Just as owning a domestic changed into assumed to be an advantageous economic approach for people, small businesses proudly owning business actual estate become typically visible as a routine and positive piece of their commercial financing throughout the length leading up to the most current financial crisis. Both of these assumptions begin to collapse right away when it’s miles hard or not possible to reap the underlying real estate loans from banks. Real estate continues to be a major factor of the overall economic system, and ongoing problems related to either acquiring or refinancing business mortgage loans give severe troubles for both societal economics in popular and small business economics mainly.
Did the bank Bailout assist Small corporations?
One of the primary arguments made in prefer of bailing out banks in 2008 become that it might permit the restoration of “ordinary financing” to agencies of all sizes everywhere. Seven years later most small organizations are nonetheless waiting for bailout investment to “trickle-down” to them. Running capital loans and business mortgages are lacking in action for many business debtors.
Real property has regularly been in financial news for each exact reasons and terrible reasons during the beyond numerous many years. Starting around 2005, worries started performing approximately the monetary fitness of each real property and the general economy. What we did not understand at the time became that banks began making speculative investments in economic derivatives tied to actual assets at about an equal time. A number of those investment practices produced massive losses that brought on the public banking crisis rising in 2007 and resulting in a substantial bank bailout software in 2008. Even the few instances in which these derivatives produced profits for the banks proved to be arguable because the profitable investing changed often at the price of banking customers.
Zombie Banks and Troubled Banks
Here are two of the real estate and banking problems that are still very actively impairing the small business economy:
Zombie Banks are still operating a Zombie Bank is one with a negative net worth (liabilities exceeding assets).
The FDIC (Federal Deposit Insurance Corporation) Troubled Banks List still has more than 200 banking institutions on the list.
It is worth noting that the FDIC does not publicize the problem bank list or name specific banks on the list – probably fearing a “run on the banks” if they did so. The recent “bank holiday” in Greece illustrates how quickly bank depositors can lose confidence in banking institutions. But the FDIC does release the number of banks on their troubled bank list on a quarterly basis. For example, the March 2015 total of problem banks as defined by the FDIC was 253. In comparison, the total was more than 850 banks at the peak of the recent financial crisis – but there were less than 50 troubled banks before the 2008 bank bailouts.
What to Do When Banks Say No
Small business owners must draw their own conclusions about the current financial health of banks, but it seems unlikely that a “Troubled Bank” will be able to make a “normal” level of small business loans. If banks are still saying “No” to routine commercial financing for creditworthy small businesses, what is the recommended response? Small business owners should actively review alternatives that include non-bank financing, reducing business debt, and increasing sales with cost-effective solutions such as business proposal writing. At some point, the practical need to fire their bank and banker will by necessity become one of the realistic actions by a commercial borrower in need of business financing but unable to obtain it from their current banking institution. In such a scenario, “You’re fired” can quickly become another example of life imitating art.
Stephen Bush is a business finance consultant and business writer. He specializes in assisting small business owners with business writing and career training. Steve is the founder and CEO of AEX Commercial Financing Group. He works with small businesses throughout the United States and Canada.