Tag Archive for 'credit scoring'

Small business capital acquisition even when the credit market stinks

This isn’t my first rodeo. The current recession is my 7th one to work in since 1969. As I have noted several times in the past few months, the single greatest difference between this downturn and others is the collapse of the credit sector resulting in a steep reduction of credit availability to consumers and businesses. In every other economic crisis since the Great Depression, when consumers and businesses wanted to make a purchase requiring some level of credit, there has always been a healthy and motivated credit industry standing by to help put purchaser and seller together. Not this time.

And this challenge is no respecter of size: Pharmaceutical players no less than Pfizer and Wyeth had to cobble together transactions from five banks in order to finalize their merger.

Thankfully there are some bright spots for established small businesses. Independent community banks are still lending to small businesses that have, or want, a relationship with those institutions. Credit unions are still hanging in there and expanding their influence with businesses. But for the most part, consumer credit firms and the big banks are MIA.

Notice my qualification word “established” in the previous paragraph. In my 2009 predictions, I said that, unlike previous recessions, the current credit dearth will not be kind to small business start-ups, which historically have relied heavily on the founders’ personal credit lines, including home equity, to capitalize their new small business baby. Consequently – and sadly – start-ups will not play as large a part in this economic recovery as they have in others.

Also in my 2009 predictions, I said that the Obama administration would deploy part of its stimulus efforts through the Small Business Administration. The president should expand the influence of this well established channel to help small businesses acquire the capital they need through their local banks, and I think this will come to pass.

Recently on my small business radio program, The Small Business Advocate Show, iBank founder and Brain Trust member, Tom Markel, (www.iBank.com)talked about the state of the credit landscape, plus his own proposal for what he thinks President Obama should do for small businesses in his first 100 days in office. Be sure to listen to the wisdom of this important voice on small business capital acquisition, including his multi-step small business stimulus proposal for President Obama. And don’t forget to leave a comment.




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