Some Banks Are NOT Open For Business; Why Won't They Start Loaning Money To Small Businesses?

        What's The Deal?

Maybe it's because of the debacle at Bank Of America.

Maybe it's because of the mortgage crisis last year.

Maybe some of the banks that are too big to fail are in bigger trouble than we think. Maybe Robert Reich is right. His article.

I received a call today from a commercial loan representative at a major local bank here in Cleveland.

I have sent him most of my franchise candidates over the years, and he has been able to help them secure some terrific financing for their franchise start-ups.

We discussed the current commercial lending climate, and when I asked him about how his bank is looking at start-up franchises, here was his response;

"Joel, their not."

After I picked up my dropped jaw, I asked him what their reasons were. His response;

"Their just not looking at any start-up businesses, franchise or not."

I told him that....Actually I said nothing except, great talking to you, best of luck, yada yada yada...

I do have my own business to run here, you know. (Angry) It relies on folks who will be applying for commercial SBA and non-SBA loans to start businesses of their own. You know, the downsized of America who are sick of doing a high-level job search every 2.8 years. The ones who contact me, or who are referred to me by folks like her, her, and them.

Like this former Ford Motor Company employee who I helped get into a business of his own.

Fox Business News just reported on the credit crunch for franchises

There are other ways to finance a start-up business. A local bank is just the one that makes the most sense. (Usually)

So what are prospective small business owners doing to get funded?

A couple of folks I have helped get into business have done this.

Some are using their credit cards. More and more.

Here's what was written at CNN.com;

"Credit cards have always played a big role in helping entrepreneurs get new ventures off the ground. What's changing, analysts say, is that other options are disappearing."

They continue;

"The number of small business loans for $100,000 to $1 million fell 23% in 2008, according to an SBA analysis released in May. But the number of loans under $100,000 rose 16%. Charles Ou, the report's author, attributes most of that increase to an increase in credit card accounts."

Please finish the great article over at CNN.com, and then come back and share what you have done to find funding for your start-up or growing business below.

Comments

[John Bankenwanken]

King,

We will open our vaults to small businesses and franchises when we can.

Right now, confidentially, we are trying to keep our money stashed for a bit longer. Not all of our money is really liquid-if you know what I mean.

Banker 2

[The Franchise King]

Paul,
Just when you thought it could not get any weirder, CIT files for BK.

Unreal.

Alternative financing will have to be looked at for lots of current and future small business owners.

Joel Libava

[Paul Segreto]

I believe the CIT bankruptcy filing will tighten already tight credit markets. It's my understanding the $2.3Billion the US govt loaned CIT will not be paid back due to the bankruptcy. Instead, the loan amount will be converted to preferred stock. I would think this would put Obama and the govt in a better position to push financing, but only upon CIT emerging from bankruptcy. Needless to say, this certainly will further muddy up the financing waters. As you mentioned other ways to finance a business, this may further efforts for alternative ( and creative) financing.

[The Franchise King]

John,

Thank you so much for chiming in and supporting my blog.

In my heart, I feel that the President is pressing the banks pretty hard to start loaning money.

LOTS of bad paper is still on the books, rumor has it.

Here's hoping!

The Franchise King
Joel Libava

[John Sternal]

Thanks for blogging about this issue. It's a sore spot for so many small businesses out there and I've blogged about it as well from a marketing perspective. Here's hoping President Obama will warm up to small business and loosen the purse strings in the coming months.