I have read a ton of articles recently on what the current administration is planning on doing to “bail out” small businesses which have been hit so hard in this recession. The question is, does your small business really need a bail out?
To start, I consider myself to have fairly reasonable views politically. (Don’t we all?) With that being said, I may not agree with everything that President Obama does but I don’t think he is knowingly trying to create the 2nd coming of the Third Reich. In fact if any of us ever completely agreed with a president I don’t know what we would do. In the case of his plans to infuse capital into small businesses, I appreciate the spirit of the message but not the tactics used to employ them.
The issue I have with this is two fold. The first issue is that the current administration apparently forgot about what just happened to the housing market. This is with regards to the proposal to funnel money at a reduced cost to community banks and credit unions. Sounds great right? Except that cheap cost of funds was the same thing that helped kill the mortgage industry as banks lost their minds. The real issue with the plan is that not only are banks getting money at a reduced rate, they are also required to lend that money specifically to small businesses.
If I am a bank president, I am positive that I don’t like being told how to lend my money for my bank but in this case what does the bank have to lose? They have no skin in the game on this deal. They borrow the money for cheap and then if the loans don’t work out, which a lot of them wont, they will just say that the government made them lend the money. What were they to do? This is the same thing that we did with mortgages.
Cheap money+regulation that encouraged more people to be home owners=epic fail
A message to the small business owner:
If you are looking for a bail out or are angry because corporations are getting all of the bail out money, get over it. This is no different than any other time. An 80% failure rate in the first 5 years historically for small business tells me that times have always been tough for small business owners. This just didn’t develop over the past couple of years.
Looking for a bail out, to me, shows a lack of leadership. You’re telling your organization that you can’t solve the problems within your organization. Waiting and thinking about a bail out just keeps you farther from finding the solution. Leadership means facing tough times and asking what your organization can do to overcome.
Ultimately, there are root causes to a businesses problems that more often than not don’t include a lack of capital. Infusing money into your business without understanding what the real reasons are that your business lacks capital is essentially throwing good money after bad. The proposition is risky at best.
I firmly believe that the problems that exist within small business today can be solved without the governments help. Somewhere within your organization lies the answers to the questions that you seek. Now it’s time to get dig deep and start looking for the solutions to make your business a winner.
What do you think small businesses can do to help themselves?