Cnn Money Small Business

Pull $12.5 Billion From Small Business Loans

According to the Treasury of the United States, banks have removed about $1 billion from their small-business lending programs since last November, as indicated by CNN. This means that banks have reduced their lending to small businesses for seven straight months and the total reduced to small businesses since last April is $12.5 billion. This has caused some devastating consequences for the economy within the United States including unemployment of ten percent, according to CBS. The problem is that the banks reduce money loaned to small businesses and this causes the inability within the business to expand or hire new employees. This causes higher unemployment and the local economy suffers even more.

I personally have experience with this as a small business owner because I have applied for a loan two times within the last nine months. I own a small bottling company that distributes beverage machines within the city of Larchmont, NY. The summer months are the months that provide the most business for us. As such, we typically need to have the money to purchase replacement machines and to provide service to the machines that are currently operating. We also need to buy spare parts so that we have them for future repairs to the machines. Additionally, we usually hire about 50 workers in order to help maintain the machines and keep them stocked. Since the summer is typically when we make these hires in order to keep up with demand, we usually apply for a small business loan by June 1st of each year in the amount of $10, 000. This loan is used to provide capital for the entire summer.

This year we applied for a small business loan in the amount of $10, 000 for JP Morgan Chase, and we were denied. On July 1st we applied for the same loan at HSBC bank and were denied. This meant that we were unable to expand, and we lost three contracts. This caused a big drop in business, and we had to lay off 20 employees in addition to not making the new hires. If the banks continue to reduce lending, then we will be forced to sell a share of the business in order to obtain the funds for expansion. The reduction in loans by the banks has resulted in a loss of business for myself and the loss of a job for many of the employees within the business. This has been my experience with small business loans within the economy today.

Sources:

http://www.cbsnews.com/blogs/2009/11/06/business/econwatch/entry5549581.shtml

http://money.cnn.com/2010/01/18/smallbusiness/small_business_lending_drop/