Since a good percentage of our bankruptcy clients are small business owners, I keep an eye out for articles on financing.
This article from Christian Science Monitor caught my eye because of the contradictory messages about small business lending. While the federal reserve system is “encouraging” banks to lend to small businesses, banks counter that small businesses simply aren’t asking for loans.
Banks have…been restricted by tightened lending standards, says Bob Seiwart, a senior vice president at the American Bankers Association, who manages the group’s Center for Commercial Banking and Business Lending. “Money is available to viable small businesses,” says Mr. Seiwart. “But the terms will be different than in the past, as they should be reflecting the added risk of lending in today’s economy: rates will be higher and loan terms will be shorter.” Regulators have also started to require that banks maintain a higher level of capital in order to lend. In the current economic climate, the new standards have been difficult to sustain, said Seiwart.
CNNMoney reported, “Loans to small businesses dropped from more than $710 billion in the second quarter of 2008 to less than $670 billion in the first quarter of 2010, according to bank financial reports submitted to the Federal Financial Institutions Examination Council.”
Chapter 11 for breathing room and restructuring
If you are a business owner who cannot fund operations, consider talking to a qualified bankruptcy attorney. One option that might fit your circumstances is Chapter 11 bankruptcy, which allows for an orderly reorganization. Chapter 11 provides the debtor time and space to reorganize its financial affairs and repay its creditors some or all of the debt owed. It is a vehicle through which debtors can reject or cancel certain leases, contracts, and other debt obligations, and get breathing room to obtain new financing, sell property, or otherwise arrange to repay creditors.
No one wants to file for bankruptcy protection, but it serves an important purpose in re-ordering a troubled economy in a regulated manner.
Get the facts about filing or avoiding bankruptcy by speaking to an experienced bankruptcy attorney. Many will offer you a free initial consultation.