This morning, Steve Matthews and Vivien Lou Chen over at Bloomberg discuss the impact of the tight credit market on small business owners and their lack of empowerment to hire new employees.
Commercial and industrial loans at U.S. commercial banks declined by $900 million during the week ended April 14 to $1.27 trillion, according to Fed data released on April 23. In March, such loans hit the lowest point in more than two years. Revolving debt, such as credit cards, which are often used to finance small businesses, fell by $9.4 billion in February, the biggest decline in three months, according to Fed statistics.
Lawmakers recently passed a “jobs bill” (and I’m disappointed that Scott Brown supported it) that will do absolutely nothing to empower businesses to hire.
Real Example:
Michael Chapman, the owner of a building company with 20 employees in Santa Fe, New Mexico, has had trouble getting a bank loan and this month he let Kansas City Federal Reserve Bank President Thomas Hoenig know it. Tight credit in commercial real estate “has really made it impossible for banks to lend to people like me,” the president of Chapman Homes said during a question period after an April 7 speech by Hoenig. Chapman said his company, unable to get a loan to hire 15 workers while big Wall Street firms get record bailouts, is “too small to succeed.”
We recently learned that GM was using bailout money to pay back their initial bailout. This is a real slap in the face of honest, hard working business owners who play by the rules can’t get a bank loan. It doesn’t take a rocket scientist to realize that funding unprofitable companies with tax dollars isn’t going to get us out of the recession.
Are you listening, Washington? Start taking the bailout money that has been repaid and offer interest-free loans to honest business owners across the country. These people will be grateful for the opportunity to grow their business, they’ll repay the loans and they’ll create new jobs. It really is that simple.
