Harry Pollard on the Current Banking Crisis for Small Businesses
Prior to September 2008 it appeared that most small and large banks were making progress in overcoming the effects of a modest recession, and most businesses, including those in real estate related businesses, believed that the market would return in the Spring of 2009. Despite such generally optimistic views, many businesses at that time struggled to position themselves for the expected recovery, and were short on additional capital, having already worked through several years of the recession.
Unfortunately, in September of 2008 a number of major investment banking firms began to have severe difficulties. As a result, the Treasury Department and Federal Reserve began a rescue effort that has continued to date, resulting in an apparent stabilization of most of the large commercial and investment banking institutions, but which has also led to expenditures of billions of the taxpayer's dollars. It further appears that Wall Street large businesses have recovered from the crisis, but it is absolutely true that Main Street small businesses are mired in some of the most difficult financial challenges since the 1930's.
Because banking regulators have placed severe controls over all banking loan portfolios, it has become effectively more difficult for banks to extend loans to businesses that are deemed to represent greater credit risks. Such controls disproportionately impact smaller, closely-held businesses more than their larger, publicly-traded counterparts. Accordingly, most small businesses find that they no longer have the access to the working capital and other business loans needed to operate. This is particularly true of the real estate related businesses.
It is ironic that large businesses seem to be enjoying a recovery while small businesses are not. Why would the stimulus packages and regulatory changes favor the large businesses when small businesses are responsible for most of our economy? The national unemployment rate is approximately 10% at the current time. This should not be surprising since small businesses contribute to approximately 80% of total employment. Large businesses have access to the capital on Wall Street which is not available to most small businesses. Since Wall Street is "back in business", large businesses have been able to find the capital they need, but securing capital is a continuing struggle for small and medium-sized businesses.
Difficulty in raising and maintaining appropriate sources of capital impacts every aspect of a business, and can lead to a myriad of problems and legal issues. At Parker Pollard, we understand the background of the difficult financial climate, as well as the problems that such climate raises for small businesses. Accordingly, we strive to help small and medium-sized businesses address the numerous business and legal issues required to respond to today's environment. Whether the nature of a business is financial, construction, real estate, sales or other Parker Pollard will work to help you find answers to the challenges that your company needs to address.
