Wednesday, May 14, 2008

Stupid Bankers - Redux

Stupid Bankers is the title of a blog posting I wrote almost a year ago after Ken Lewis, CEO of Bank of America, stated "we are close to a time when we'll look back and say we did some stupid things".

Not surprisingly, banks were not just doing stupid things in the large corporate loan market, but in the small business loan market as well.

Today's Wall Street Journal (subscription may be required) reported that more and more banks are experiencing increased defaults in their portfolio of small business loans.

The culprit - loose underwriting standards that ignored a small business' ability to repay the loan from cash flow and a willingness to overlook the lack of secondary collateral.


While Suntrust and National City were also mentioned, it was reported that the Bank of America set aside in the latest quarter for soured business loans to small business was estimated at $660 million!

Just like the large corporate borrowers, small business will pay the price - much tougher underwriting standards, more expensive business loans and tighter loan terms.

I had meetings with three bankers today - each confirmed the dramatic change in their bank's credit appetite over these last few months. One admitted that it's subject to change each and every day.

Got assets? Especially accounts receivable? There's plenty of money for the lending!

Need help finding the right lender for your particular financing requirement or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : Wall Street Journal , credit crunch , business loans , small business , Bank of America

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