Manufacturing companies based in the United States are realizing an increase in demand for their products and want to expand, that’s the good news. The not so good news is the banking sector is holding all the money and they are not letting it out.
In a report by CNN they cite “lack of capital to grow” as their biggest challenge at a time when they need loans “to hire more workers, buy new equipment and aggressively market themselves.”
Anyone in business understands that cash flow is the key to success, and when the cash flow is dammed up, everything downstream dries up. This is precisely what is happening now and what happened during the financial crisis of 2008 under President Bush.
Unlike back in those days of 2008, the banks have the capital to lend. In the CNN report, a small business manufacturer, Matt Henderson, president of Performance Machine & Manufacturing, operates two machine shops in Tennessee that make parts for the automotive industry.
Business has been increasing at his shop and is reaching over 80% of what they did last year, essentially almost doubling his business. As his company continues to see an increase in demand for his product, he needs banks to loan him cash to expand and hire more workers.
He is asking for a $140,000 in financing to expand and hire more workers. Unfortunately he is hitting a brick wall, even after showing the banks his financials proving his business is increasing.
He currently has a thirty person staff and they are working 6-7 days a week. Henderson said, “If I get the loan, I can hire three full-time and two part-time workers and buy new equipment, I also want to do a heavy marketing campaign to bring in more business.”
Perhaps if this trend continues, our country should start talking about opening state banks to compete with the banking institutions. It has worked in North Dakota for 100 years, so why not do the same in every other state in the nation? Access to capital in North Dakota is great and small businesses get the cash they need to increase hiring and expand their business.
In fact, the financial crisis didn’t really affect North Dakota much. They were insulated somewhat due to their state bank. As credit dried up across the country, North Dakota kept chugging along, never really getting nailed by the tsunami coming from Wall Street.