Dear :

  "All we want are the facts ma'am, just the facts..."

                              -Detective Joe Friday, Dragnet

Sometimes our newsletter is packed with meaningful general information and sometimes we prefer a Joe Friday fact-based version. This month, we feel a little "scrappy," so we're going with our version of Joe Friday, focused on the current trends for demand and access to capital markets for owners of smaller, privately owned businesses.         

The crime: Private business owners are in a cash crunch position and lenders are missing opportunities.

Question ma'am (Joe Friday "speak"): We think that's true. So, what are the lenders, the ones with the money, doing about this?

The history:  

• 2009: Community banks could "borrow from the fed window" at lower rates
• 2010:   A Small Business Lending Fund was established to provide capital to community banks
• 2011: Big banks commit to increase their lending to small businesses by $20 billion over the next 3-years (really, 3-years?)

Question ma'am: Sounds reasonable. So how's it all working out for the business owners, the ones who need the money?  

According to 2Q survey results published by Dr. John Paglia of The Graziadio School of Business, Pepperdine University:

• 75% believe the current market is difficult for raising capital
• 44% of those who applied for loans were successful; 56% were not
• 41% business owners are using personal assets to finance their business
• the indexes used by Dr. Paglia (PCA and PCD...access and demand) are 27% and 36.5% respectively. Note: it's generally believed that when the index is 50% or higher, the capital market is stable/stabilizing.

Next question ma'am: So, did the above mentioned initiatives fail?    

Not sure but it's suggested that:

• Lending rules/programs have changed and banks have not done a good job of telling business owners what they are
• Lenders need to do a better job of sharing information among themselves and find new ways to streamline the lending process
• Banks need to operate with more transparency - e.g., publish the minimum thresholds needed for loan approval.

Last question ma'am: Why should you care about the stability of the credit market?  

It's really simple Detective Friday: the ability to sell or grow my business depends on access to stable capital markets with deal and lending terms and conditions that work for all parties. It's really that simple.

For more information from the survey, click here. 

The capital markets for small businesses have changed and are changing very quickly.  We know from experience. We have several lenders we work with on a regular basis and are in constant contact with them.  If we can help, give us a call.

                             by Ed Davis, Partner

Thanks from the
Harvest Team!

Greg Caruso (410) 507-5441 Email

Ed Davis (301) 325-7687  Email 

Arnold Heckman (301) 572-6000 ext. 312  Email  

Glenn Molin  (540) 287-1776  Email

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