"U.S. Banks Rolling in Money," Says F.T.

Small Business Loans Refused
Even as banks routinely turn down commercial loans to viable, and creditworthy small businesses, bankers are awash in a sea of money. According to yesterday's Financial Times:

As of November, cash assets in the US banking system had more than tripled since before Lehman Brothers’ failure, accelerating to more than $1,200bn. Meanwhile, loans books have shrunk... Favorable markets mean companies have also raised money and then parked it at the bank. Cash now comprises more than 10 per cent of total banking assets, its highest for almost three decades.

So banks have $1.2 trillion sitting there doing nothing while every day they refuse countless small business loans to established customers who are good risks. No wonder more, and more entrepreneurs are turning to merchant cash advances for their business funding.

Merchant Funding and the Government
Why isn't the government doing more to force banks--especially those that took tax dollars in bailouts--to make the small business loans that the economy so desperately needs? Is Wall Street's lobby so powerful that legislators are scared to take them on?

It certainly isn't a question of politicians, and regulators failing to recognize the problem. As recently as November 30, 2009, Jon D. Greenlee, who is associate director of the Federal Reserve's Division of Banking Supervision and Regulation, gave testimony about small business loans before the House subcommittee on oversight and investigations. He said:

Small businesses, which tend to have less financial flexibility in a recessionary environment, have been particularly affected during this cycle. Of note, small businesses rely on banks for 90 percent of their financing needs, compared to large businesses, which use banks for only 30 percent of their financing. There are more than 27 million small businesses nationally that employ about half of the nation's private-sector workforce and these businesses have approximately $1 trillion in debt outstanding. Access to credit markets is expected to remain a challenge for these firms, but at the same time, with inventory and capital spending levels at near historic lows, the demand for credit has remained weak.

Business Funding Demand Weak?
Mr. Greenlee was doing very well, right up until those last few words. Is it really true that "the demand for credit has remained weak"? Or is it that banks have been failing to meet that demand?

Maybe Mr. Greenlee has data to back up his assertion. But out here--beyond the Beltway, at the sharp end of the real world (does the real world have a sharp end?)--it feels as if the latter is more likely.

Merchant Funding Is Critical
Certainly, way too many small businesses are being forced to forgo opportunities to expand. Or are unable to cover emergency expenses, such as the repair or replacement of broken, and outdated equipment. Or are struggling to keep on top of short-term cash flow crises.

If you're in any of those positions--or need business funding for any reason--and have been turned down by your bank, then check out the opportunities offered by merchant cash advances here.

Need a Merchant Cash Advance? You're Not Alone

Merchant Cash Advance--A Growing Need
If you're considering taking out a merchant cash advance (and why on earth are you reading this blog if you aren't?), then the chances are either that you've been turned down by your bank, or that you didn't bother applying because you knew that you'd be turned down.

And that's frustrating. Because, according to a December report from Experian, a company that provides credit references, small businesses are currently the best credit risks. In fact--although it's not quite a straight line progression--as a general rule, the smaller the business the better the risk.

Small Business Loans Are Low Risk
The report shows that, during November 2009, the average risk score for small businesses with fewer than 20 employees was 59.53, which makes them the most creditworthy of all groups. By contrast, companies with 1,000 employees or more scored a scary 34.14.

And of all the dollars owed by those small businesses just 15 percent were overdue. That compares with 23 percent for enterprises with 1,000+ employees.

What's the Problem?
The trouble is, banks are hoarding their (or, arguably, our) money, and refusing commercial loans to small businesses. The government recognizes the problem, but seems powerless to act. Last March, Timothy Geithner, Secretary of the Treasury, said in a speech:

Across this country, tens of thousands of small business owners are finding it harder to get the credit necessary to stay in business. Credit is essential to economic recovery, and we need our nation’s banks to go the extra mile in keeping credit lines in place on reasonable terms for viable businesses.

The government of the United States has put in place extraordinary protections for the banking system, so that banks can continue to benefit from low costs funds, and so that they have access to the liquidity they need. We need you to put that assistance to work for the American economy.

Banks Obdurate
But, as you know only too well, very little has happened since Secretary Geithner spoke, nearly 10 months ago. And way too many American entrepreneurs with viable businesses are facing impossible trading conditions--and even bankruptcy--because of inadequate small business funding.

Merchant Cash Advances Offer a Way Forward
Merchant cash advances can offer an immediate source of working capital to those whom banks turn down. Of course, as with any borrowing, it's important to find the right lender, and understand fully what the loan terms involve. But more and more people are turning to this source of very fast business funding.

If you'd like to find out more, you can get up to five merchant cash advance quotes here.

Loans for Business--They Still Don't Get It

Merchant Funding: Some Reality

Back at the beginning of last November, Equifax, a firm specializing in credit intelligence (an oxymoron, if there ever was one), published some data about small businesses. The report found that, at 9,361, the number of bankruptcy filings for small businesses in September was up 27 percent on the same month in 2008. Comparing the entire third quarter of 2009 with that of 2008, the rise was a full 44 percent.

In an accompanying statement (if only of the obvious), Dr. Reza Barazesh, head of North American research for Equifax's Commercial Information Solutions division, said:

Economic pain is continuing for small businesses across the country. We're still seeing hefty increases in the number of bankruptcies in a lot of major metro areas.

Much Left to Discover

Fast forward to December 28, 2009, and a press release from Discover Financial Services, "a leading credit card issuer, and electronic payment services company." It carries out a regular survey, called Small Business Watch, which monitors the opinions, and attitudes of those who own SMEs.

The press release's opening paragraph started:

Economic confidence among America's small business owners was steady in December as fewer of them believed the U.S. economy was getting worse compared to November, and more saw conditions for their own businesses getting better in the next six months, according to the Discover Small Business Watch.

Phew! So everything's all right again. Economic panic over.

Devil in the Detail

But wait. Read a few lines down, and details emerge. For instance:

22 percent see conditions for their own businesses getting better in the next six months, an improvement from 19 percent in November; but still in contrast to the 52 percent who see conditions getting worse, 24 percent who see things staying the same, and 3 percent who aren't sure.

So maybe it's a little early to be popping Champagne corks.

Small Business Loans Still Not Fit for Purpose

The reality is that business funding remains a serious issue for all too many SMEs. Banks are still not lending to many good, solid customers.

If you're struggling to find the money to run or grow your business you may want to think about the pros and cons of a merchant cash advance.