August 30, 2014

TARP Squeeze Threatens Business Lending

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As the U.S. Department of the Treasury wraps up its Troubled Asset Relief Program (TARP), rolled out in the dark days of 2008 at the height of the subprime mortgage crisis in an effort to prevent the collapse of the banking industry, critics worry the end of the program may unintentionally threaten small business lending. Here are some predictions about the difficulties businesses seeking financing may face and how entrepreneurs can weather the storm with some simple strategies.

Payback

Brother, can you spare a dime? Small businesses that have traditionally relied upon community banks for loans or lines of credit may be especially hard hit as these banks try to repay TARP money, writes blogger Maria Valdez Haubrich. Either the banks will cut back on business lending to meet their obligations, or if they have not taken TARP money, will be inundated with loan requests from business owners whose banks have cut them off to pay back the federal funds. Network Solutions

Squeezing the little guy. While many bigger banks have already repaid the TARP money with interest, an estimated 300 small community banks still must repay those funds. Community banks face a perfect storm: unable to raise the money on the public market, they must raise their capital ratios to meet new federal regulations and pay not only dividends on the Federal money, but principle and interest. Inc.com

Belt-Tightening

Where there’s a will, there’s way. Fortunately, bank lending isn’t the only or even the preferred way for entrepreneurs to finance the startup or expansion of a business. Some of these options include private sources of capital like outside investors, crowdsourcing, or money borrowed from friends and family. SBA.gov

Got to admit it’s getting better. The state of small business and entrepreneurship in the U.S. can be hard to gauge, no matter how many statistics are examined. Attorney, author, and small business advocate Barbara Weltman has looked at the numbers and finds strong entrepreneurial spirit, hard struggle, and some failure in a tough economic climate, but no simple set of stats that captures the state of small business today. Free Enterprise

When Times Get Tough

A family affair. Several factors make a family business better adapted to flourish, even in tough times and without outside financing. As Lauren Harvey observes in this guest post, family businesses often save money on salaries, with family members simply taking a share of the profits. Investment is also more flexible, with families putting money into the business only when the market and financial conditions warrant it.  Small Biz Diamonds

By any means necessary. Sometimes greater investment in costly marketing and advertising isn’t necessary to grow your business. In tough economic times less expensive approaches like blogging and other social media marketing can also be hugely effective. Here are 11 examples of business blogs that attract and retain customers. Web Marketing Today

Little big man. Small businesses are often fiercely proud of their scrappy “little guy” reputation and suspicious of the bureaucratic best practices of big business. Still, business consultant Geoff Vincent believes small businesses can have it all, with operational and structural sophistication that can improve performance and efficiency in tough times. bizCompare

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