Credit crunch hits small businesses
If the inability to land a bank loan is preventing you from expanding, you’re not alone. Have you had trouble getting financing for your business? Has making payroll been a challenge? Is your line of credit too low? Tell us how the banks are treating small businesses.
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DiggSmall business with proof of upcoming work and good income stream. Over 25 yrs exp. Never behind on any payments, lots of equity/assets. 696 credit score turned down today by Huntington Nat’l Bank for a line of credit & consolidation loan.
I have purchased a franchise business and have not been able to get SBA financing in 6 months. I have been told by the larger banks that they dont do SBA loans for start ups that have not been in biz for at least 2 years. I have been told by the smaller community banks that they cannot use my assets because they are in California and I live in Georgia. Ive been turned down 5 times, had lenders sit on my application for weeks only to tell me they cant do it after telling me initially it looked like a go. Im not sure what other options are out there….The franchise fee has been paid and there are no refunds under any circumstances as the contract states…and thats 25k!
We were told at our Credit Union that our loan would be slaved to the prime rate, I believe it was 1.5% above prime. We were under the impression that it would be a fixed rate at that lock in.
After spending oodles, and many long hours, while working full time, we got our property, clearance from the DOT,town hall, surveys, had our Civil Engineering drawings created and submitted, we find out that it is a VARIABLE rate loan. We are then told that, unless you could pay it back in say, 5 years, there are NO fixed rate loans available for business in THIS COUNTRY, and this was in 2005, when things were good. How come nobody is talking about this crisis. We are in the variable rate loan, and it is fine for now, but we could easily be forced into bankruptcy at any time the prime goes too high. Tell me, why can’t an American, get a fixed rate on a good solid business model, especially when the value of the property/building is worth 3 times the loan value? Anybody?
I run a small General Contracting business in North Carolina. We have experienced the collapse of several lucrative projects due to the local banks inability to make loans to our clients. The comments are all the same, “maybe the SBA can help”, “the loan needs more equity in the deal”, “the business is too risky for this economy”, and on and on. It just seems that the banks don’t want to lend money. When is the national bailout money going to hit main street? If people are not allowed to borrow money, this nation will come to a screeching halt and the recession will become a depression.
We have been trying for months to find a bank that will even present to the SBA. We have tried all banks from the largetst public to the smallest community banks and all try to fit us into their own internal programs while saying the SBA requirements have tighted and we would not qualify.
We are an enviromental contractor and have had SBA loans in the past. We have a large volume of goverment transportation contracts now and even though we lost money in the residential housing market in the past we still have the ability to repay any new loan. No matter what the size of the bank they all are not interested in SBA loans. I guess this is a sign of the times.
I have learned that SBA backed loans are small margin products for banks and the banks do not want to mess with them so they advertise as an SBA lender to get people in the door and screen them for in house lending products. Most will never even present to the SBA. They do not make enough money for the hassel they have to go through to secure the loan. Who knows? All I know is we are a customer trying to get to the SBA and can not.
It has been a 6 month nightmare so far in trying to get an SBA loan for a franchise start up business. We have had banks that sat on our application for three months, saying everything would be fine then declining when we finally put pressure on for them to give us a decision. We had banks who have given verbal approval only to change there mind over the weekend saying either they would only finance a going concern or as in one case that they would not finanace any business in Michigan. Remember this is after they had our documents for 4 or 5 weeks and had verbally approved the loan. The franchisor who I am dealing with normally arranges these loans. They have told me that it has never been so hard to get an SBA loan for their franchisees.
Thank you very much for your post. Absolutely excellent information and very useful for me. Great done and keep posted. Looking forward to reading more from you.
CreditGetWealth.com
The issues you face are no different than those of any small business owner in this environment. The fact that you are a MBE or SDB is not the issue so stop hiding behind it. You write rubber checks and then whine because you are having trouble getting a loan. Why should any lender believe that you are willing and able to make payments if you already have a history of bouncing checks?
You talk about being duped and another vendor is being paid for your work, as well as not being paid my a “majority” firm for work performed.
The information that you have posted would tend to indicate that you are high risk due to the bounced checks, that you lack the necessary skills to manage your business, your finaces and collect on open invoices. Why should any lender want to make a loan to your business? You are HIGH RISK and it has nothing to do with the fact that you are a minority business. As a lender I wouldn’t touch you with or without an SBA guarantee because you show no reasonable expectation of being able to operate your business successfully with your current management team.
You are hi
Contract Design & Development, LLC (CDD) is currently seeking a business loan to construct a department of transportation project (I-895 /I-95 Interchange) in Baltimore Maryland via a DBE/MBE subcontract.
CDD is scheduled to meet with Suntrust Bank’s branch manager first to reinstate CDD’s business account -after it was closed for overdarfts- and to apply for a line of credit ($50,000.) or a small business loan, less than fifty thousand, for operating cost.
CDD’s contract is with a local established highway contractor who has agreed to assist CDD by paying early (bi-weekly) and reducing the rention by fifty percent. Although this will be a big help the real problem for CDD CDD is immediate cash flow. CDD is strapped for cash due to non-payment by a Baltimore based signs & graphics contractor who had a federally funded Metro contract that CDD completed in St. Louis, last year.
For a certified disadvantaged and/or minority business enterprises, such as CDD, securing a bank loan or line of credit has become nearly impossible and with some majority firms willfully taking advantage of MBE firms by simply not paying them for their work has caused great harm to many. Not paying any business is tough but particullarly bad for a small business and even worse for a minority business enterprise. It could greatly harm or even force a business to close.
CDD, a government certified minority business enterprise, was dupted into financing a portion of Gable Signs & Graphics, Inc’s, a majority business, St. Louis Metro “Signs & Graphics” contract. As it stands, Gable Signs & Graphics (GSG) was paid for work that CDD performed by Bi-State (Metro), a government entity and MBE certifing agent for CDD. Metro and Gable left CDD holding invoices totalling over three hundred and fifty thousand dollars.
GSG has CDD money in it’s bank account while CDD is forced to seek a loan.
So, not only does MBE have to face the credit crisis we also continue to fight discrimnation and neglect from some governmnet agencies (Metro).
The current credit crisis has turned most banks into money horders and some businesses into theives.
I sure hope Barach Obama will change this. Yes we do.
I will follow-up and let you know if CDD was able to secure the line of credit or bankm loan from Suntrust Bank.
On this comment page I’m seeing a lot of issues that folks have with getting an SBA loan. The first problem most folks have with getting an SBA loan is that they get connected with the wrong SBA lender. I’ve heard untold numbers of stories over the years from my clients about ficticious SBA requirements that their bank told them they needed to meet. Half the time it’s probably their lender lying to them, and the other half it’s lenders not knowing the right answers. Find a lender with a good track record of making SBA loans, or at least a lender you can trust to tell you the truth. Most of these stories posted on this comment section aren’t even possible with SBA loans. You cannot be approved and then denied later. SBA loans are not ‘hard’ to get – my typical client works at it for a month or less. The SBA is not hard to work with – they’re often much more liberal in their lending standards than are most banks. And once and for all – of course the SBA (and your bank too) want a lien on your home if they’re making a loan to you that isn’t fully covered by the collateral in your business. That’s called prudent lending and is good for our banking system and our taxpayers who back up the SBA.
Banks are required to take all collaterial avalable up to the value of the loan. Personal guaranties are always required! If you are unwilling to risk your personal assets for the business you should not be expecting the SBA or anyone else to assume the risk. I you are so sure of your business then put up your money where your mouth is and accept the personal guarantee. If you feel that is too risky then do not expect the bank or the SBA to assume the risk for you.
Find out from the bank why they declined the loan. Did there underwriting criteria change in that time frame? Did your credit score of other information material to getting the loan change? I assume there is more than one bank in your area, take your project, and current copies of credit reports and credit scores to other lenders see if there interested.
On what do you base your statement that you are having trouble with the SBA? Has you lender approved your loan contingient on approval of an SBA guarantee? It may be beneficial to contact your local SBA district office ans ask then to explain the SBA guaranteed loan program to you. This will assist you with understanding the process and it may assist you in identifying lenders that would be more receptive to your project.
Hello sir my name is WIll Jones, I am a financial consultant. I recommend seperating your personal credit from your business credit by forming a corperation and hiring a professional firm that are experts at positioning your company to be in compliance with the lending market requirements. Trade credit is a great way to go so you can use it as a great reference. visit this website. http://www.bcscredit.com. David Gass is an expert on business credit. or call 1-866-254-6076 ext. 133
I am a small trucking company in Ohio, have been trying for over a year to get some debt restructuring done with no success. Recently I tried to refinance two of my trucks which have about $160,000.00 equity available, but again no success. With every day a struggle with payroll, diesel cost and maintence, payroll taxes and insurance it is tuff, but so far no one seems to care.
All I need is $400,000 to start my Auto repair biz. I already invested $80,000 of my own money. My bank told me on Friday that the SBA loan that was originally approved 5 months ago fell through.
I am not sure what I will do now. Any advise out there?
I am in the process of purchasing an office condo under the SBA 7A loan program. I too was asked to use my house as collateral. Everything was fine until this housing market took a dive and value of my house plummetted $100K. I now can’t use my house as collateral and have to come up unexpectedly with $100K to put down.
Want to see a real small businessperson on the SBA? Click this link:
http://voices.washingtonpost.com/small-business/2008/10/start_them_up_and_theyll_never.html
Small businesses historically have benefitted from the SBA, but as times get tough, small business owners need a DIY bailout plan for themselves!
Enjoy! It’s a gift!
I can attest to this as well. We are in the process of purchasing an existing profitable daycare business that’s getting about $100k net. The selling price is $300k but it’s been very tough getting an SBA loan. As implied, the SBA should encourage banks to lend to small businesses, but instead, it’s the other way around. The requirements have been very stringent, and even though we are putting 25% equity, all 6 banks we have applied to are requiring us to put liens on our properties. On top of that, they have additional requirements apparently because they are considering us a new business, even though we are purchasing an existing business that’s been profitable for more than 5 years. Because of these additional requirements, even if we the lien is put on the properties, the chances of getting the loan is still below 30%. So we have to look at alternative ways of raising the capital. Capital One offers a $100k loan that doesn’t require a collateral (indicated on their website). We applied for that more than a month ago. We’ve made follow-ups and all we got was their loan department was reviewing it and that they needed additional documentation like additional background reports on stakeholders, etc. Well last week we got word from them and they want us to re-submit our application and go through the same process again. They said they don’t know if the applicant’s financial situation have changed so they want to start over. It’s getting very frustrating.
I have put over $700,000,000.00 in my business of my family money, we have positive cash flow for our business, were willing to put our unmortgaged house up for collateral and have, by the way credit ratings in the high 790’s and still had problems with the SBA. Obviously you have never tried applying for an SBA loan. And by the way, Mr. Long, small business is the backbone of this country and pays plenty of taxes too.
I bought an existing business in March which does pretty well and we have been posting month-over-month increases. But, this is my first jaunt into a retail-type business. For the past 5 years I have had real estate investments. Not a big player, but I do own a few rent houses and an apartment complex. Early last year I saw the bubble about to burst and did not purchase any more real estate. Now I am in the midst of refinancing many of these properties because they were with a bank that was siezed by the FDIC. I have had a terrible time getting refinancing due to owning a new business, real estate market jitters, and I also had a bankruptcy 6 years ago due to divorce. I went though about 9 banks before getting a yes. I still have to refi some more but it is a difficult road.
I disagree with the comment Grady made regarding the demand is down for loans, that is not true. The SBA has a program for small businesses who need working capital called the Community Express Program, the demand was been increasing, since it is a pilot progran SBA capped the program so lender’s could only do 10 loans per month. Why in this economy would the federal agency which is charged with the mission of helping small businesses stop the largest and fasting lending program to minorities and small business owners in the country? The volume amount is only 12% of the total 7(a) portfolio and less than 2% of the dollar amount. Especially at a time when small businesses could really use the capital. After all everyone says Small Business is the backbone of our nation, they why won’t the SBA help small businesses? I have seen the demand increasing for the request for loans, but SBA has made it so difficult for small businesses to get the loans by curtailing the programs most needed and it comes with paid technical assistance by the lenders. The increase in demand is across the United States. Main Street is still waiting!
Love these small business articles – all talk about poor entrepreneur, and the big bad bank/SBA. Let’s look at it from another perspective, the taxpayer. Entrepreneur wants to take risk, buy/start up business, but doesn’t want to risk his own assets, but is okay with sharing the risk among 300 million US citizens that are guaranteeing the loan. Me, Mr. taxpayer, doesn’t quite see the equity in such an arrangement, as Mr. Entrepreneur has most to gain, least to lose. Mr. Taxpayer is okay with helping Mr. Entrepreneur, but Mr. E better have some skin in the game, such as his house, before Mr. T participates. That is how capitalism works.
You should be ashamed of yourself. If clinton pushed subprime loans why did not your dear bush put a brake on it ? The republicans had the house, the senate and the white house. Why did they let it go thru 2006 ?
So ypu think Oama wants to increase taxes on small businesses ? Who brought up on you this economic situation that will put you out of business? I WAS a republican- a hardcore one for that matter. NOT ANYMORE. I dont think OBAMA is the best , But I think any democrat is better than any republican
To Evan from Louisville, KY : Sept 24th. You hit that right on the head! The majority of our population does not realize the reality of our monetary system. The feds control everything in our education system from first grade to the Universities. Ever wonder why we haven’t been taught how the monetary system really works? It’s because they don’t want you to know! We have been living in deception all these years benefiting the Feds in which they are a private entity desiring to control the world…..
We, the people in the United States of America, need to overhaul the Central Bank and the Federal Reserve Sestem to make our money a value based system rather than a credit based system.
The credit based monetary system is a self destruct system in which is what we are seeing today!
We own a hardware business and have for 32 years. During that time, we have stayed with the same bank, never missed or been late on payments. We have been asked to “exit” this bank because they are now owned by a larger bank in another state that does not want investments in retail. So far, we have been turned down by 5 banks, that have all told us a month ago, our deal was a “no brainer”. We employ 80 people who are all going to be on enemployment if we can’t get refinancing, and our 32 years of hard work will all be for nothing. This is a very sad time for America, and a very scary time for all of us. If we loose a majority of our small business , the very ones that employ people, and pay our taxes and support our communities, the future is indeed bleak!! And to top it all off, Obama wants to INCREASE taxes on business
Wow. What a misleading bunch of misinformation you’ve arrayed here. Of all the sob stories posted, not one has to do with the so-called “credit crunch.” Not one of your business owners said anything about being affected by the current investment bank crisis, but instead by the nine-month recession as a whole and rising energy prices, neither of which will be solved by the $700 Billion giveaway to Wall Street. Yes, retail is down. It’s been that way for quite some time, even before AIG et al went belly up.
Credit SHOULD be cut-back. Overextended credit is what caused this mess in the first place. And really, if credit was going to be frozen anywhere, wouldn’t it make sense to freeze unsecured lines of credit (i.e., credit cards) first? Yet, offer after offer still comes to my mailbox everyday. Perhaps that is because credit cards are provided by REAL banks, not these investment banks that have gone the way of the dodo.
As a matter of fact, the stock market has already rallied past Monday’s losses and the dollar is surging. Take a look up, CNN. The sky is not falling, no matter how bad you shill for Wall Street.
Hy,
You don’t have an idea about what gonna happens if those guys don’t get the bailout. Who gonna pay the bill is Main street, so much more than Wall Street. This is not about leave the bud guys alive, this is about leave you, the small bussines and workers, alive..
Anyone want a viewpoint from the UK?
I think the whole bailout saga is a stupid thing to do. Banks took on unbelievable risks with utter disregard for the import of their actions, all in the name of profit.
Now they should be brought to account – not bailed out and allowed to continue along their merry way. Something does have to be done and fed intervention is necessary, but 700 billion pumped into the banking system is not going to kick-start inter-bank lending, nor is it going to rescue your economy (or indeed ours!).
And, once again, as in ‘29, the poor will suffer the most.
$ Trillion for parallel interim banking. No bailout
The government should be directly loaning money to creditworthy businesses & homeowners. If it does want a banking system in place then create a parallel one, while allowing all the irresponsible banks to get closed out & replaced by strongly regulated new ones. This cleansing process may take months or years, but will avoid rewarding the ones that created the trouble in the first place. The government can keep itself secure by being first in line on recovery of these loans secured by assets against the loans and 100% personal liability of all the business’ directors/executives and homeowners.
Allow the irresponsible banks gets foreclosed & their executives driven out of jobs.
I have a small business that employee 10 people down from 15. We have had to reduce our work force because of the downward trend in business. Our company is showing a reasonable profit this year to date, the biggest challenge we are facing is our account receivable. If our customers do not submit payment in our stated terms, we find it hard to pay our vendors and our staff. If the credit crunch closes down our credit options, we would be in jeopardy, because of a cash flow issue not a profitability issue. This would send 12 more people to the unemployment line, vendor’s uncollectable receivable will increase putting them in the same boat we are in. That is the true meaning of trickle down economics.
How about giving the 700 billions back to the people that have been doing the right thing all along? SMALL BUSINESS OWNERS! We pay our taxes, we give jobs, we grow…and we don’t steal like the Big Boys have done for the past few years. This is the reward for doing the right thing. We bail these losers out, our businesses are hurting, can’t get financing, but all the big shots CEOs that made millions at our expense sit in their mansions with a fat bank account. What’s wrong with this picture? Why do we put up with it in this country?
I completely disagree. Small banks are in big trouble,too. Think about it, a small bank doesn’t have the capital to fall back on. When Main Street bank doesn’t get any cash flowing through the doors because its loans are in default, what do they do to meet their reserve requirements? How do they lend any more? They borrow from other banks. When banks stop lending to each other the Small Community banks are closing their doors.
I’m just an individual who really hates the continual calls that I get from lenders trying to give me loans that I don’t want nor need. I wish that they had no money to lend!!!!!!!!!!!!!!
The large banks, Bank of America, Chase, etc are not lending money because they sell all of their loans. Since no investors are buying loans, they have no funds to lend.
The small banks have always made loans and then kept those loans and serviced them to provide the best possible customer service.
This current credit crisis gives the small banks a chance to regain business that they lost years ago because the large banks undercut their interest rates.
You reap what you sow. Large banks have always treated customers like a number. The small banks have always treated customers like their next door neighbor.
The other great reason to do business with small banks is that they are all American owned.
In 1988 I borrowed $2500. to start my graphic design business. I paid it back in 3 months with my “earnings” (now there’s a concept), and have been profitable ever since. I expand according to how much money I actually make, not how much I think I will make, so I do not borrow.
The problem with this economy right now is that there is too much borrowing and not enough earning.
Business so slow trying to get a loan i still dont know if i can get it
If the market is crashing, how come the DJIA closed down only 29 points today? Can’t anyone read the market for themselves and see that this is all one big Bush created crisis? Does anyone remember how we got into Iraq? Can you say “mushroom cloud and WMD? Think for youselves and stop letting the Government tell you what they want you to hear. After all, it is YOUR money they’re talking about – not theirs.
This bail out will make a lot of sense if it is stipulated that banks have to renegotiate the terms of existing mortgages. For example make the teaser adjustable interest rate that got people into trouble in the first place fixed for 30yrs. The will allow people to stay in their homes, and free up extra money for them to spend and jump start economy. Although one will hope people will saving more.
The whole problem started in 1999 when Clinton pushed through sub-prime mortgages so that more people could by homes….unfortunately, the plan was not adequately policed.
How will mainstreet be able to get qualified for a loan? They have had late payments and defaults so there credit scores have suffered. This “bail out” is geared toward the rich and stable. Small buisnesses that have missed paying employees and vendors have also fallen out of the running for loans. Banks are going to be more catious than ever and not lend to the people that need it and select only safe loans. Mainstreet will still be in the same place. Is this an attempt to save the final days of this president or set up sec. tres next job in the privatge sector. To much grandstanding and not enough reality. We all better learn chinease.
It is simple, if you need a loan… you don’t qualify. If you qualify, you don’t need a loan. End of story.
Why not give everyone in the country $1 Million dollars and save the taxpayers $699.7 Billion dollars? I can live off of that as well as plenty of other American Families
My family and I own a motel and we are trying to remodel the bathrooms because they are in very bad shape. We have paid off the loan on the motel and on our house in full this year and are debt free. The best offer we received was a variable interest loan from a bank at prime plus 8% which is ridiculous! We have never sent a late payment and have good credit histories. I can’t imagine how hard it is for ordinary people to get by.
WOW, seriously. So any business that has to borrow – to expand, update etc, should just shut their doors. hmmm I must have missed that one in my MBA classes years ago (or maybe they have changed the curriculum. The banks freezing lending has to be reversed or not will small business be hurt, but ALL business will be, which will then hit mainstreet with massive unemployment. Look, the banks really messed up, and the Republicans are with out question at fault – 6 full years of their leadership and 6 full years of deregulation – the only two things they can ever say is “tax cuts” and “derugulate” well now thanks to THEIR policies we will have tax hikes (oh yeah they are comming), and massive regulation.
The bailout proposal if it goes through, will be the greatest swindle in world history. Paulson and Bernanke, along with the Bush Administration are attempting to provide unlimited FDIC coverage for the Global Banking Casino.
The Casino’s CDO Ponzi scheme when poorly, and the masters are whining because their trickle up economy is trickling down.
The average consumer will be able to borrow from their local bank. The only downside is those poor Investment Bankers and robber barons won’t have the cash to leverage a buyout. Downsize and send the mice in search of new cheese.
This is just another Bush White House RoFD (Rumor of Financial Destruction)lies.
Everybody wants to either blame the financial institutions or The Fed. The problem begins with the person in the mirror. If your not paying your mortgage after you signed a contract…you created this mess and its on you. We are bailing out the banks because mortgages are not being paid. You want this to be fixed…make it a lot more difficult for people to walk away from a mortgage…For instance, if you dont pay child support the gov’t can eventually attack your paycheck which I am all for…how come they can not do that for the most expensive purchase an avergage person will make.
This country does not hold people responsible.
I have never had to borrow money to run my business, and if I did, I would quit. When you have to borrow money to run your business, than you shouldn’t be in business!
Why are you still building then? The market said stop building and shut down your operations.
The proposed $700 Billion bailout is totally wrong. If they pass the bill and money spent and foreclosure continues, they will be back asking another $1 trillion bailout. Use the money to buy foreclosed properties and also help people who are behind on mortgages and need help.
One mistake here will destroy the country completely.
The businesses that are healthy can make it through a rough few years. Those that are using credit for daily operations should not be doing that anyway and should consider closing the doors. Those that can survive will survive without this bailout and those that live on credit will have to change their ways….finally.
I did not have an issue refinancing out of a subprime mortgage and into a 15 year fixes (little higher rate but only about 1/2 to 1% above the going rate). After that, I cut out all other credit and have been doing fine.
I think this bailout is a really bad idea. There are other ways to deal with this issue (such as maybe offering FHA insurance to subprime mortgages and maybe allowing the banks to not have to mark-to-market their bonds). The banks took bad risks and their should be something that punishes them for doing so. To simply give them a blank check is to tell them that they can do whatever they want and the taxpayer will bail them out
The money is going stragiht into the pockets of the fed. reserve, which is a private entity that controls the money supply so esstientally the money is being sold to the government at interest. Thus putting us more in debt. None of are taxes are used for things that the people need, they are all used to pay the interest that we owe. The central bank is what needs an overhaul beacause it controls the people through debt. The goverment is nothing else then a facilator (it’s a collector of or money) for the central bank. The central bank in return controls every aspect of the world to a certain extent…
I say “RIGHT ON” Trey from OK. Our elected officials are the problem. They don’t have a clue as to what they are doing. They use NO common sense and only do things for the “Good” of their party. We need Term Limits now and kick some of these folks to the curb who have been in office for decades. They need to see what it is like to live in the real world and earn a living like the rest of us.
I am in the lending business, and due to the government regulations, my lenders had to make these low income loans to people who couldn’t even pay their rent, much less a mortgage payment, and on top of that at 100% loan-to-value.
As Americans we need to get a grip on our politicians Democrats and Republicans, and clean house. Also, stop all the personal attacks, if yo have made a mistake in your life and you run for office, your tomorrow’s news. Along with that, let’s start going after the news reporters that live for all of these ersonal attacks and pull out all of this “dirty laundry” of everyone but themselves. I think it’s time as a people we need to demand and expect major changes.
This bailout is just simply a bad idea and should not be considered. The market will fix itself…one way or the other.
It is too late to place blame, we must move forward with the bailout. I am a homebuilder in Wisconsin, credit markets have tightened so much that now my condo buyers can not get financing. This despite the fact the condos are a sucessful project, unfortunately the credit markets keep raising the downpayment required andnumber of units sold. Our market is challenging, however, our local market is suffering because of the overbuilding in Florida, Arizona and Las Vegas. Soon, very soon the entire mortgage market will shut down, the home building industry will lay off millions of employees. Pass the legislation!
I think “the” major mistake we’ve made is to allow a “debt industry” to emerge in the United States which has and is replacing our focus on the core industries that made us Great Americans!
Fees are generated from “more debt” and it becomes a pernicious cycle to create ever more mounds of debt to generate fees (which in many cases goes to pay the debt)!!
We’ve given too much credence to “debt management” and Wall Street (with their FICO scores) give us a report card on how much debt we can handle — almost like a race – get that high FICO report card so you can enjoy better debt!!
What happened to the “debt free” and paying off the mortgage? I remember having the loan payoff party where burning the mortgage was a symbol of freedom.
Wall Street has sold us a bunch of gunk and garbage which now is headed for the heap pile. This is like Ford, GM and Chrysler selling us cars and when we want warranty service they run to us for a bailout!!
America would be better without this focus on debt and it would certainly be better without Wall Street.
By the way, as it has always been, if you have wealth you can get loans — no problem!
Here’s what we should do with the
700 billion:
In a conference call with analysts yesterday, Stuart Miller, chief executive officer of Miami-based Lennar Corp., the second- biggest U.S. homebuilder by revenue, said Paulson’s plan wouldn’t stop home-price declines.
“The current stop-gap measures to aid hard-hit financial companies will be repeatedly frustrated by falling home prices and the securities that back them,” Miller said.
Ten percent, or $1.1 trillion, of the $11.25 trillion of U.S. mortgages are delinquent or in foreclosure, according to Guy Cecala of Bethesda, Maryland, trade newsletter Inside Mortgage Finance.
“The $700 billion theoretically would be enough to completely pay off about two-thirds of all troubled mortgages in the country,” Cecala said.
I agree 100% let the boys who have been doing their homework take over in banking. DD
If capatilism and the free market really work then there should be no need for any bailout of any kind. I’m sorry but the idea that we need to nationalise the financial sector is ludicrous if you truly believe in either of those ideas.
You can’t have it both ways, when you tell small business owners and home owners they deserve what they get in a free market, then you have no right to going running to the government when you’re lack of fiscal discipline drives your own business into the ground.
I believe the economy will suffer and suffer badly, but if the excesses of greed and cronyism aren’t paid for properly, then we’ll learn nothing. I also believe that bankrupting the US in order to save a few financial institutions is insane. We’re talking about giving away the money we use to provide health care, educate our children and build infrastructure, all because some overpaid executives decided to gamble their company’s money away on the stock market.
I can live without a new car or a new home for a few years. I can’t live with my kids getting no education and the our nations roads and bridges crumbling into dust.
Financing for my $500k retail operation is the primary business challenge I am faced with every day. Moreover, the financial institution that is currently my lender has been pushing to change the terms and conditions of my 5 year loan or call the remaining balance at what is now the end of the third year of servicing. This after they did so 3 years ago, in a move that still feels like it was nothing more than a way for them to generate fees. In addition they are now grossly over-collateralized. They are unwilling to extend a LOC, and their position makes it impossible to borrow from any other source other than at rates that make no business sense to consider.
The only time I ever hear from my loan officer is when they want something.
The whole situation has become so frustrating that I’d simply rather liquidate the inventory, close the business and pay-off the loan than continue to deal with them.
I don’t know about small business, but I get constant solicitations to refinance. I can get a loan with abosulutely no problem
Everyone completely bashing the banks are ignorant of the situation. The banks in some cases made poor decisions. No doubt about it…
But dont forget it was the federal government and fannie/freddie putting incredible pressure on them to lend money to low income borrowers. In 1977 the federal government began seriously pushing FI’s to make loans to “low income” and “minority” borrowers. In exchange fannie/freddie would help take them off the bank books(thank you democrats). The pressure was upped again in the early 1990s. And in 1999 the democrats decided to tack an amendment onto the banking modernization act further increasing these requirements (thanks again democrats). Then in 2002 the Bush Admin and the Republicans decided it would be a good thing to help “low income” borrowers and they increased the pressure some more. Then in 2004 the admin decided to tout home ownership at “record levels” (thanks republicans). Then in 2004 mr. Cox chairmen of the SEC decided to losen capitalization rules which resulted in some firms leveraging themselves to more than 30:1 (thanks republicans). In 2005 they also continued to encourage freddie/fannie to buy up loans. Freddie/Fannie told the banks “go ahead make the loans we’ll buy them, securitize them and sell them, and we can’t fail because we’re government backed”. Very few in the senate were paying attention but a few were, including John McCain who said this was distoring the markets and going to cause a financial crisis….umm noooo thats not possible. Making loans to people who can’t afford to pay them back is a service to the poor! We can’t not provide services to the poor. (thank you republicans!).
And to top it all of Senator Chris Dodd has received more money from FI’s and fannie/freddie than anyone else in the house or senate. On a per year basis Obama has received more money from them and is third overall on the list. But don’t worry there are plenty of republicans who have taken money from them too.
The problem was the undue pressure the federal government and entities put on the marketplace to make these bad loans to begin with and then buy them from the banks. Banks should have known better IMO, but the root cause of the problem was deregulation in a few areas that should have been left alone (capitalization rules) and regulation in the form of government quota’s for low income loans. To top it all off Dodd wants to increase funding for low income housing subsidies as part of the 700B dollar bail out. The very problem that got us here…unfreakin’believable.
While the banks bear some blame, our house and senate, both republicans and democrats got us into this crap, we the tax payers will have to fix it and we’ll be sold a bill of BS goods and one liners as to how/why we need more regulation (probably in the wrong areas) and how we’ll continue to require loans be made to people who can’t repay them.
Ridiculous.
Trey
RE AMEX
Arthur, I got a very similar response from AMEX last year. One day I was checking my online account and my credit limit had been reduced on my one card and my other no-limit card now had a limit.
When I called them to find out why, they said very similar things….. people who use their cards where I used mine were higher risk (I don’t why how they could tell that, I used it and paid it off every month and never at unmentionable places.)
They also said that I was now a higher risk to them, though my credit score fluctuated only 2-3 points up and down from when they issued me the card a year prior to last year.
So I asked them how could I be riskier now if nothing changed, their response “you just are.” They then proceeded to tell me that if I wasn’t happy with their decision and service I could close my accounts and be done with them. I told the rep flat out no, “if you think I am a risk for stupid reasons then I am going to continue to haunt you until you get over your stuidity.”
Unfortunately for them I am still a cardholder to torture them and every month I request a credit line increase just to harass them.
I simply do not understand how any businessman who drives an imported automobile can have any complaint about the current economic and financial condition of America or be surprised when he cannot obtain a loan. On average, an imported automobile sends $125,000 of economic activity out of America. This is jobs, deposits, profits, payrolls, jobs, deposits, profits, payrolls, etc. and other economic activity lost to the American economy and to many small businessmen.
If you own an imported car, drink imported beer and wine, etc., etc. YOU are part of the problem. This is not protectionism; it is a simple statement of fact.
J D Power recently rated Ford as the number two and GM as number three auto brands for quality. There simply is no reason to continue to send our capital overseas by buying imported vehicles.
America is quickly becoming capital poor and this will have disastrous results for our future. As we continue to lose our capital it will become much more difficult to finance a business.
The comment from M. Fernandez in Miami at 12:01 is EXACTLY why this bailout is completely unnecessary. Smaller, well-managed banks will be more than happy to expand and lend to credit-worthy people and companies. There is no “credit crisis” for people who are good for the money. We NEED this shake-out to get rid of all the deadwood that is choking our economy. Let those who are motivated by greed and a get-rich-on-other-people’s money mentality go belly up, and good riddance to them.
Just say no to the bailout because it will only delay the market correction. I’m sure that their are many good finacially strong banks out their that can lend out money to credit worthy people and business. Those banks that played by the rules ethically can now step up and fill the void of the larger unethical banks that will go bankrupt. Banks make money by lending and those people that are credit worthy will find no trouble finding healthy banks to get loans from. These bankruptcy’s will create many opportunities for the ethicall banks to grow and prosper.
I used to have this problem, but I realized that it was because I was using not only my business credit but my personal credit. When you use personal credit the banks and lenders tend to look more closely at your finances. If you use just business credit, they tend to be more amenable to loaning money or credit lines. The problem was that I did not have a strong business credit history so I was stuck and ended up taking out a loan against my house to fund a recent business expansion. When I needed more money I looked for a better solution. I ran across a lot of those “do it for you” companies but they all turned out to be scam artists that did not really end up providing service. I actually had to report one of the companies because they would not return my calls. I ended up working on it my self. I found a system that any business owner can follow that ended up getting me enough business credit I was able to get a line of credit without using my personal credit to get, and I am excited now that I have funding to help me weather this financial storm that seems to be brewing. The companies website is Insiders Guide To Business Credit
let the fed provide the 700b bailout all they do is print the money why do they wish to hold the American people as ransom for something that they have gotten rich all they do is print Money and charge the Federal goverment an interest rate as low as 1% as high as ? let them pay without us providing T bills as security.Who any one remembers the S&L and Niel Bush silverado Bank what a fleecing on the people it was individuals in thier level that brought all these risky loan products so I feel THEY SHOULD PAY!
Lets remember these banks when times are good again (and they will be). Right now the banks are hording up money to cover their losses on stupid decisions that they made. Do everything in your power to boycott these people and let them pay the piper for their ignorance.
The problem is we’ve all gotten used to the easy money that was inflating our economy. I’m a banker and I hear the same thing from everyone requesting new money: “but I have good credit,” to which I can only respond “yes, but can you afford to repay the money I’m lending you?” I always get the same response: silence. During the boom times, lenders never bothered to ask that question, or they made up the information to support a yes answer.
I’m very fortunate to be with a large conservative financial institution that has steered clear of all of this subprime non-sense. So, while we did well during the real estate boom, now we’re doing even better from the credit crunch, since our lending standards never changed to begin with. We’re getting all the solid business from banks tightening up and clamping down on credit to both good and bad borrowers.
I recently received a letter from Amex, which stated that they were curtailing my lending, because OTHER PEOPLE who borrowed money from the same lender as me (Countrywide) were a poor risk.
They also said that PEOPLE WHO USED THEIR CARDS AT THE SAME STORE AS ME WERE A POOR RISK.
What B/S.
I can’t see how this environment is different than before. It is a proven fact that banks (and all others) look at ability to repay as their primary consideration. Everything else is secondary. They want excess cash flow. They don’t want to lend against “fixtures” or fleeting AR that, let’s face it, is less than secure in most small business environments.
So, if you don’t need the money (you are profitable and have excess cash flow, or aren’t highly leveraged, then you can still get a loan from just about anywhere. But if you a small co, and an obvious repayment risk (cash flow-wise), boards will never approve you for a large loan, and don’t want to mess with small loans. It’s just how banks work….
Am I wrong?
Remember, a lot of small business loans have been re-packaged and sold off to investors just like mortgage loans. The insidious process of making loans (money), knows no bounds.
Foreigners come to the land of opportunity and that is exactly what they get…an opportunity! Its a shame; born and raised in the USA..pay taxes and support our government,and can hardly receive $5 to help put purchasing power back into the lives of US citizens. Whatever happened to for the people by the people?
What Bank ? They don’t know we are alive. Can we be that nieve to believe the banks will lend in the future? Too who 900 FICO scores.
Small business needs a bailout. Now
Since when was it ever “easy” for sart-up and small business to get money. Most fail. Who would pick up that tab? The credit crunch featured on the news shows, and its “cures” are directed at small business.
I started a product development company last year and will deliver revenues of $1.6m this year. We tried a total of 11 banks (started with the big guys: BOA, Citizen’s etc)and had no luck – they all told us to come back in 18-24 months after we had more revenue history. We then tried some smaller regional banks and ran into the same problem….hours of paperwork, credit checks, forms, meetings and then ..NO. We finally tried a small local bank just down the street from our office – within 2 weeks we had a $200k asset backed line to use on inventory. We are now talking with local Angel groups and overseas investors and making some headway. Moral of the story: Don’t Give Up! Just like anything else when running your own business – you will get out what you out in.
Don’t forget that credit unions do not have to pay income taxes while all the rest of us do!
My construction company has grown from a one-man show to 14 employees with 1M/yr gross. Last year, Q4, the phone stopped ringing – nothing was coming in. I tried bank loans – nothing. Then started with the “receivables loan” people, who promised a great package that would just skim off my credit card sales for repayment. After 2 months of endless document requests, phone calls, emails…I was turned down by them all. The reason? Too much fluctuation in my Credit Card receivables. One month, $20K. The next, $2K. They want a business like a restaurant that has very little fluctuation in their CC receipts.
As a footnote, we’ve had the best year ever in 2008, and, knock on wood, have had no need to be soliciting loans.
One of the issues you may be facing with attempting to get a bank loan is the fact that you are going to a bank. I’m sure there is a Credit Union in your area that has a business lending arm that may be able to help you reach your goal or at least a portion of it. In these economic times, the credit unions are willing and able to assist you with requests that the ‘traditional’ resources may not. I would strongly urge you to check into what a small to mid-sized credit union in your area can do to help you reach your goal.
I can echo many of the small businesses here. No one, except the credit card processing advance companies are interested in helping small business owners. Credit Unions are no help…one of the largest in the area requires a higher credit score than Bank of America to even apply for a loan. We have tried several different banks and credit unions. We have had bankers lose paperwork, and even suggest that I had fabricated my balance sheet. As for colladeral, most do no recognize inventory, future sales or even fixtures. No one understands the business better than, we, the small business owner. The lenders don’t realize that we employ people. We are the ones creating good wage-earning job, not Walmart. When we struggle, we are the ones having to lay off employees. So, getting a loan is impossible. As for a SBA loan, banks don’t like to do them because of the amount of paperwork involved, so they put high restrictions on getting approved. As someone mentioned earlier, no bank will lend money right now to anyone that actually needs it.
There are other alternatives to bank financing for growing businesses. One often overlooked asset are a company’s current accounts receivable. Banks do not like them, but their are companies that specialize in purchasing your receivables at a discount giving you immedate access to cash to finance your business growths. Search the web for factors.
Business Owners,
What do you have for collateral when inquiring for a loan? Have you been renting your real estate for the last few years? Now is a great time to seek an SBA loan for the purchase of real estate. Some banks will extend some working capital, cover moving costs, and allow for equipment purchases as a component of a real estate transaction via the SBA 7(a) loan program. This combination gives the bank collateral, and a government guarantee, therefore giving the small business owner credit worthiness. More importantly, it starts to build equity in the business’ real estate and leverage for the next bump in the road. Not to mention additional cash flow. Most rent vs. purchase analysis favor purchasing comprable real estate significantly, especially considering that some SBA loans are prime based and capped by the SBA. The biggest misconception about SBA loans is that they take 6 months to get approved. The SBA has streamlined this process significantly with the Preferred Lender Program allowing participating banks for a streamlined approval process. Most loans can be approved and closed within the same time period of a conventional loan. Maximum SBA eligibility for a borrower is 1.5 million dollars. This allows for government guaranteed loan sizes up to 4 million dollars. If you want an SBA loan for real estate, reconsider using the bank on the corner “that does everything” and seek out an SBA specialist, such as myself. The SBA developed these programs for times like these.
npruski@firstheritagecapital.com
Good afternoon. I completely understand everyones concern as I used to work for a large lender and was literally able to give loans to almost everyone. Nowadays, it’s a lot more difficult. I have joined a leasing company that can offer 100% financing on equipment and most other business needs. We work with all types of companies and have the flexibility you may be looking for. Please feel free to contact me for information – We work with all US states. Michelle @ (267) 960-2636
Lenders are going fishing, again. If your business does not need money they will make the loan as they want in on the profit. If you are marginal they do not care to partake in any risk. I can’t even get insurance right now!
I agree – there is money at Credit Unions for small loans – 10 or 15K tops. Also try social lenders Prosper – excellent results there up to 20K with good credit and DTI. Small Business owners should investigate private lending also.
Our small 7yr. old business have been applying for a bank credit line over the last 4 yrs without success even with broker assistance. Every time we would apply either the rules had changed. lost paperwork, need more info or would not give a reason why we were not approved. To fund expansion we have been forced using credit card advance (shark) loans 30-48% which cam kill you. We finally did get an approval (lucky) for a Bank credit line at reasonable rates but only a very small amount of $20k for business doing 800k growing 100% a year, pretty ridiculous.
I have a smallish business. After a slow start we have doubled revenue every year for 3 years. 20% EBITDA, very cash flow positive, plenty of cash in the bank. Can’t get a credit line on recievables even though the recievables are “name brand” companies. I just wanted the line as a back up if timing between AR collections and payroll was a problem during a growth spurt. I have been a CFO for 20 years prior to this and have never seen anything like it.
Jeff is right on track. I have worked for 3 Fortune 500 companies and currently with a credit union. I can advise going to the CU first. They didn’t take a hit from the crunch and are on solid ground to make great loans. Always check first to see if the do “business purpose” loans before applying. But a lot of CU’s will have “anything loans” that can fit the bill.
Don’t forget to check out credit unions. More and more of them are offering small business loans and they still have money to lend.
Hey All,
We actually operate as consultants that help small business owners get the financing taht they need. What we have done is researched 100’s of banks throughout the USA and have pinpointed requirements and basic decision making rules that each bank has put in place in approving or declining a business loan. Most borrowers have 3-4 chances at various banks before their credit reports are completely riddled with inquiries causing auto declines at 98% of american lenders. We can maximize the amount they get by going to the right lenders each and every one of those 3-4 times and get approvals at all of them. Of course with todays economy and bank rules and regulations being so volatile there are no guarantees. The value of our service is really becoming a necessity. Why go into to trial and have the prosecutor defend you? Its time to hire a “lawyer” to actually defend you in the application process. We do not charge unless success is attained. Thats how confident we are. http://ainloans.com
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I may be able to assist you! How many credit pulls have you had over the last 30 days? I have a cash advance co that is interested if you are interested in factoring.