Small Businesses Go Into Financing Intensive Care

An earlier editorial noted that business financing is effectively on life support based on recent reports of reduced business loans made by banks throughout the country. There is several reasons why intensive care comparisons might help to report what is wrong with working capital financing and simultaneously provide a healthy prognosis for impacted businesses. Because commercial financing is proving to be a serious challenge for most tiny business owners, this analysis should be reviewed by any borrower about to get or refinance commercial loans.

Lending activity has also decreased significantly for other forms of business financing such as commercial mortgage loans. Commercial loans have essentially been downsized or laid off as lots of workers have. The realization that banks are seldom announcing publicly that these cutbacks have occurred is what makes this situation different. Perhaps bankers like to think that when they stop making tiny business loans nobody will notice. When it becomes public knowledge that their tiny business lending window is effectively closed, the bankers who placed commercial financing in to intensive care are astute to realize that their public picture will suffer even further destroy.

Before they realize that the business financing world has changed before their eyes, it is possible that tiny business owners might need to connect several dots. As this editorial and other reviews indicate, banks are fundamentally no longer providing the commercial loan services that they two times did. Commercial borrowers should primarily rely on extensive candid discussions with other tiny business customers of the bank to confirm whether their bank is two of the few exceptions to this new reality. Even in the rare instances in which banks are truly lending "normally" to tiny businesses, the prevailing trend of less working capital financing coming from traditional banks should not be ignored.

During the past two years, banks have lost much credibility and lovely will. Until the federal government provided large bailouts for lots of of them, most of these lenders were on life support themselves. While a number of the banks have recovered, others are effectively still in the intensive care method. But whether they are reviewing the healthy banks or ones still recovering, working capital financing for most tiny businesses is predominantly in what appears to be long-term intensive care. Banks are generally reducing or eliminating a large portion of their business financing activities, as indicated from most ongoing public and private reports. For example, with tiny or no advance notice, most banks appear to be closing commercial line of credit programs for tiny businesses regardless of profitability or length of the lending relationship. This is apparently not a temporary move to the sidelines but a permanent reallocation of resources to more profitable activities based on the manner in which this is being accomplished.

While business financing patients (commercial borrowers) might be in serious condition when they find that their bank won't provide needed commercial loans, experienced tiny business finance specialists can frequently help in restoring financial health that will facilitate a business getting out of an intensive care situation. In some cases, this involves finding a healthy bank that is willing (and able) to provide "normal" commercial loans and working capital financing. For successful commercial funding it will be necessary to explore non-bank solutions in lots of other instances.

Submitted: Monday, March 1st, 2010 - 11:43AM

The Collapse of the Dollar, The Rise of the Euro

The American economy has taken a real beating so far this century. The early 21st Century I'm sure will be remembered as being a time of upheaval and change, particularly for the United States. Before the Dollar, there was the British Pound. The Pound was once the world's reserve currency backed up of course by gold, but more importantly by the British Empire. Who would have thought after surviving two World Wars the Pound would be usurped as the world's reserve currency by the currency of the former British Colonies? Well, that's exactly what happened.

The United States guaranteed that each Dollar could be traded for its current value in gold. This is important as America's financial problems at present can be traced back to 1971 when Richard Nixon abolished the Dollar/Gold standard, turning the Dollar into a fiat currency backed by, well, the Federal Reserve. Now this is no longer the case (being backed by gold), the Federal Reserve can print as much money as they want, because they are no longer limited by the amount of gold available and therefore exchangeable for US Dollars. The problem with this is that printing more and more Dollars and putting them in circulation devalues the currency and WILL eventually lead to hyper-inflation. This can now be seen in the performance of the Dollar against other world currencies but, more importantly, in its performance against gold. Don't be fooled by its recent Bullish performance, the Dollar will not make it out of this decade alive.

Alternatives to the Dollar

Of course, as the world has approximately 60-70% of its reserve currency in Dollars, they are not going to sit back as the value of their reserves fade away. China has recently paid a lot of interest in gold and silver and there are rumours they may be toying with the idea of putting their Yuan back on a gold/silver standard to boost confidence in their currency and gain support for the Yuan to be the new reserve currency. My opinion is that the new reserve currency will be, the Euro.

Some of the oil producing countries have already spoken about switching to the Euro. The Euro is in a different class to any other of the worlds currencies because its back by 16 nations, all pretty much independent from each other. This makes the Euro unique as a currency and provides stability, despite the recent issues with Greece which I believe stem from a time before the Euro and was also down to a lot of Government incompetence and public ignorance. The Euro will rally back and reach parity with the Pound, and then it will be introduced in Britain. Then the Euro will then take its place as world's number one reserve currency.

Submitted: Monday, March 1st, 2010 - 12:00AM