Archive for the ‘lending’ Category

Bank Lending Will Improve— Slowly

February 22, 2010

Says Chamber of Commerce Economist at Dealer Expo

INDIANAPOLIS — If you’re looking for working capital for your small business, don’t count on getting it from your local banker any time soon, says a leading economist. Martin Regalia, chief economist for the U.S. Chamber of Commerce, told a gathering of business executives at the Dealer Expo here it will take about six months for banks to return to “normal lending practices.”

Martin Regalia

Speaking at the annual meeting of the Motorcycle Industry Council (MIC), Regalia said that it will take time for banks to define the risks— financial and regulatory— before they feel comfortable lending again.

“The biggest factor in getting banks lending again is time,” said Regalia. “Banks are in it to make money like everybody else, and contrary to what the president says, you cannot run a free enterprise system without risk.

“Risk is what we all take. It’s what we all manage, and it’s why we make the money we do. Without risk, there is no return—nobody pays you for certainty. So, banks are in it to manage risk. As time goes on a little bit, they will get a better feel for that risk, and they will begin to lend, and they will probably, at some point down the road, overshoot again and under price and over lend to the risk. But that takes time.”

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Obama Can’t Have It Both Ways

December 17, 2009

Free Market Should Dictate Lending Practices

President Barack Obama seems to be uncertain about how he wants to deal with U.S. bankers—sending them directly conflicting messages about their lending practices—and his inconsistency is causing a continuing problem for consumers and small businesses who can’t get the credit they need, especially those in the powersports industry.

On the one hand, he beats up bankers for making so many bad mortgages and creating such a mess that we taxpayers had to bail them out. Shame on you, you greedy bankers, he says, for making so many lousy variable rate mortgages to people who couldn’t make their payments when the new rates kicked in.

That seems like a reasonable position. I think there were a lot of lenders and Wall Street pros who got caught up in spinning mortgage paper, quickly shifting loan packages off their desk and on to the next greedy investor before he could look at the underlying poorly structured loan. While Wall Street bankers bear the brunt of the blame for packaging these loans, the real blame has to come back to the originator— the local banker who approved the so-called NINJA loans for people with no income, no job and no assets. Main street bankers were far from innocent in the entire sub-prime housing mess.

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SBA Launches Dealer Floor Plan Program

July 1, 2009

Government Guarantees Up To 75% of Loans
Move Is Expected To Free Up Money for Dealers

July 1, 2009— The Small Business Administration (SBA) today launched its pilot program designed to increase dealer access to floor plan financing. Details were provided this morning in a conference call with news media representatives and SBA staffers.

As many as 4,000 loans could be guaranteed under the program that runs through Sept. 30, 2010, said Eric Zarnikow in response to one of my questions. Zarnikow, the SBA’s associate administrator for capital access, said the agency is limited to backing only 10% of the total number of loans it makes under its 7(a) program, which would be about 4,000 at the current rate of processing.

The SBA will evaluate the program next year and determine whether or not it should be retained or dropped. “We’ll determine what to do at that time,” said Zarnikow.

Floor plan loans will be available for a minimum of $500,000 up to $2 million under the pilot program—dubbed by the SBA as its DFP (for Dealer Floor Plan). The loans will have a maximum repayment term of five years.

The loans will be made by local banks to dealerships, not by the federal government, but the government will guarantee a portion of (more…)