Bank Financing for Start-Up Businesses – does any actually exist?
Banks were always known as a potential funding source to help businesses start up and grow. There were good days when you could visit a bank, tell them about your business plan, and if they could understand it – were willing to take some risk and lend businesses money. The system has now devolved to a point where banks can benefit from very low interest rates, but are not willing to share the benefits of these rates. The government has made low interest rates a ‘benefit’ to aid the economic recovery – but banks won’t share.
Banks have found ways to make plenty of money on low interest rates, become fee based businesses, and charge ridiculously high fees for services they don’t even provide – late fees, exorbitant interest rates on credit cards, and any other way they can justify charging fees. They have de-risked the lending environment to themselves, but de-financed banking along the way. Safe loans to their best customers only has become the banking way of life. This approach does not help start up companies nor help companies poised for growth, but don’t yet have the multi-year track record required. Now, too many start ups can’t survive for 2 -3 years minimum requirements.
This deep economic recovery continues to cease to exist with only the largest, most established companies having access to financing. Since start up companies are supposed to fuel a recovery and be a major factor in job growth, banks are effectively choking the recovery out of existence and responsible for the lack of job growth from small businesses.
And, the excuse is the exorbitant regulatory environment choking banks ability to provide financing and effectively be the banks that the economic recovery requires. This regulatory environment makes is acceptably impossible for small businesses to obtain the financing they need to invest in and grow their businesses. Nobody even wants to go to ‘the bank’ any more.
This deep federal government induced recovery continues to choke small business growth and job creation. How about a little innovation to allow banks to return to being the banks we need, take on acceptable risk, and be a legitimate financing source for businesses? Even the SBA and state agencies like Mass Development only stand behind these archaic bank practices. Let banks be banks again and let bankers be the vital cog to work with businesses on reasonable terms.