Read more about the article Small Businesses – Stop Worshiping Them?

Small Businesses – Stop Worshiping Them?

Doesn’t a lot of this jawboning about job creation make your brain explode?

I’ve never read articles by Rex Nutting before, who writes for MarketWatch on the WSJ Digital network … but a banker friend of mine referred me to his “Time to stop worshiping small businesses” article.

I’m not sure where Rex gets his information but his conclusions about the limited job creation value of small businesses is generally unsupported. After arguing, in Clintonesqe fashion about “it depends on how small the definition of small is”, he goes on to claim that while “small businesses do create a lot of jobs, but they also destroy a lot.” Citing a Census Bureau study, he claims that “once they pass their first birthday, small companies, on average, lose more jobs than they create. Many fail within years.”

[pullquote]Who says tax rates don’t matter to job creation?[/pullquote]

A recent study by the Ewing Kaufman Foundation reported an entirely different result, concluding that “80% of the jobs created in the first year are still here after 5 years.” There’s not enough detail available to comprehensively compare these disparate reports, but to debunk the value of SMB job creation requires a little more factual support from Nutting.

He also claims that tax rates don’t matter (more…)

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Read more about the article Small Business Finance Bill passes – So What?

Small Business Finance Bill passes – So What?

Do you often wonder how this country gets along with the Pollyanna views inside the Beltway, mostly comprised of those who have never had to meet a payroll? The Senate passed the Small Business finance bill last week as a few Republicans crossed the aisle to provide the needed votes. The House is expected to quickly pass this version. More later … but ….

So What? It’s a $30B bill so it sounds like a lot of money … but so did the TARP $750B number when it was announced … and it’s still a long way from fully invested. The NYT claims it will help “credit-starved businesses” … says who? Read Uncertainty is killing business – NOT credit in which I review why credit availability is NOT what’s killing small business. If you’re uncertain about what uncertainty we’re certain about … read the WSJ verbatim quote to be reminded of the painful litany of  the economic and regulatory  quicksand on the road to recovery.

[pullquote]Are you uncertain about what uncertainty we’re certain about?[/pullquote]

Sure, there may be qualified businesses struggling to get credit. It is tougher out there, the underwriting standards are less flexible … but will the economy recover when credit is extended to small and middle-market businesses? No, (more…)

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Read more about the article “There you go again” ….

“There you go again” ….

I think that line is attributed to Ronald Reagan’s impressive debate performance against Jimmy Carter in 1980 … but just the same, it applies to the stream of recent articles about business lending in the middle market.

The WSJ discusses a report that banks have eased their credit standards in recent months. Of course, there’s no metrics to confirm that, or what it means … and you’ll waste a lot of energy finding middle market businesses that concur. More realistically, there is little demand for credit because businesses have little confidence in economic growth in the near term. (more…)

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“We’re not an eleemosynary institution!”

That’s the phrase one of my oldest and closest banker friends always used – he became the President of a major division of a major bank before he retired. You may not know that word – and it’s at least a “50-center”, maybe more, but he loved it and used it on me all the time.

… pause … have you looked it up yet or are you waiting for me to tell you? … come on ….

Yeah, that’s what I thought. Okay. It means charitable, as in “we’re not a charitable organization” … meaning we do have a few basic rules:

  • We expect to get paid … so we’d like to confirm that your projections provide sufficient free cash flow so you can actually pay us back.
  • We like to have some collateral in case something goes wrong.
  • We’d like to see some owners’ capital invested in the business so we know we’re in this together.
  • We’ll probably ask for your personal guaranty, too, to be sure you’re dedicated like the “bacon” and not just committed like the “egg”.
  • It would be nice if you had some kind of demonstrable track record and relevant management experience so we can assess whether you know what you’re doing in the business you’re in now.

Those are the basic rules … which is why I’m getting pretty tired of the endless news articles and blog posts about the lack of adequate capital for small business. (more…)

Continue Reading“We’re not an eleemosynary institution!”

CA seed money drying up

No surprise that California's continuing budget problems resulted in a significant drop in funds available through the California Small Business Loan Guarantee program. Why? Because a chunk of its trust fund was used last year to help plug the budget gap ... more gamesmanship by our elected reps in Sacramento.…

Continue ReadingCA seed money drying up
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