I work with a number of companies in my consulting practice and meet with a lot of bankers from a wide variety of banks, both for networking as well as for the needs of my clients.
Recently I have been working with a few companies that are in need of a line of credit and have explored both asset based loans and factoring agreements to secure funds. Traditional banks have disqualified themselves and the company for various reasons. Other capital asset and factoring companies have also walked away from the deal, some in the 11th hour.
In discussing this situation, with both the potential lenders and other bankers whom I have known for years, it seems to be a systemic issue across the board. It’s almost as if Prohibition has been declared on small and mid-sized business loans.
A long time friend, a commercial loan officer, told me that they are walking away from most all loans for fear of being wrong down the road. He’s pulling a salary and has made very few loans and cannot justify his salary to himself.
His speculation is that the bank’s stockholders will eventually wonder where their return is. My bet is small and mid-sized business owners will eventually get vocal and start questioning their politicians as to why the big banks and big business get bailed out, or rescued, with no trickle down effects to small business.
Other bankers I know, at a few of the large banks that are merging, also seem to be in suspended animation. These tenured bankers are maintaining contacts, but are lame ducks until after the mergers of their banks are complete, new directives are issued, and authority is one again bestowed to make loans. Even forgetting the economy, these bankers have now been, for all intensive purposes, inactive for over two months and expect to be so for another two months.
Small and midsized businesses drive the economy and create the majority of the jobs today. While prudent loan practices are obviously warranted, many good businesses are losing their lines of credit. Once the spiral starts, employment and growth will suffer.
Many bankers also shy away from SBA loans, which recently seem to be less and less a solution which was covered by Sam Thacker in his AllBusiness blog recently.
The SBA operating and lending budget is well under $1 Billion. The bailout fund allocated was over $700 Billion. Maybe it’s time to invest some of that $700 Billion – or make the banks that took the money make the loans.
We have a lot of idol bankers…..