19 April 2021
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Credit where credit is due

Troy Hazard
15 April 2010

In an effort to drive the US economy, Washington continues its quest to get big banks to offer more to small business lines of credit, and week on week it seems to get more challenging.

The lenders are just not buying into the rally.

And in part I can see why. For one, why would they extend cash to a small business that is already on its knees, meaning that they too put their line of credit and in turn their business at risk? I mean after all, their business model is already archaic at best and one of the most inefficient animals I have had to deal with. Overlay to that the potential of further bad debts and for sure you’ve got a bunch more that will hit the wall.

Now don’t get me wrong, I am not saying the banks should not ‘lend’ a hand, for sure they should pony up, after all so many of them helped create the position we’re in right now. And after 20 years in business you’re not going to find this entrepreneur taking the side of the bank. I’m yet to find a bank that I can say I truly have a relationship with, in fact I am yet to find a bank that I would not happily break out the snags if it was burning to the ground.

But you will find me taking the side of logic. And for sure if there is one thing that defies logic for me, it’s the basic American business banking system.

Let’s take a simplistic view of the model –
  • According to my ‘relationship’ banker here in the USA they are 10 years off an efficient online inter-banking EFT system. At the moment if you want to pay your bills online with vendors and suppliers, or have customers pay you through inter-bank EFT its $20 to 50 a transaction if they do not have the same banker. In fact I opened my business account in Florida, moved to California and went into my bank to update some information and was told that they had to ‘call’ Florida as they were on a different computer system and they could not access the information online. In their own business.
  • EVERYONE writes ‘checks’ (cheques). They take the usual weeks to process in the normal business system, five days to get to you in the post, and further five days in some instances to clear and then you’ve got your money. ALREADY you have 10 business days, or a potential two weeks added to your debtor days, when small business is scratching to make payroll of Friday.
  • The credit rating system to me is from the 60s. Here, I have NO credit. The bank cares less for my foreign asset, my history of earning in Australia, my Australian tax return as proof both personally and professionally of earnings in the last five years, nor my earning capacity here in the USA. BUT they are happy to take my cash each month and look after it for me. In short, we pay cash for everything here, phones, furniture, cars the lot. And when I did go to get the cash out of my bank to pay for our car, they would not give me the money. I was told I had to give them 24 hours notice on larger withdrawals… hmmm interesting concept that! You don’t trust me to lend me anything but you’re happy to have me make an advance request for my money back.
    Now I don’t know about you, but I can’t recall the last time I wrote a cheque in my business in Australia.
    In Australia, at the age of 17 I had a visa card for $500, at 18 years old, I had a car loan for $5000, at 24, one of Australia’s leading banks agreed to underwrite me for a $1.4 million acquisition of a radio station. And yet in the USA… I am a newborn!

You want to fix small business credit Washington? Fix the banking SYSTEM, get these guys online in into the new millennium. Get the efficiently right then they might just be able to wear the rollercoaster of the good days and the bad days with small business client lending.

Troy Hazard is the former global president of the elite Entrepreneurs’ Organization, and Switzers’ resident alien in the United States. He has owned managed and run ten companies in the last two decades; is an international speaker and author of The Naked Entrepreneur.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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