Small business owners simply can’t seem to catch a break. Just when the economy seems poised for an uptick, something always seems to come along and knock it back down. Specifically, I’m talking about actions like Bank of America’s (BofA) decision to sever lines of credit for some of its small-business customers. (For more on this, see this LA Times Business article from January 3, 2012.)
Is this just another example of lenders trying to right their own ship by taking it out on the little guy? They seem determined to correct their own lending missteps at the expense of those least likely to be able to afford it.
According to the U.S. Dept. of Commerce, the 27.5 million small businesses in the United States with less than 500 employees represent more than 99% of all employer firms and pay about 44 percent of total U.S. private payroll. Over the past 17 years, small businesses have generated 65 percent of net new jobs and annually generate more than half of the non-farm private Gross Domestic Product.
Given these statistics, it seems to me then that we—meaning you, me, state and Federal regulators, lenders, politicians, you name it—should be doing everything possible to make sure small businesses get the support they need to stay afloat and to thrive. To that end, we could at least create the kind of stable, predictable, and fair business climate they need to succeed.
But calling in small business credit line balances (as BofA is doing), forcing these businesses to either pay up in full now or pay in monthly installments over shortened timeframes (often at percentage rates of 12% or higher), hardly seems conducive to promoting small business survival.
Think about it. Where, as a nation, does this get us? More failed businesses, more unemployed, more bankruptcies, and lenders with more bad debts on their books. Can you tell me how this makes sense? (Feel free to comment, I’d really like to know!)
As a 4-time new business owner, I have seldom found support for start-up loans from banks or government lenders, even in decent economic times. But the facts don’t lie: small businesses generally need the most support they are ever going to need at start-up and then for their first three years as they struggle to make ends meet. This has always been the case, and it’s especially true in today’s business climate. But good luck getting a loan nowadays if you can’t first show 3 to 5 years of favorable financials, while also putting up your house as collateral. Tell me, how can a small business show 3 to 5 years of financials to get a loan, if it first must get a loan in order to start up? Can you say, “Which came first, the monkey or the banana?”
Our country was built on capitalism, and while the media, many politicians, and the disenfranchised would have us believe “capitalism” is a dirty word, the fact remains that new, small businesses are the life blood of our economy. Without them, we can’t hope to survive, let alone prosper.
In America, it used to be you could both dream about starting your own company and actually make it happen. Sadly, these days it seems there’s little support for small business. Seems kind of ironic, really, that as many rail against big government and others condemn big corporations, we seem to be doing little to support the very element of our economy that could most help drag us out of this economic quagmire.
I say it’s time we help out the small guys (and gals). What about you? Share your thoughts, plus any insights you think might help out other small business owners.