone. Who has helped them lat....oh.
Banks were given money in the bailout and now all they make are real estate loans, that they call business loans. They build new branches on every corner with their 1/2% money.
EVERY manufacturing business has working capital problems......but the Chinese companies do not. Banks are forcing the manufacturing to China. There is NO money for small businesses, but unlimited money for our military adventures. RESULT we are the leaders in making war equipment....and NOTHING else except government paper work.
So now the banks are screwing the "Job Creators" while somehow boosting their profits by refusing to lend...gaming markets elsewhere I imagine...and once again the country is left to endure prolonged stagnation and economic hardship.
Nope...no need for well-thought meaningful financial reforms in this equation.
Seems pretty simple to me. The banking industry wants an adminsitration that's friendly to poor regulation and poor oversight. The current administration passed at least a token regulatory reform package. I don't think we're going to see any improvement in oversight any time soon, but the fact is Repubs are definitely more banking industry-friendly (and corporate-friendly in general) then the Dems. Time for the Dems to go, so the banking industry is doing all they can to keep the economy in the toilet.
Welcome to the New World Order. And we thought the Soviet Communists were a bad idea.
DW, do you remember Barny Fwank? Do you understand what happened in the real estate market due to these regulations you covet so much?
if the bank would not loan better think again about the business plan,two years ago it was the banks fault for lending money to any one,now they are to fault for being prudent.
perhaps with regard to mortgages but not so much with commercial lending
Do enlighten me, Korn - I have my popcorn and a beer ready. My money's on the Community Reinvestment Act, but I'm curious about your $0.02 worth.
mornin' ren.
Yes, with the onslaught of government over-regulation, penalties if you fart wrong,...the complete and utter uncertainty of this current administration's REAL intent...is it any wonder.
I see the next 10+ months as complete stagnation. Businesses in lockdown.
Morning Beev, I call it the summer of discontent. It is rapidly approaching. Took my 12ga out of cosmoline the other day.
ron: The owner of the local Ace hardware recently sold his property, not the business, mind you, just the property. The new owners didn't want the business. He's been in business at that location for almost twenty years. I asked why he was getting out and he said he couldn't take the uncertainty or possibility of four more years of Obama. The Obama supporters seem to come from the land of the non-entrepreneurial spirit, the land of the collective, the land where the government takes from the productive to give to the non-productive.
ron carson
you are absolutely right about this administration hindering small business. they are trying to regulate banks, both large and small. I worked for a major bank for 19 years and a community bank for 10 years as a lender at various levels of management. I sat through the meetings when high level management would decide to simply make the spread on deposits....most people in here have not a clue with what restrictions banks must now comply. Most of these people are shooting from the hip
Mygirl - your ace hardware owner is either a liar or ignorant. He got out because he wanted out and the economy sucks. Obama nor the next president will have anything to do with small businesses doing well or not, never has and never will. I have been in business for thirty years and don't care who is in the white house, it is easy to tell what the problem is and electing a different President will not solve the problems.
Hanging most of the Congressman would be good start and then burning down every home in Washington worth over about 230,000 dollars. Then the Thieves of our Republic wouldn't have any place to stay. If you think any of the front runners in the Republican party would do anything about corruption in Government and the running of the country by the lobbyist you are very deluded.
Or: when he sold the property, the new owner may not have offered him a new lease for the space. This speaks to your point that he may be ignorant. It is also possible that he was not capable of finding a buyer for the business and was delighted to sell the property.
I've owned businesses for going on 30 years. In my opinion, the Idiot in Chief does make a difference. We have some presidents who are effective communicators who are capable of making people feel OK with where things are at (Reagan and Clinton) and then we have others who can't communicate to save their lives making people feel nervous and unsettled (Carter, Bush I&II, Obama). When people feel good about things, they spend their money and the economy moves. When they are nervous, they hold their money and nothing happens. Our society relies on an economy moving as quickly as possible all the time.
One of the biggest problems as I see it is that we have a minority of people who actually vote followed by a majority of people who whine and moan and, in at least some cases, refuse to get educated and then cast a ballot. We have a political system that causes the extremes of both parties to be pushed to the forefront when the reality of life happens somewhere closer to the middle. And, because of our society's endless desire to see people built up and then beaten back down, the brightest minds available are too smart to subject themselves to the political process at all.
This is hardly news for small business owners. We get stabbed in the back by banks, and thought of as "evil" business people by the MSNBC crowd. The bank of mattress is the only thing you can rely on.
I don't think the msnbc crowd thinks small businesses are evil, I think they don't like large corporations influencing politics these days(having a larger voice and what seems to be the only voice in DC these days). We also do not buy the republican/Tea party line that if we tax people making a million dollars or more we are hurting small business and "job creators". The truth is only 0.5% of all small business make profits in access of 1 million dollars.
"Get Money Out" of politics.
The greatest trick that's been pulled is actually convincing you guys (small biz owners) that you're part of the club. You're not. Make no mistake about it, the only people 95% of Republicans and 50% of dems work for are the fortune 400.
I got on here two months ago saying this exact thing I pissed off a bunch of conservatives when I said that part of the reason we are not recovering or creating jobs fast enough has nothing to do with our government and everything to do with banks not giving business loans due volatility and speculation of possible investment loss in the world market.
whatever
that is only partially true...there is much more to it...like the amount of increased reserves required by newly imposed banking regulators, for instance. Has anyone addressed derivatives yet? They may be one of the biggest problems at the investment banks
You are right and I don't think anyone who has ever been in business questioned you.
I was in a small business for 32 years and right now the rules and the power of large business makes small business startup impossible. Till you break up the huge advantage large business has there are no idiots who are going to compete against that!!
The rules are set that most big business is too big to fail and gets bailed out or helped but small business if you fail or run into a head wind of some kind it means tuff @!$%#!!!
Big banks and big business want to squeeze out the mom and pop operations of america. They want ALL of the business for themselves. Its a big business world now, they will leave no room for the little guy. Its a shame.
When my small business applied for credit, we had almost 3 years of growth - we were turned down. Then we tried the INK credit card and CHASE ONLY looked at our PERSONAL credit and overlooked every aspect of the business. Again, we were turned down - so our expansion comes out of our own pockets. There is no real benefit to banking with any one specific, not even the credit unions had anything unique to say.
Well, by the looks of some of these comments this is a pretty rich bunch. I just own a neighborhood restaurant that's been in the same location for twenty years. I don't know what regulations you guys are complaining about. I haven't noticed much change since the Bush years. Yeah, the banks won't lend so that forces us to try to operate month to month and sometimes day to day, but the real problem is that people in our town have no money to spend anymore. The main industry here is building and it's deader than Marley's ghost. If people don't have jobs they can't buy food. I don't have a degree in economics of course so I'm sure it's a lot more complicated than that. When the politicians run for office 365 days a year for the entire term of office, it's all politics all the time. OF COURSE they are going to make the other guy fail! It's what they do, and to hell with the country. And they call themselves Patriots.
Since, you have a degree in economics, let me run by you my analysis of the situation. Let me know what you think. I believe the issue is that we need to focus on increasing consumer demand. I'm going to call it the "shifting wealth" issue. Fixing the "shifting wealth" issue can solve the jobless problem of 24% out of work (15% welfare & 8.6% unemployed) that we have currently. If the consumer - business or a person - doesn't have money to buy things then the producers have to reduce their inventory which results in lose of jobs. So, this means that in a recession, it must be a priority to encourage the consumer to spend money. This can be done in many ways - reducing taxes, reducing prices on goods, and taxing savings. It is easy to reduce taxes quickly - just vote to lower the rate. Reducing the prices on goods is done in three ways which takes a few years to take affect - subsidies (i.e. from taxes, lotteries, etc.) or building something that can reduce production costs (i.e. highways, railroads, refineries - gasoline prices, or research - find a cheaper way to make it by giving grants to universities). Then there is the tax on savings which takes about a year to see effects, but has historically worked really well. Our low income and middle class are short on savings currently, but our upper class is not spending their money - they are hoarding it. For example, it has been stated that Apple has more revenue than the Federal Government. We need to encourage them to invest in the business sector. Former President Eisenhower understood this concept well, and he implemented a graduated tax rate all the way up to 97% on the corporations and wealthy, (amazing!), and had a hefty estate tax system in place also. He also had a 2% unemployment rate. Why? Well, it is pretty simple. If you are a Chief Financial Officer (CF0) of a company at a board meeting - are you going to want to tell the board that you gave the state/federal government most of your yearly net income due to taxes or would you want to say you reinvested into the company by buying equipment or hiring people so that the company would grow. President Eisenhower was a very smart man. The 2% unemployment was by design, not by chance. For those companies that didn't invest, well, their money went to build our fabulous highway system.
"Get Money Out" of politics.
ron: Good point. Guess the general attitude towards businesses is that they exist to support the taxing entities.
Ron...
If this congress/business relationship was a boxing match, the ref would stop it
Absolutely not true about running for office 365 days a year.. maybe 50 days a year acting like they are doing congressional business, 50 days a year making speeches, and 100 days a year at fundraisers. How to fix that? Get the Money Out, and cut their pay to represent the 50 days they are supposedly doing work, and cut their benefits to be like us working stiffs!
VA BlueRidge, What the hell are you smoking? Tax on savings? Seems like a 'death tax' without dying to me!
So, you are saying tax saving but you fail to realize that you paid taxes on earnings and only were able to have any savings until after you paid income tax. Thus, the government is entitled to tax you AGAIN just because you have the money! WOW! Obviously, you have no savings, thus no big deal for 'the other guy' to pay taxes. This is anothe 'tax the rich' scheme. You are obviously a liberal because only a liberal would support double taxing those that have the money.
Who in hell would go into business with the kind of taxes you are advocating.
I started a business and invested savings and a good part of my 401K to finance the business. The paperboy was cashing my paycheck for the 1st two years. By the way 60 hour weeks were typical during the ist 2 years.
Under your plan, now that I have a very comfortable living, I should pay taxes if I have savings? Meantime, 47% of wage earners pay nothing in federal taxes???And, where will my taxes go? To folks who do not work and get unemployment, are on welfare, are receiving (falsely) disability or other government 'dole'? Yeah, I'm all for that, you dolt.
I'm a Republican, who has participated in 5 start-ups, and 3 of those start-ups were bought out by billion dollar companies. So, I used the wrong word. Change "savings" to "net income". What I see happening, is that large amounts of net income, year to year, are being saved, instead of being spent to build and restore our economy. It obviously isn't fair for an engineer to pay 38% on their gross salary, when the average for a multi-million person is approximately 17% now. The taxes being collected from our big businesses is historically low also.
The point is that we need to provide incentives for those businesses that have large stock piles of money in the tune of multi-million/billion to start investing them in their business, or if they feel they can't expand presently, then they should be taxed to help build the infrastructure of this country, so that they can expand in future.
For example, our railroad is not world class, our ports are not the best in the world, we need to build oil refineries to bring down the price of fuel (trucking is suffering). It is not acceptable to say they are waiting, they are unsure, the business climate isn't good, or the health costs may be too high in the future. If our big businesses can't lead us out of this recession, then we can tax them, start rebuilding our infrastructure into the best in the world. I don't like not being first. It is unAmerican. We need leaders and entrepreneurs, not bean counters who whine that they are afraid of the future. If our business leaders can't see the trees from the forest, then move aside, we will give it to those of us that can, who will take this country into the 21st century, and get our people back to work, and provide a future for our grandchildren.
took a couple of re reads to digest what you are saying but I do agree. Large corps are hoarding cash, if I had I would now with the uncertainity out there. Consumers are the main source of our economy to get goin, without consumer demand everthing is DOA. So you may be right or at least a starting point.
"New federal data show that the number of small bank loans to business has fallen to the lowest point in more than a decade, cutting the flow of money to a sector that's usually a job-creation powerhouse."
Mr. Boehner and Mr. Cantor, I thought that this was one of the groups of businesses that you strongly supported? What bills have you passed in the House to help the small businesses with this problem? Maybe you haven't because they do not all belong to the extreme libertarian 1% group.
DJJ, let's not try to rewrite history...the House has been passing jobs bills, etc., for the past year; the problem is that your boy, Harry Reid, won't let any of those bills come up for a Senate vote! Your outrage needs to be redirected to the real party of no, the real obstructionists, the Democraps!
jwilson, I don't know what bills you are talking about, but they sure as hell weren't job bills. Yes the Republicans called them that, but all they were doing was putting more money into the corps pockets. They weren't creating any jobs. You know that, and I know that. That is why they didn't get voted on.
verno -
Where did you get your info? And what are the HB numbers you are referring to. I will check it out first thing tomorrow morning.
Of course banks won't give out loans to small business... our government has said they would even the playing field and what better way than to force (sic) large corporations to seek deals out of America.
Destroy small business is the goal... P as in period.
The US Stock market, with it's multiple personality, should have been voted "Times Magazine" Person of the Year.
The real problem is that through the Fed, the Federal Government is
taking the lions share of available funds held by banks to finance the
government deficit. Banks have been required by the Fed to "shore up"
their balance sheets by buying government bonds to soak up the excess
money supply being created by deficit spending. It is a matter of risk.
Would you rather have a guaranteed 2.5-3% return on your investment or
take a substantial risk lending to small businesses for maybe double that return?
thanks obammy. sheesh.
Small business will only borrow money if they are convinced that there is a good opportunity to grow and prosper. Being successful is not the trend in small business now. People in small business know that they are an endangered species and they are just operating with the thought that they may not be in business in 5-10 yrs. This administration and this country really doesnt care about the business atmosphere....expecially towards a segment that cannot afford to make big political contributions.....The politicians are hurting the country with their anti business attitudes, but why should they care? They dont see any money coming their way...
Now I can agree with some thing's that Republican posters say but how can anybody fix there fingers to type the President doesn't care about small business's when he has given over 17 different small business's tax cuts since he's been in office. On top of that he gave small business's employer tax breaks for business's that make less then a billion dollars in profit if they hired unemployed workers in his jobs bill that republicans have torn apart. In other words THE PRESIDENT KNOWS that small business's are the way to get this country moving again but he knows he needs both parties trying to push legislation to help.
You should ask a few small business owners how much confidence and admiration they have for this president. Small business is so foreign to Obama that he has no understanding of the situation...and he couldnt care less.... It is easy to make offers that nobody wants or can afford.
Jeffrey, this is a perfect example of how people in general don't understand economics. People and businesses DO NOT make long-term decisions based on temporary fixes.
Who cares if you get a small tax break this year when it goes right back up next year?
Why would you hire more people when you know in a couple years when Obamacare kicks in, your costs per employee will sky-rocket?
Why would you hire a long-term unemployed person over a briefly unemployed or currently employed person? You aren't running a charity to reduce unemployment; you're running a small business that can't afford to screw up much.
Obama's "small business" efforts are smokescreens to placate simple-minded folks.
I don't recall Steve Jobs ever whining about how he couldn't innovate and grow his business because the government was not granting his every wish. FYI: "Real Titans Don't Whine"
I live in a small, rural town. In the 3 years I have been here I have seen numerous small businesses go boom then bust. Usually it's a doomed business from the start, such as opening up a retail store catering to teenagers thinking that parents would keep handing out the money to their kids to buy that kind of clothing. I have also seen small businesses not protect themselves from theft and fraud within the company and employees end up costing them thousands or hundreds of thousands of dollars.
I can see why banks are not lending anymore. Yes it could be greed, yes it could be a anti-business atmosphere, but I think the fact that banks will be feeling the pain of a loan default plays a very large part into it.
Once again with vigor: This is disgusting! There is something very wrong with this picture. While I'm not into conspiracy theories, I do see that "the big guys" have all the power these days and see this as a good opportunity to knock off a lot of the little guys that might cause them competition in the future. I mean, this is business and this is how business is done: dog eat dog. This is also a good way to stir up more discontent, so it is doing double duty. It is very selfish and self-serving, but in business, that is not merely "ok", it is rule number one: compete and beat the crampola out of anyone that raises their head. Friedman sucks, BTW.
And no, I don't buy for one second that this is due to the Obama administration telling the banks not to loan to small business. That has to be the lamest excuse to blame Obama I've seen since well, Perry last opened his mouth...ok so that wasn't that long ago, but you get my gist.
Hey libs, get it through your thick skull. Banks don’t lose money. Businesses don’t lose money. If you raise the cost of doing business by rules and regulations, you pay. That’s right, YOU, in higher prices, fewer choices, higher fees and tougher to get loans. You are the casualties of class warfare. And when the politicians use the words "tax the rich" to get your liberal mouths drooling over another freebie, it is code for more taxes for the middle class. It has always been that way.
Road Warrior, even though the following is someone else's words, I truly believe them:
I am in small business for 33 years and I don't need to borrow any money. And I hired more help. So what is the point.??
Comes down to too big to fail to too small to care.
This is the problem with the way our people view Democrats. Often issues like the big bad banks are blamed on Republicans for coddling Wall Street. The fact is regulations like Dodd-Frank only make Wall Street and the government bed-mates. The game then becomes things like big banks using government to shut out their competitors through other regulations.
The real losers in a burdensome regulatory environment are not the big companies. Yes, the regulations might, might prevent nefarious actions from the big guys. However, the real losers are the small businesses and up and coming competitors (widening the market, dropping prices, and offering better services) to the big banks because they cannot overcome the financial burden of high taxes and regulation.
Democrats have created "Corporate America" by effectively increasing the amount of capital it takes to start and maintain a business and by ensuring big companies with bad practices do not fail. The big guys can survive the extra costs (especially with a bailout). The little guys cannot.
Very good post, Matt -- very good commentary.
And on the same msnbc front page, a video titled "Signs of Economic Recovery Slowly Showing." Seems like somebody has reconstructed the Tower of Babel.
So true. I smile every day when I see headlines online proclaiming "market set to rise (or fall) because..." and then check where the Dow is only to have it be diametrically opposite!
Chaps my hide that the Big Banks got zillions in bailout money with the goal that they'd create new loans only to see no easing for small business loans. Makes it very hard to expand thus very hard to hire. Instead, I'm forced to use my own capital which means slower and smaller expansion and less hiring new help. Sad.
Someone above made a great comment about banks using the capital to expand their branches. Gone are the days of 4 corners worth of gas stations; perhaps soon gone will be the days of 4 corners worth of Starbux; look out for 4 corners worth of Big Banks in every town in the USA.
Lending to small business is declining. This is a trend of the past 30 years. It is not a new thing. The banks have been lending to the consumer instead of the businesses. This is part of the banks troubles now.
In the past, the banks used to hold their money mostly in US treasuries. That is why in past crisis they could remain solvent even if other assets lost their value. Their US debt would still be secure. Loans to consumers are backed by an asset such as an house. Today the banking industry is invested 95% in consumer loans and mortgages. This is why the banks were insolvent when the housing market collapsed and required a bank bailout.
Here are the deflationary problems we are facing today:
www.tradingstocks.net/html/prepare_for_market_crash.html
The loans made to consumers are non-self liquidating. The consumer consumes. The consumer does not create value. Their ability to pay mainly depends on their job. Consumer loans are not put to use to create new value in the economy. On the other hand, loans to businesses are used to produce new value, to employ people, and to earn money so that the debt can be paid. These are self liquidating loans. And we have very little of them left now.
Banks see this as a deflationary collapse and they do not want to lend. Deflation occurs when total debt reaches it's growth limits and borrowing stops. Here is our debt problem:
www.tradingstocks.net/html/inflation_deflation_credit_bub.html
Once deflation starts, it is hard to turn the boat around because:
1. FED makes credit available. [Yes they do]
2. Banks must lend. [No they don't, because they don't think they will get their money back]
3. Borrowers must borrow. [No they don't, because they don't think they can pay it back]
4. For price inflation to happen, consumers must spend extravagantly and chase too few products with too much money. [Consumer is a saver now]
The summary of the problem is that the entire nation has borrowed from the future and never paid back for many decades. When the future arrives, the value of what was borrowed in the past, will be deducted from the economy, first with a deflationary collapse, possibly followed by hyperinflation if the FED prints too much money.
There is no free lunch. Economic crash cannot be avoided. What was borrowed will be paid back. It can be postponed by more borrowing, but that only makes it that much bigger once it arrives. Printing money only changes who pays for it, possibly raising the total amount America has to pay.