Recycling To Boost The Economy

About the time we can make the ends meet, somebody moves the ends.- Herbert Hoover

The National Small Business Association (NSBA) released it’s 2010 Mid-Year Economic Report and the results confirm that while many large companies have begun to see revenue growth coming out of the recession, small business continues to struggle as they face the most difficult business climate in the last 3 years. The NSBA’s report found that 41 percent of small firms are still unable to obtain adequate financing. According to Todd McCracken, president of the NSBA, “Today, more small businesses are unable to get financing than at any time in the last 17 years. Given the direct correlation between access to capital and job growth, unless small-business owners are able to secure financing, we will continue to see high unemployment.” Large companies however face a different environment as access to liquidity is plentiful with interest rates at or near record low levels. U.S. Corporations issued more than $355 Billion in bonds in the third quarter, up 32% from the third quarter of 2009. Why the credit gap? Small companies generally need to obtain financing from banks or other risk averse financial institutions while large companies can go directly to the capital markets. We’re just emerging from a credit crises driven recession where bank lending to risky borrowers was a large part of the problem so how do we address this credit gap between large and small companies without negatively impacting the credit quality of bank loan portfolios? One way is through Supply Chain Finance which allows banks to provide capital to small and/or sub investment grade companies while taking on the credit risk of the company’s large investment grade customers. This is one of the dynamics of SCF that lead U.K.business minister Mark Prisk to say “Supply chain finance is clearly an option that all large corporates should consider providing. It is one option that could help plug the funding gap of their suppliers while looking to cover working capital as they await payments.”