With all of the ruckus about bailing out the banks and propping up Detroit, one group has been left off of Santa’s list again.
They’re America’s small businesses.
Small business continues to be the backbone of millions of communities throughout our nation. Without them, our quality of life would be significantly less than we demand.
Yet whenever there’s a crisis, it’s always the big boys that get all the attention and, more importantly, all the free loot.
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Since the panic over this economic meltdown began, the banks — the main culprits in this mess — have gotten a government infusion of nearly $1 trillion. Despite this federal generosity, the banks have yet to open their vaults to that sector of our economy that really needs their help the most ,small businesses.
Making a Poor Situation Worse
Instead of coming to the aid of small businesses, the banking sector has made their lives more miserable, forcing layoffs from top to bottom.
Small businesses rely on credit to successfully manage their day-to-day operations. Many entrepreneurs use everything from home equity lines to personal credit cards to keep their businesses afloat.
Almost universally, banks have severely cut the availability to the type of credit upon which so many small businesses rely.
Why Small Guys’ Plight Will Worsen
It’s likely to get much worse for America’s small businesses before it get better.
Over the next 18 months, analysts are projecting that credit card-issuing banks, like Chase, Bank of America and American Express – the nation’s largest issuer of credit cards – will slash credit access by nearly $2.5 trillion, or about 45 percent.
This will not only put a tighter lid on consumer spending, but likely will be the death knell for many small businesses across the nation.
One sector in the economy has seen an upswing in small business lending – pawnbrokers. Euphemistically referred to as “collateral lenders,” regional and national associations representing pawnbrokers are reporting a dramatic increase in traffic from small business owners who are pawning everything from cars to power tools in a desperate attempt to keep their heads above water.
So What if Balance Sheets Are Healthier?
As Christmas approaches and a new administration gets set to take office, groups like the National Assn. of Small Businesses want President-elect Obama to lower fees and increase access to SBA loans and even elevate the SBA chief ‘s position to Cabinet level.
Many small business leaders have become vocal about the failure of the federal bailout funds to trickle down to the place they’re really needed. Banking balance sheets may be healthier as a result of the government aid, but that is little consolation to business owners who are struggling to make payroll.
Federal government aid must find its way into the hands of America’s small businesses.
Most Americans are employed by small businesses, not major corporations. Historically, America’s small businesses also have been an important source of innovation and a breeding ground for talent. If they fail, we fail.
Come on, Santa. Dig deep. America’s small businesses really need your help this holiday season.
John Cohn is a senior partner in the Globe West Financial Group[ based in West Los Angeles. He may be contacted at www.globewestfinancial.com
