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Rss- Jay Maharjan
Holding Banks accountable -
This piece on TheHuffPost makes a valid point why there is a lending freeze in the United States and how it is hurting entrerpeneurs and small businesses like you. While small businesses are uncertain about their tax future, all the bailed out banks are sitting on over trillion dollars cash – compared to 20 billion few years back. I agree with the author of the article that the banks have no strong incentive to loan to entrepreneurs for reasonable rates.
I am completely against micro-regulating small businesses and in good economies against government micro-managing banking. However, at the times like this a careful oversight on the banks makes a lot of sense. I don’t think cash reserve tax is going to yield long term SMB growth – the problem is – with the tax of this nature, if not done properly might force banks to lend to businesses who do not meet basic sustainability criteria.
Having said that, not having any kind of structured oversight can also be a disaster. Like I wrote in my piece Yesterday, SBA needs to get the 21st century, getting ready for conceptual economy makeover. Current structure of SBAs providing 75% guarantee to the banks strongly needs alternative approval criteria. True entrepreneurs with remarkable ideas usually end up not getting the SBA loans because SBA and other government backed loans end up giving loans to people who do not need the loan to begin with. SBA process aligns with banks criteria and focus on awarding loans based on past personal record instead of the potential sustainability of the business model going into the future. SBA needs to think like venture capitalists in terms of qualifying a business model – awarding loans to ideas that create jobs.
Entrepreneur.com: Latest Articles
Strongly agree with. SBA comment. Let entrepreneurs loose with creative ideas. Lower restrictions
[...] Entrepreneurs must take lead when it comes to get right support from the government. What took over 50 years to see a mature knowledge economy, the window to take lead in the conceptual economy will be narrow. It will simply be too late to take actions when things become obvious. In developing economies like India, elite institutes like IIT (Indian Institute of technology) is aggressively pushing entrepreneurship curriculum. China with the strong centralized infrastructure on policy making (which offers short-term unfair advantage) is pushing even harder to execute new entrepreneurship models. As I often write on this topic, the government must act to loosen, amend lending standards, rates to encourage entrepreneurship. [...]