Small Manufacturers and the Lending Crisis

Small Manufacturers and the Lending Crisis

Yesterday's front-page, above the fold WSJ headline jumped off the page: "Lending Falls at Epic Pace."  Epic, as in the "biggest full-year decline in total loans outstanding in 67 years."  It's a critical challenge — for some companies, nothing short of a crisis — that NEMA's smaller members have faced for awhile now.

The answer is simple enough (you'd think): The feds gave banks billions of dollars to increase lending and stimulate the economy.  But most won't do it.  As commercial banks tell it, this situation represents a real dilemma for them.   The Journal describes it this way:

"Lawmakers on Capitol Hill and administration officials have pushed banks to lend, particularly in light of the billions in taxpayer aid injected into the financial industry over the past two years. Banking groups and their members counter that they are under pressure from regulators to be more prudent and that demand from struggling consumers and businesses isn't there."

There isno doubt that bankers feel the pressure to lend (from Congress) and the pressure to be risk-averse (from regulators).  But no demand from small businesses?  More likely a lot of small firms have given up trying to get loans through commercial banks, and are looking for alternative means.  After all, most small businesses rely on the availability of credit.  If it's not available, many simply will go out of business.

It's an issue thats' on the minds of a lot of electrical manufacturers, and will be one of the topics of discussion at our June 23 NEMA Small and Medium Manufacturers Forum.  (Registration for that event — open to NEMA members — should be available on our website March 15.)  We're bringing in some finance & investment wizards to discuss alternative strategies for small businesses to get their hands on more cash.  It'd be nice to think that our American financial markets are still flexible enough to create some competition for the banks.

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