Dewell Marketing

Small Business Job Engine Still Out of Gas

So 2 years after the widely publicized bailout began, small businesses are still at the bottom of the pile. This, even though lawmakers, bankers and politicians are on record as saying small businesses are the “job engine” of the US economy accounting for nearly 60% of new jobs.

The Chairman of the Federal Reserve bank is being widely reported as being disappointed that the banks are not lending, but claims the Fed has no power to force banks to do so.

Meanwhile Congress, who is operating in some other reality zone, let a provision of the stimulus package expire on June 1st that offered the very beneficial 90% government guarantee behind SBA loans. Even though SBA loans were on the rebound and some small businesses were getting the credit they needed.

Are Bank Regulators to Blame?

In a recent article in the Phoenix Business Journal, they report, “During its listening sessions, the Fed often heard that “bank examiners have prevented banks from making good loans,” Bernanke said. “We take this issue very seriously.”

Apparently many banks are ignoring the strong performance of some of their small business customers, pre-meltdown, and refusing to lend them money even though they have contracts in their hands.

Start Ups Haven’t Got a Chance!

The report goes on to say that startups are even worse off than established businesses. For a long time, startups could count on money from friends or relatives, or many used home equity loans to finance their businesses. That has all changed since someone pulled the plug on the housing market in 2008.

The article ends with a very sobering quote:
“Financing for startups is virtually impossible to obtain,” said Robin Prager, assistant director of the Fed’s division of research and statistics.”

Read more of the whole article here: Bernanke ‘lights a fire’ for small biz loans – Phoenix Business Journal