A recent article in Bloomberg Businessweek highlighted a major problem with all of the so-called Stimulus Packages that we have been seeing over the past year - we really don’t know how much is actually getting to small businesses. The most recent attempt would provide $30 billion in capital to smaller banks with the idea of them lending to small businesses. But, as author John Tozzi points out, we really don’t have enough data to understand why lending to small businesses is down and just what a successful “stimulus” would look like. Even the Congressionally-appointed watchdog of TARP, Elizabeth Warren, admits that there is not sufficient evidence that money provided to banks is actually getting out to small businesses in the way it was supposed to.
Just why is there such a lack of information? Is it because data is so hard to come by? Is it because no one in the government up to now has bothered to look for it? Is it possibly because no one wants to know the truth? You could easily find adherents for each of these theories, but that still does not answer the original question. The Federal Reserve Bank of Atlanta will attempt to get some idea of what is happening in their area with a quarterly survey of banks and their lending practices. Whether this will result in usable data and what will be done with the information remains to be seen.
One possible reason for the “lack” of data could be that policymakers are looking for single answers rather than acknowledging that there could be multiple factors involved. Banks might decide not to lend based on a businesses “creditworthiness” or on its own tightened standards. Many banks were faulted for lending to businesses that perhaps were not good risks, but at the same time many banks had been “encouraged” to make more loans. Rather than review their policies and make small adjustments, all too often the reaction was to retreat to a “hold” position and not lend to any business that was not the cream of the crop. Additionally, when lenders began to open up their vaults they tended to deem many businesses as poor risks because their balance sheets had suffered from the Recession - even if the businesses were still solvent and succeeding as much as could be expected.
Another possible reason for the decline in lending could be the fact that many businesses are not expanding in this down economy. Many small businesses are simply holding steady or have contracted in order to survive the Recession. In the May survey of its members, the National Federation of Independent Business found that only about 8% of respondents indicated they had unmet credit needs. Poor sales was a much bigger concern to businesses, and not something that lending could improve. If a business is not selling, it has very little incentive to expand and so little reason to look for credit. However, as economist Brian Headd at the SBA’s Office of Advocacy pointed out, if a large number of businesses that do want to expand cannot get the credit they need, this would negatively affect any recovery.
Perhaps with more information we will get a better picture of exactly what is happening with all of this stimulus money the federal government is throwing around, or perhaps not. But, if your business is looking to expand and is considering an SBA-backed loan, I strongly recommend that you speak with an expert who can help you decide what your best plan would be. I have over 30 years of experience in SBA and business lending and have placed over 2,000 loans worth over a billion dollars. I encourage you to contact me at CraigGFrancis.com, SBALoanStore.com or at 888-666-9722, or connect with me on LinkedIn.
Just why is there such a lack of information? Is it because data is so hard to come by? Is it because no one in the government up to now has bothered to look for it? Is it possibly because no one wants to know the truth? You could easily find adherents for each of these theories, but that still does not answer the original question. The Federal Reserve Bank of Atlanta will attempt to get some idea of what is happening in their area with a quarterly survey of banks and their lending practices. Whether this will result in usable data and what will be done with the information remains to be seen.
One possible reason for the “lack” of data could be that policymakers are looking for single answers rather than acknowledging that there could be multiple factors involved. Banks might decide not to lend based on a businesses “creditworthiness” or on its own tightened standards. Many banks were faulted for lending to businesses that perhaps were not good risks, but at the same time many banks had been “encouraged” to make more loans. Rather than review their policies and make small adjustments, all too often the reaction was to retreat to a “hold” position and not lend to any business that was not the cream of the crop. Additionally, when lenders began to open up their vaults they tended to deem many businesses as poor risks because their balance sheets had suffered from the Recession - even if the businesses were still solvent and succeeding as much as could be expected.
Another possible reason for the decline in lending could be the fact that many businesses are not expanding in this down economy. Many small businesses are simply holding steady or have contracted in order to survive the Recession. In the May survey of its members, the National Federation of Independent Business found that only about 8% of respondents indicated they had unmet credit needs. Poor sales was a much bigger concern to businesses, and not something that lending could improve. If a business is not selling, it has very little incentive to expand and so little reason to look for credit. However, as economist Brian Headd at the SBA’s Office of Advocacy pointed out, if a large number of businesses that do want to expand cannot get the credit they need, this would negatively affect any recovery.
Perhaps with more information we will get a better picture of exactly what is happening with all of this stimulus money the federal government is throwing around, or perhaps not. But, if your business is looking to expand and is considering an SBA-backed loan, I strongly recommend that you speak with an expert who can help you decide what your best plan would be. I have over 30 years of experience in SBA and business lending and have placed over 2,000 loans worth over a billion dollars. I encourage you to contact me at CraigGFrancis.com, SBALoanStore.com or at 888-666-9722, or connect with me on LinkedIn.
Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at
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