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A few weeks ago, I read a very sobering account of a small business' struggles in our current economy.
The story was about a lady who owned a custom furniture store. She has been in business for 20 years, with 11 stores located in California, Michigan, Illinois and Texas. "When you're a small business you're a microcosm of everything," she said. "There are no stimulus programs or packages for us, no free enterprise zones."
A few years ago, she was selling more than $1 million dollars of her elegant pieces monthly. She had 130 employees. But now, the recession has been crippling. She is down to 6 stores, her volume cut in half, and her employees down to 75. She tells employees, customers and suppliers that her focus is to be here next year. The real threat to her survival, she says, is that the lubricating oil of small business - the credit system - has collapsed.
Her firm thrives on a vast network of credit arrangements, formal and informal, binding together everyone from landlords to suppliers in accommodating relationships of accounts receivable and payable.
Now, she says, " every participant nickel and dimes everyone else, for fear of being stuck with the bill". She would typically have credit of $60,000 to $70,000 at a fabric mill - now, the mill has capped her credit at $3000 - essentially, no credit at all. She orders less, defers purchasing raw materials, has less flexibility to meet her customers'
requirements, the mill gets smaller orders. Who benefits? No-one.
It gets worse. Last month her bank placed a hold on $60,000 in advance deposits paid by her customers. This was her working capital. The bank said it would not spring the money loose until she put up a cash reserve of $300,000 ! Why? The bank decided that as a furniture manufacturer, she presented a high risk of going bust, in which case the bank would be on the hook to customers who had put their deposits for unfilled orders on a credit card. Of course, the freeze only threatened to make the bank's own fears come true.
Eventually, she convinced the bank to back off, but only after scrambling with her customers to arrange discounts if they paid by cash or check. She had not bounced a check in 20 years, and had no debt. She found another bank.
She says she can't even get a $100,000 loan, even though she has more than that in open orders waiting to be filled. Instead of running her company and designing furniture, she finds herself talking to accountants and bank vice presidents, just to keep her business going.
I am sure everyone of you reading this knows someone like our furniture maker. Maybe it is you who is experiencing the same thing. So, where is the recognition and focus from our government and financial institutions on this crucial issue? Why has this not been priority #1 in getting the squeaky wheel turning smoothly again? Why is the heartbeat of America beating so faintly? Why is this allowed to continue? Why?
What does this have to do with seller financing, and buying and selling notes? Everything. Seller financing is the "lubricating oil" when traditional financing is not available. It steps in and fills the void. It creates it's own network so that commerce can continue - the commerce of buying and selling property. No matter what is happening in the economy, people always need a home to live in. No matter what is happening in the economy, people will find themselves in a circumstance where they want or need to sell their home, and a buyer is out there looking for that home. If the Behemoths of Americana - the banks - won't help the people in need, well, the people will just have to help each other.
Denny Stanz
California NoteBuyer LLC
760-245-5366
760-245-5367 fax
dennystanz@verizon.net
www.CaliforniaNoteBuyerLLC.com
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