Banks Have No Money for Small Businesses
It is simple, with a recently announced 100 billion liquidity short fall for US and thus banks are not going to be lending to small businesses. This is on top of the onerous regulations added to the old regulations that a small business should plow through to even be considered.
Here are two quick examples:
We have a contact with one of the arms of the World Bank to assist with Anti-Money Laundering for a developing nation. It is a small contract but we know there will be a strong cash demand in the beginning that may stress the cash flow. We approached two different companies that we have dealt with for 30 years and the other 10 years. Both flatly declined to loan against a World Bank contract but offered me a line of credit on my home equity. I took the contract to a private lender and a line of credit was completed and signed overnight.
A glazing company was redoing the front of a series of church buildings for a Catholic diocese. The contract represented many millions of dollars. The business approached several lenders who were unwilling to take a contract assignment from a billion dollar charity – even when it was accompanied by a completion bond and payment bond. It seem all charities were on their enhanced due diligence list and they chose not to evoke the EDD work. In the end the financing was put forth by the glazing companies’ glass and metal suppliers. The job was completed and paid within days of the schedule. When the glazer went back to the bank and asked if they would re-consider, the banks declined saying they just do not lend or deal with any non-profit or charitable operations.
We are not sure what this means for business, but it is further empirical evidence of the disintermediation of banks from the economy.
