Why Businesses Can't Create Jobs Even if the Recession Is Over

Unfortunately, some lenders allow the SBA guarantee to stretch their comfort zone. I applied for a SBA Patriot Express Loan in 2008. When the seller threatened to back out of the deal unless she received a loan guarantee right away, the lender extended it anyway even though there had not been an appraisal yet. The bank waited until a few weeks before closing to order an appraisal. Every appraiser contacted refused to issue an appraisal on the property because it was too unique. They said they could not justify the price. At this point the bank wanted to back out, but the seller had already closed her business and auctioned off all her assets except the real estate. She threatened to sue us both if we did not go through with the deal. So the bank wrote the note. Due to the lack of an appraisal, they required my home as collateral too. We had a great business plan but we had not planned for a recession. The business closed after eighteen months. I went to an attorney to see if there was any way I could save my home from foreclosure. He said that the bank had a dragnet clause in the mortgages and I should start looking for somewhere else to live. My home was in a building where I had another business, so I lost that business too. I have had to move to another city and get a job. I can't get a mortgage since two foreclosures and a likely bankruptcy are looming over my head. There should be more oversight to be certain that these lenders are not taking advantage of borrowers. I have had numerous real estate loans from this bank and they have never made a loan without an appraisal before. They let the guarantee on the SBA loan loosen up their standards. As a result, I have lost my home and two businesses. The bank even had the nerve to tell my husband to take out a loan against his retirement account to make interest payments with so they could delay the foreclosure!!

Deb M. of IA 11:09PM March 04, 2010

Banks are being punished for having put money at risk, so we should expect to see less lending until there is a clear signal of a policy shift.

We are also diverting a large percentage of the nation's resources to less profitable uses. The stimulus package is being spent largely on make-work, not on infrastructure or research that might improve efficiency or which would even come close to the value private industry would yield from those resources. I don't really understand what is in the new health care package, but it worries me that it is apparently bad enough that even the labor unions, who supposedly were key beneficiaries, had to be bribed to accept it. And certainly it is costly.

We cannot devote a particular resource to public use and also have it available for private use, we can only choose between alternative uses. And this is not a zero-sum choice because these alternative uses do not create equal benefit.

So won't a natural result of this shift of resources be to deprive the more profitable ventures that would create a recovery? Won't this shift naturally be reflected in a scarcity of credit? Isn't this just one of the ways that the invisible hand of the market pushes back so that that the quantity demanded by the private sector falls to match the resources that are available after the government has consumed its share?

Anonymous of VA 9:12AM January 19, 2010

Mz de Rugy needs to get out of her office, away from her "research" and into the real small business world. As a business broker for 28 years, having completed the sale of over 4,000 transactions, all of small companies with less than 100 employees, without any doubt or exageration, there is a cork in the lending bottle for small businesses, unlike anything I've seen before. And, the expiration of the 90% guarantee and of the forgiveness of SBA origination fees (both of which uncorked the bottle for a short time and released the vital flow of captial small businesses needed, until this brilliant solution expried a few weeks ago). Now unavailable to borrowers and banks, with no evidence that anyone in DC cares to re-institute these important tools, this neglect has pushed the cork back into the bottle. This reluctance to provide capital, the life blood of small business survival, couldn't come at a worse time. This lending climate, for small businesses, is worse than the late 1980's when banks failed by the bunches, saved by the RTC eventually. It's worse than the fall out we witnessed after the dotcom bust of the early 2000's. This time, the decision makers are doing exactly the opposite of what should be done to re-stimulate the economy, to dramatically increase employment fast, by their re-corking the financing bottle for small businesses. Mz de Rugy makes another mistake comparing qualified small busienss borrowers to unqualified toxic home mortgage borrowers. The businesses who will bring us out of this mess are NOT dead-beats. They are the businesses with great qualifications, like the banks and the SBA have always demanded of borrowers, who need "get through" and expansion capital, who are highly likely to pay back their loans. And yet, those are the very ones who are being left out of the current "recovery" plans. The Administration feeds billions to bankrupt big corps, and to the institutions that got us into this mess in the first place, but won't incentivize banks to "back the play" of the solid, salt of the earth, hard working millions of "main street" entrepreneurs. Very weird, folks. If the Administration comes out of their stupor, and uncorks that bottle, all of us will witness a return to prosperity like we deserve.

William B Martin of MO 9:46AM December 04, 2009

The engine of our economic growth is the creativity and ambition of millions of entrepreneurs, and our online platform is a timely matchmaking tool for the marriage of capital to their new emerging businesses.

New Companies Translate into New Jobs:

Entrepreneurs are the key to re-building the nation’s economy; their optimism and innovation is exactly what our country needs right now. With more than 16 million Americans unemployed and vying for just three million available jobs, entrepreneurship is the only strategy for growing our economy — locally and nationally. By connecting entrepreneurs to a solid network of education and support, and leveling the playing field for access to capital, we'll quickly see new companies emerging from the ashes. And new companies translate into new jobs. It’s one thing to believe in “the American dream.” The question is how to actually facilitate it in the real economy.We have a working solution at www.fundingroadmap.com

Ruth Hedges of NV 6:13PM December 03, 2009