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View Full Version : Economics Bernanke Says `Creditworthy' Small Businesses Can't Get Loans


petegz28
07-12-2010, 03:49 PM
http://www.bloomberg.com/news/2010-07-12/bernanke-says-banks-must-do-all-they-can-to-get-loans-to-small-business.html


One problem banks face is “healthy borrowers not wanting to borrow,” said Kevin Watters, chief executive officer for business banking at JPMorgan Chase & Co. The New York-based lender is “trying to get borrowers off the sidelines,” he said.

Now, riddle me this, why would healthy borrowers want to become "un-healthy" by taking out loans when their business is not increasing???

This is yet another example of how throwing money at the job situation doesn't fix it. Until Congress sacks up and creates a job creation friendly environment this is going to continue.

"Jobs" is really starting to become the 4 letter word that will plague this administration.

The Mad Crapper
07-12-2010, 04:47 PM
"60 seconds in a minute... that can't be right"...

Rain Man
07-12-2010, 10:21 PM
Every time the Feds want to "help" small business, they offer to loan us money. Most businesses don't want loans, they want a positive business environment.

petegz28
07-12-2010, 10:22 PM
Every time the Feds want to "help" small business, they offer to loan us money. Most businesses don't want loans, they want a positive business environment.

What a fucking concept!!!

notorious
07-12-2010, 10:29 PM
Every time the Feds want to "help" small business, they offer to loan us money. Most businesses don't want loans, they want a positive business environment.

This.

What blows my mind is the criteria required to be considered for a loan.

It is so high that if you meet their criteria you don't need the loan in the first place. ROFL

WoodDraw
07-12-2010, 10:30 PM
That's pretty selective quoting when you consider the rest of the article deals with the struggles of small businesses to get credit, and your one quote comes from a fucking banking executive lobbying for a bailout bill.

You don't think the ability of small businesses to obtain credit effects their hiring practices? Where did you get your economics degree? Fuckwhit academy? That's Econ 101 stuff.

notorious
07-12-2010, 10:36 PM
You don't think the ability of small businesses to obtain credit effects their hiring practices? Where did you get your economics degree? ****whit academy? That's Econ 101 stuff.

You are correct. All business owners would be in heaven if they could make enough money to expand without credit. It is possible but it would take a loooooooooooonng time to accomplish, especially in this economy.


The typical way to grow a business is loans, cash flow to make payments, rinse and repeat.

WoodDraw
07-12-2010, 10:37 PM
Here's a much better article from the AP that at least attempts to address the nuances of the problem.

http://www.nctimes.com/business/article_efa5937d-313e-582d-8ff9-15f9fc93f2f5.html

"I wish I could conclude this wrap-up with a list of the three or four things we could do to immediately unlock small business lending," Fed Governor Elizabeth Duke said at the conference. "But the problems are numerous and complex, and they will require creativity and persistence to solve."

petegz28
07-12-2010, 10:40 PM
Here's a much better article from the AP that at least attempts to address the nuances of the problem.

http://www.nctimes.com/business/article_efa5937d-313e-582d-8ff9-15f9fc93f2f5.html

Here is an idea, lower if not eliminate the taxes on small business. Making it cheaper for them to do business will do more good for everyone then expecting them to take out loans to finance business they don't have

notorious
07-12-2010, 10:41 PM
Here is an idea, lower if not eliminate the taxes on small business.

Speaking for myself, being an owner of two small businesses, I agree. :) :) :)

WoodDraw
07-12-2010, 10:42 PM
You are correct. All business owners would be in heaven if they could make enough money to expand without credit. It is possible but it would take a loooooooooooonng time to accomplish, especially in this economy.


The typical way to grow a business is loans, cash flow to make payments, rinse and repeat.

And I'm by no means arguing the fault comes solely from the banks. My guess is that it's probably a combination of banks tightening lending practices and focusing more on larger, diversified borrowers, and small businesses reluctance to increase leverage and risk, especially at higher rates than they became accustomed to. It's a bitch of a situation, and one I'm way under qualified to discuss.

notorious
07-12-2010, 10:51 PM
And I'm by no means arguing the fault comes solely from the banks. My guess is that it's probably a combination of banks tightening lending practices and focusing more on larger, diversified borrowers, and small businesses reluctance to increase leverage and risk, especially at higher rates than they became accustomed to. It's a bitch of a situation, and one I'm way under qualified to discuss.

A business needs cash flow to expand. The economy is in hibernation at the moment, thus restricting the cash flow and most reasons for a business to take a chance.


On a side note I have done the opposite and became more aggresive during this recession. I expanded my business to 2 other cities and I am thriving. My competition has pulled back, and by doing so it opened the door. Doing the opposite of the majority actually works in some instances.

WoodDraw
07-12-2010, 10:53 PM
Here is an idea, lower if not eliminate the taxes on small business. Making it cheaper for them to do business will do more good for everyone then expecting them to take out loans to finance business they don't have

"Finance business they don't have." That's just a loaded statement. You assume that all credit is bad or equivalent to playing craps. And that's simply not true.

And a bill is before Congress right now that includes small business tax credits to help spur lending, and I fully support it.

petegz28
07-12-2010, 11:02 PM
"Finance business they don't have." That's just a loaded statement. You assume that all credit is bad or equivalent to playing craps. And that's simply not true.

And a bill is before Congress right now that includes small business tax credits to help spur lending, and I fully support it.

Do what? WTF would a business that is suffering from decreasing sales take out a fucking loan??? You're so far off base with your comment I don't know what to say. Credit is good. But only when it can be paid back. If a business is suffering from lower sales volume taking out all the loans in the world isn't going to make more people walk through the door.

And understand this, tax credits are not or should not be used to incentivise lending but rather to incentivise growth of the business. The growth will take care of the lending. But simply trying to jam credits through to get a business to borrow is as fucked up as a $3 bill.

WoodDraw
07-12-2010, 11:29 PM
Do what? WTF would a business that is suffering from decreasing sales take out a fucking loan??? You're so far off base with your comment I don't know what to say. Credit is good. But only when it can be paid back. If a business is suffering from lower sales volume taking out all the loans in the world isn't going to make more people walk through the door.

And understand this, tax credits are not or should not be used to incentivise lending but rather to incentivise growth of the business. The growth will take care of the lending. But simply trying to jam credits through to get a business to borrow is as fucked up as a $3 bill.

You're applying what you think in your mind is the typical small business, no doubt colored by your political beliefs, and then applying that to a macro economic level. In reality, each small business has it's own economic and social situation that determines its actions.

Your model simply doesn't back up what happens. In order for businesses to expand, they have to be able to have access to credit. That's true in great economic times and poor economic times. The Fed isn't talking so much about small business funding because they want the Obama administration to ask them out for a second date and maybe get lucky at the end of the night.

That's not to say that all businesses should get an open line of credit. But most economists would agree that lending for small businesses is currently below what economic conditions would typically call for. And certainly to continue any type of recovery, you have to increase the availability of credit to businesses.

petegz28
07-12-2010, 11:52 PM
You're applying what you think in your mind is the typical small business, no doubt colored by your political beliefs, and then applying that to a macro economic level. In reality, each small business has it's own economic and social situation that determines its actions.

Your model simply doesn't back up what happens. In order for businesses to expand, they have to be able to have access to credit. That's true in great economic times and poor economic times. The Fed isn't talking so much about small business funding because they want the Obama administration to ask them out for a second date and maybe get lucky at the end of the night.

That's not to say that all businesses should get an open line of credit. But most economists would agree that lending for small businesses is currently below what economic conditions would typically call for. And certainly to continue any type of recovery, you have to increase the availability of credit to businesses.

You have it right except for one, little, teeny, tiny aspect. In order for business to expand they have to have the business to justify expansion.

Let me put it another way, if less customers are walking through the front door, there is no call for expansion, therefore no need to take out more loans.

Loans don't make it cheaper to do business. Which is exactly what small business needs right now.

And I am glad you and most economnists have figured out the problem. What I am telling you is how you fix it.

And please, stop with your idiotic assumptions about why I think the way I think, based on my political beliefs and all.

What it comes down to is jobs, son. JOBS. And you create jobs by creating an evironment for companies to create jobs. Which starts with making it cheaper to do business, thus they can charge less for their product or service, thus creating more demand, thus the increased demand creates jobs and growth and expansion which creates the need for loans.

For the final time, giving a business that is suffering a decline inrevenue a tax credit for taking out loans is not going to fix the problem because it doesn't increase the revenue. It increases their debt. And if more people aren't walking through the door then all you did was cost someone their job on the long run.

WTF good does it do for me as a business owner to take out loans to expand when I can barely keep what I have going because the business isn't there?

HonestChieffan
07-13-2010, 06:52 AM
Just a free bit of advice:

IF you are considering hiring a new person and you need to go to the bank to borrow to fund that addition, stop. Slam your head into a wall till you are back to normal.

You borrow to expand/improve/stock. You do not borrow to hire someone.

Government has no idea what happens in a day to day business of any size.

Velvet_Jones
07-13-2010, 01:56 PM
I am having a flashback from the '70s where the Carter administration promoted borrowing by farmers to increase the size in order to compete better. Cheap loans were offered. It basically killed a lot of family farms. The weight of the debt was overshadowed by any gains made by being larger. When crops were plentiful you could not sell them at a reasonable price and you lost money. When crops were bad you just lost more money.

Anything the federal government promotes should be viewed with a huge amount of skepticism. They could fuck up a county fair.