Working Capital and Business Finance Quiz
Working capital financing and small business finance options are proving to be in short supply with little indications for improvement. Here is a short quiz that will offer some insights about the current state of commercial lending.
Are there still good banks? After the financial bailout, are banks still failing?
An appropriate answer is yes for both of these related questions. Telling the difference between good and bad banks is unfortunately not an easy task for innocent bystanders. Because there continue to be ongoing weekly reports from the Federal Deposit Insurance Corporation about bank failures, it should be apparent that there is still a lending crisis that was not resolved by the bailout. While neither bankers nor politicians want to talk openly about this situation, the rest of us can still draw our own conclusions.
When lenders say that funding is available even when it is not, is this sometimes called phantom business loans?
Yes, and the terminology builds upon a similar usage by technology engineering firms in announcing products often classified as phantom software when they wanted to discourage consumers from purchasing from a competitor even though the company that made the announcement did not actually have an item currently for sale to the public. The practice was always controversial because there were so many documented instances in which the phantom software never materialized beyond a press release. This questionable approach to public relations has apparently made its way into the world of small business lending.
Are banks required to provide small business lending after they were given taxpayer funding by the financial bailout two years ago?
No, there were not such conditions placed upon the banks when they were saved by the taxpayer funds from almost certain financial collapse, and except from the viewpoint of the bankers themselves this is a mystery worth examining in much more detail. Instead the recipients can effectively do what they want with the money because the assets are considered to be fungible. This seems like a term invented just for such an occasion. It means that monetary assets are interchangeable and that for all practical purposes it is not possible to say what happened to the money given to the banks. But in any case, they were not burdened with a stipulation to provide commercial loans and appear to be investing a significant portion in what most observers consider to be risky areas similar to what got them into trouble at the beginning of this crisis.
This report was not designed to be an exhaustive examination of small business loans but rather was intended to alert business owners about potential lending problems at an early point when it is more likely that necessary action can be taken before it is too late. In the brief commercial finance quiz shown above, some insights into lending difficulties with commercial mortgages and working capital loans were suggested for further consideration.
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ABOUT THE AUTHOR
Stephen Bush has provided business financing services throughout the United States for over 30 years. Please visit the AEX Commercial Financing Group website for The Working Capital Guide at http://aexcfg.com