Why Money Isn't Flowing From the Banks

Depending on who you are talking to the recession is over, will soon be over or isn’t going to be over anytime soon. Many small business owners are looking for financing. Many for growth and some because they just need a bridge to help get them through the current economic times. Funny though, regardless of how strong your financials are very few seem to be getting financing.

The SBA ARC Loan Program, a guaranteed $35,000 short-term relief loan for small businesses facing immediate financial hardship to help them ride out the current uncertain economic times and return to profitability, is rarely being received. Very few companies in Colorado, and throughout the country for that matter, have been granted the loan. Why, well amongst other things there is so much paperwork required that the banks don’t make any money. In fact, in many cases, they actually lose money.

Yes, banks should be helping us get out of this bad economy. But they aren’t. They don’t have to lend out money to be profitable. Here are just a few reasons:

• Banks have received TARP (Troubled Asset Relief Program) money to clean up their books.

• They are still making money on their credit cards.

• They borrow money from the Fed for nearly nothing and buy 30-year Treasuries at 5 percent. A nice profit for the banks considering they are using our (taxpayers) money.

• They still have their “toxic” assets that have been written down, and they will eventually provide a profit.

So where else can you find money? Well, that leaves private financing - anything from family and friends to Angels and Venture Capitalists and everything in between. There is private money out there but it is harder to get, more expensive and there is less of it. Since there are a lot of people looking for money our friends with money are pickier than ever in terms of whom they give their money too. And of course, generally speaking, deals take longer to put together.

So what can you do? Well, for education you can go to the Angel Capital Summit Nov. 17^th. You can also work on your business – make sure you have a solid business plan and supporting financial model. To learn more about how to do that attend Planning, Focus & Discipline… 3 Keys to Leading Your Company Out of the Recession on Oct. 21^st or 27^th. Investors want to know where you want to go and how you plan to get there. Having a compelling story with a solid plan to back it up will only help you. And last, but not least, talk to your local politicians. Until the Feds change the rules for the banks money will be slow in coming, which means jobs will be slow to come which will prolong the economic recovery.