The Huge Disconnect In The Real Business World
May 7th, 2008 · by Bob Meyer · 3 CommentsThe Fed drops interest rates to banks, which can borrow money at 2.5%. Do the banks pass this on to small businesses or consumers? Absolutely not…banks don’t want to take the risk of lending to the job creators (small businesses)…and they’re not fulfilling their traditional role of stepping in with lending.
The National Small Business Association’s recent survey shows that members are finding that “available capital” is one of the greatest risks to their firms. It also showed that 44% of these businesses had used a credit card to provide financing over the last year.
The increasing use of credit cards to keep smaller companies afloat shows the huge disconnect (dislocation) between government policy and life in the real business world.
The bottomline: Small business is left to credit card financing as a last resort, where the covering of high interest rates (19% to 24%) make it extremely difficult to operate profitably.
The smart and aware business owner is using barter at every opportunity in these challenging times–it’s the financial insurance policy.
BarterINSURANCE
This entry was posted on Wednesday, May 7th, 2008 at 7:15 am and is filed under From the Desk of Bob Meyer. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
May 9th, 2008 at 5:36 pm
Banks are making it harder and harder for businesses to get loans. And then what happens? Small business goes out of business, or downsizes and people lose their jobs. The jobs that give them the paycheck to pay the banks their mortgages.
We’re finding that we have been helping companies tremendously by showing them how to use barter to conserve cash. When a company “gets it” they are so thankful to have the ability to be part of an exchange that is looking out for their well-being.
We still need cash and banks really need to step up and work with barter exchanges to help small business thrive. Or else we all lose.
June 6th, 2008 at 7:38 am
I queried the National Small Business Assn. for context on that 44% figure. Findings:
> Survey was conducted mid-Feb. 2008
> Credit card financing among respondents was 44% in both 2007 and 2008.
> In 1993, only 16% of respondents said they resorted to credit card financing.
> In 2000, NSBA’s survey found 50% of respondents using credit card financing.
Here’s my interpretation:
1. Credit card financing — normally a last resort for small business owners, as you pointed out — has nearly TRIPLED in the past 15 years.
2. The year 2000 was about when the dot-com bubble burst, sending the economy into a tailspin, hence the 50% rate.
3. The small-business credit card financing rate of 44%, extending now for at least two years, is only about one-tenth lower than 2000’s 50% rate, when the economy suffered one of its deepest (and precipitous) crises of modern times.
4. Bottom line: small business owners are living crisis-to-crisis and not recovering sufficiently during cyclical economic respites to cushion the next rough patch without credit card financing — a precarious situation in which systematic barter could spell the difference between surviving and going under if the present-day economy continues to sputter.
June 6th, 2008 at 10:15 am
Barter Maven…Thanks for the additional information and your interpretation.