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.
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Reynardine
May. 7th, 2012 at 5:44 pm
An increase in credit unions isn’t a bad idea, either.
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A Walkaway
May. 7th, 2012 at 8:32 pm
State banks and state credit unions… sufficiently regulated… I like it.
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Churchlady
May. 7th, 2012 at 8:46 pm
Credit unions can’t fund businesses- need to change the laws NOW. Smaller banks OUGHT to be a source of funds, so why they are not is worrisome. They’re mid-stream, so perhaps pressure is coming from the top?
We need to keep up the drumbeat on restoring manufacturing AND on the anti-American lending practices of the banking industry.
I know this is a stretch – bear with me here – but there are several lending sources that today mostly finance home and consumer loans but that are empowered to finance other things. They are Muslim owned businesses that do practice, as part of their legal banking methods, riba=free lending. Riba is interest. They use entirely different methods and are far more honorable and yes, profitable, and stable than other commercial banks. The Bank of Whittier is a chartered bank in CA. There are other investment sources as well. They got through the downturn with very low impacts, so they ought to be models for new community banking methods. Nothing radical about them – they are great people and pillars of their communities – just traditionalists that do business in more sane fashions.
I can see Reps. Foxx and King getting their knickers in a twist over this use of “sharia” principles, but hey – it works, it’s honorable, and it’s capitalism at its old fashioned best. What’s not to love? Only idiots would think there’s something nefarious going on right under our noses. I have referred Christians to these banks, and it’s been great for everyone concerned.
ShoreBank – used to be South Shore Bank in Chicago in the area where a certain graduate of Harvard did some community organizing – has different methods but similar outcomes. Community banks in general are far more responsive to business needs and individuals overall.
So I hope that man in Tennessee (where the dolts in the state legislature are trying to outlaw everything sharia compliant which is like outlawing kosher) finds a community bank for his business that is not being squashed by the Big Bank desire to kill the economy. And to anyone NOT in Tennessee – look online for alternatives to your big banks. They’re out there in many different forms.
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Sandy Cunningham
May. 7th, 2012 at 9:32 pm
my brother got a substantial loan from a Canadian bank to start his business. It’s worth checking out. SHCCCC
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