Responsible and Creative Workout Methodology is Vital for Small Business Financing in Light of Recent Loan Crisis

The Federal Reserve recently released details on the $3.3 trillion in emergency loans made during the 2007-2009 financial meltdown. According to CNBC, the findings published included who borrowed how much and what collateral they put up, while shedding light on who benefited most from the central bank's controversial efforts to support financial institutions and credit markets. Read the full article here: Fed Discloses Details of $3.3 Trillion in Crisis Loans.

We are in favor of the Feds past policy of making loans to institutions under severe and in many cases unwarranted pressure during the darkest days of the financial crisis. As we saw during the “exuberant” bubble times, where investors were overbidding assets beyond reasonable expectations, there was a converse and reflexive excessive pessimism during the depth of the downturn.

“Too Big to Fail” Institutions Saved by Creative Workout Methodology 

While the recently released documents remind us of how crippled the financial system had become during the crisis and how much it's recovered since (banks earned $14 billion from July through September this year) they also bring back memories of the confusion and fear exhibited by “talking heads” on pro-business media outlets reporting on the plunge in real time the stock market at that time. The Fed and U.S. government stepped in and did the needful while commentators were either paralyzed or occasionally spouting laissez-faire “Hooverisms”.

Conversely, when the pit of the downturn was pretty clearly seen to be behind us, those same talking heads began to criticize and complain about the methods and scope of the government’s involvement which prevented a depression catastrophe. We disagree with this disingenuous position and think the same creative philosophical workout principals that averted a depression apply in current bank work outs. Rather than take the “traditional” laissez-faire formulaic methodology to have companies exit their banking relationships, we firmly believe a creative approach should be applied.

In fairness, why should the large banks and companies be “saved” by “creative out of the box” thinking and programs that have been shown to be successful and in most cases profitable for the government - and not apply that kind of thinking for small businesses? We are of the opinion a secure, fiscally responsible workout methodology should be reviewed, seriously considered, and implemented by every responsible bank and workout officer.

Responsible and Creative Workout Methodology is Vital for Small Businesses Financing

We are in challenging times economically and financially, and the old strategies used by banks to work out their clients are failing in the current market. Banks that currently lack an effective policy for optimally divesting themselves of large portfolios of bad loans need to embrace a new approach to workouts such as the one recently outlined in The Secured Lender that will accelerate their rate and efficacy, and will optimize the outcome for both the banks and the borrower. These loans, if refinanced, can also provide alternative lenders and private banks with substantial deal flow.  

Small business deserve the same consideration the “too big to fail” institutions received and an intelligent workout methodology that outlines a fair and optimal solution to these necessary workouts. It is understandable these companies need to exit their bank relationships due the banks regulatory requirements. It is imperative the banks behave intelligently and responsibly, within the letter of their regulatory requirements and authority to assist these small companies to exit in a creative, orderly, and optimal way which assures their survival and preserves the many jobs they provide to our citizens.

 

About US Capital Partners, LLC
Since 1998, US Capital Partners has been providing prompt, innovative, and reliable financing solutions including lending, corporate financing, and debt re-structuring to businesses across the United States and abroad. US Capital is a private investment bank, direct lender, co-lender, and lead financial arranger that specializes in asset-based debt for small- to middle-market private and public companies. The company’s innovative approach allows them to provide the best financing available, not only for companies in excellent financial condition, but also for companies who may have been refused credit by traditional lenders.

If you would like to know more about how your business can secure the funding it needs, visit http://www.uscapitalpartners.net/ or call (415) 882-7160.