No, we aren’t in, or heading to a depression, but the horror stories are beginning to fly. On the radio, I listened to a man with an American Express account since 1972 tell how his credit limit was slashed from $11,000 to $250 without warning. He found out in a form letter. I’ve read about another man with excellent credit and a perfect track record have his revolving loan limit knocked to $16,000 by his bank. It used to be $150,000.
Banks are extremely skittish these days. They realize how close to the precipice they came and don’t want to revisit the edge anytime soon. As a result, Banks are looking out for themselves first, and passing on any proposal that doesn’t come with a “belt and suspenders” type guarantee. Decisions that used to be made by collateral values, research, and updated financial information are now made using rejection as the automatic – and safe – choice.
But wait a second. Didn’t the banks just get a huge government bailout check? Yes, says Joe Nocera, but to them, those checks are to secure and rebuild their institutions, and not to be passed on to small business. Even SBA backed loans, traditionally a much more attractive proposition to Big Banking, aren’t enough to get their attention. No, damage control is the daily catchphrase for who knows how long.
So where does that leave the small business owner? Nocera suggests that smaller community banks may still be a good resource for loans. While they are in the same boat as big banks, community banks still seem to take the time to study proposals on a case by case basis, and utilize the SBA program.
If you are getting treated harshly by conglomerate banking institutions, your local community bank may be a life-saver.
