Washington’s “fixes” for the stock market that crashed last Sept. 29 have done nothing to bail out me or my small business, but instead have left me, and many entrepreneurs like me, literally bailed on by our government.
Despite a federal transfer of $148 billion to 13 major banks, lending at 10 of them actually dropped 1.4 percent last quarter. As the Wall Street Journal discovered, J.P. Morgan Chase took $25 billion in federal Troubled Asset Recovery Program funds, yet its lending fell 2.2 percent. Citigroup scored $45 billion, but its loans slid 3.2 percent. Taxpayer billions in; no money out. Americans feel the squeeze, including me.
I am what a bank wants in a credit risk. I have been a small-business owner for 28 years, and a client of the same bank in St. George, Utah for 15 years. This institution has extended me many loans, and I have paid them as scheduled without fail. I own considerable real estate free and clear and earn a healthy income. I have a great credit score and never miss payments. My St. George, Utah-based company, Hybrid Light, LC, manufactures the Hybrid Solar Lite, an earth-friendly solar flashlight that lately has received much attention.
That same autumn week when our markets crashed, my company received the largest purchase order in our company’s history - well over 350,000 flashlights to be delivered to Costco by Christmas. This was no easy task, and we had been in negotiations for a year just to get to that point. One would think that approaching a bank with a signed purchase order of this size, solid collateral, plus a stellar payment history spanning a decade and a half, we would have no trouble borrowing against this purchase order. Too bad things changed so drastically last September 29 when some $1.2 trillion in market value was erased. And the Dow Jones Industrial Average lost 777.7 points - the largest single-day decline since the September 11 attacks. Investors worried that Congress would not thaw out the nearly frozen credit market, meaning banks would clutch fists full of dollars, rather than lend to companies and individuals so they, in turn, could keep the assembly lines and cash registers humming.
Congress, Treasury, the Federal Reserve, and other federal agencies have spent much energy and far more money bailing out large banks and businesses, supposedly to help them to help small-business owners like me. The federal government has handed banks and financial institutions a veritable pot of gold: some $3.35 trillion in actual capital, by some conservative accounts, plus another $10 trillion in backstops and guarantees. But just as many of us feared, bankers have hesitated to share this wealth - even with those of us with attractive credit histories and promising business plans.
In recent weeks, rather than being greeted by my bank’s normally open arms, I have been told that my loan application needed “to be pushed up the ladder.” Someone presumably a few rungs higher told me the bank needed more documentation. After another week, I was asked, yet again, for more documentation. The paperwork I handed over just created fresh forms to fill. This happened three times, each delay costing another week.
After waiting on my bank for four weeks, and after approaching two other banks, the story remained the same. I never officially was denied credit. Instead, I remained in an endless and fruitless holding pattern. Faced with a rapidly approaching delivery date, I ultimately had no choice but to secure short-term funding from a factoring organization at annualized interest rates of 27 percent. This turned my initial Costco profits into red ink.
I now have a second order pending from Costco’s domestic stores, as well as their international outlets. I also have new orders from Lowe’s and L.L. Bean. Rather than celebrate, I worry 24/7 about finding the money to satisfy these new clients.
Ideally, my erstwhile profit on my initial Costco order would have financed these subsequent orders, or at least helped collateralize short-term credit so I could manufacture the flashlights my clients wanted. But here I am, back at square one, asking myself yet again: Where will I find the money?
Despite Uncle Sam’s massive, $13.35 trillion bailout, I have been bailed on - left to fend for myself, as have many of my entrepreneurial brethren, even as my tax dollars cascade into the vaults of multinational banks that these days are doing little to nothing to help folks like me.
Terry Peterson is founder and president of Hybrid Light LC, a St. George, Utah manufacturer of solar-hybrid flashlights.