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The Banking Crisis Still Looms Large



Take a drive through your city in any developed country… Look at office complexes, industrial parks, and through residential neighborhoods. What will you see the vast majority of the time? “For Sale – Seeking Tenant,” “For Lease” and “For Rent – Space Available”. These are the proverbial “signs of the times” regardless of where you reside. Why is so much real estate available? Why aren’t businesses growing? Why are unemployment numbers still so high? Obtaining capital for small businesses has still not become any easier since the credit crunch of 2007 and 2008. With credit still being restricted, businesses are not able to receive the funds necessary to fund their expansions.

Today, if a small business owner goes into their local bank branch, in many instances now, he is treated just like any other customer. Prior to the banking crisis of 2007 and 2008, special “Merchant Only” lines were seen readily available, with tellers and bankers ready to wait on small business owners hand-and-foot. This is rarely the case now. Many banks have reduced their small business services, especially in the realm of small business loans. Obtaining corporate credit used to be as simple as filing a report with Dun & Bradstreet, having a good FICO (credit) score, and having a small bit of collateral on paper. Many times, it was possible to obtain a sizable line of credit (up to $50,000 in many cases) with only a soft credit check and an application. Such financing is rarely available to a business owner, unless they plan on putting their personal residence up as collateral.

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All of these consequences are simply confirmation of what has not been reported in the news media – the banking crisis of 2007 and 2008 still looms large today. Economists know what helps an economy grow – the free flow of money through its various sectors. With no capital being added into small businesses by way of the banking system, small business owners are struggling to find alternative ways to fund their companies. This is both burdensome and takes a lot of time away from the business owners to be effectively running and growing their companies.

When business lines of credit were easier to establish, and banks were truly the friend of the entrepreneur, a business owner was able to leverage a small amount in order to invest into larger projects, hire an additional employee, lease the necessary equipment, and many other important purchases. Today, a business owner cannot hire an additional employee if they don’t have the cash readily available. This is one of the reasons that we currently see unemployment in the United States at or above ten percent! Companies are afraid to shell out the money to pay for more employees with no guarantee that they will be able to afford it out-of-pocket.

Currently our banking system is unable to figure out a way to extend funds to small business owners and entrepreneurs who are launching start-ups. The small business is the backbone of the world economy. Until this crisis is resolved, the credit crisis of 2007 and 2008 will continue to play a role as to why the economy continues to stay stagnant in 2012 and until the foreseeable future.



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