In many of the articles I have read concerning the current recession have identified small businesses as key proponents to pulling our economy out of this decline. However, this article discusses how banks for the seventh consecutive month have cut their small business lending by another $1 billion. Furthermore, the banks that received the most help from the treasury bailout programs have cut their small business loans by $12.5 billion since April. These statistics clearly indicate that banks are not helping out small business owners with the necessary credit needed to launch, run and grow their ventures. Nonetheless, banks stand firm with their decisions citing reasons that small business are risky borrowers, and fewer entrepreneurs are looking to borrow and take on more debt. It is difficult to assert who is right in this matter, but small businesses rely heavily on loans from banks. It is necessary for these banks to do their part in helping our economy climb out of this recession.
I feel that it is unfair for banks to continue to cut their lending to small business owners because it results in continuous isolation of the middle American worker. Without aid from the banks, small business owners and employees will continue to fall by the way side, further contributing to already high unemployment rates. However I also recognize the difficulties that banks face especially because of the low interest rates they will receive in return for their loans.
ReplyDeleteI agree with Kyle. Pulling lending to small businesses is understandable but pulling them to this degree, with seven months of straight decline? That is a major decline in small business lending. Small businesses are being affected from the economic turmoil and they should have various possibilities to receive loans from different banks. Small businesses, although not a large amount, offer jobs to people, and in these economic difficulties many people are searching for jobs.
ReplyDeleteThe banks that have declined in small business lending have received billions of dollars from the government, these companies understood that they were to big to fail. Along with failing but receiving government aid they are still paying their CEO's huge bonuses.
-sean walter
This article makes me think of the causes of cutting off loans to small business. I remember once, in a TV interview, a banker told that the reason why banks prefer to large loan borrowers is simple because it would bring more profits, plus the processes of examining and approving large loans and small loans are nearly the same. Therefore, it is much more cost-efficient to lend money to large companies.
ReplyDeleteAs for entrepreneurs, from an article, I learned there are also some reasons for small businessmen’s inactive behavior when living under the economic recession. It is true that it is still very risky to run a small business at this time, although entrepreneurial activities are regarded as the key proponents to pulling America’s economy out of the recession.
In summary, I think it might be better to enlarge this issue’s discussion scope, calling on more people’s attention. That is, not only discussing this issue within bank and entrepreneurs, but figuring out the solution by relating entrepreneurs to the whole society.
This is just one of the very few problems with our capitalist society. When the banks are concerned about their profits and earnings they are not going to take into account the fact that small businesses depend on them. I can understand why the banks won't give the money to these businesses so I won't fault them for doing so. If it were your job at the bank to make sure your maintaining steady profit, you would do the same thing.
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