“If SDBs continue to be overlooked they might find their current status of having one foot on an economic banana peel and the other in a balance sheet graveyard even more dire as our nation continues through the current market correction“. – Rudy Sutherland, the 8-PAC Editor
Despite the current efforts of the Obama Administration and the newly capitalized SBA, what we are hearing from our constituents is that the availability and the cost of capital for the Small Disadvantaged Business (SDB) has changed a hell of a lot over the past six months. It started last year with large and mid cap firms, and then hit the small & small disadvantaged marketplace with a vengeance; with particular impact on SDBs.
There are a number of different factors driving this phenomenon. Obviously for banks and other financial institutions, there is the challenge of raising capital and what it’s costing to raise it in the wholesale market. However, there is also the risk margin. Terms and conditions have become a lot tighter, and when this happens there is empirical-historical proof of a disproportionate impact on SDBs.
Previously, banks were prepared to give out credit on much loser terms regarding security and gearing levels and so forth. Now they are looking for more security, less gearing, and more guarantees from business owners. They are also less prepared to back businesses that don’t have a strong history of profit or cash flow. This, unfortunately, is the category in which very many of our nation’s SDBs find themselves.
Thusly, 8-PAC implores the Obama Administration, Congress, and the newly capitalized SBA to provide more emphasis on making capital available and affordable to the Disadvantaged segment of the Small Business population of our great nation. As it stands, if SDBs continue to be overlooked they might find their current status of having one foot on an economic banana peel and the other in a balance sheet graveyard even more dire as our nation continues through the current market correction.