billddrummer

Paychex Warns About Small Businesses

Hi Judy,

Excellent reporting as usual!

The small business sector is being whipsawed by customers who are going out of business or delaying paying invoices, insistent landlords and vendors who want money NOW!, and bankers perceiving unmanageable risk in extending credit to anyone without 6 months of operating reserves and a strong track record. If credit dollars are available, they're more expensive than ever, despite the Fed actions designed to loosen bank pursestrings.

Small business customers have depended on the banking sector for startup capital through the SBA program, among others, operating cash with lines of credit and factoring services, equipment and capital improvement financing, commercial real estate lending for expansion, and buy/sell arrangements, to scratch the surface of what's available (or what was available) through commercial banking channels. These products appear to be stymied by a perceived higher risk premium when lending to small business.

In my view, unless lending becomes more plentiful for small businesses, the sector will continue to struggle. Perhaps giving tax breaks to banks for small business lending would unlock the credit markets to this vital part of the US economy.

ATB,

Bill