Tuesday, October 5, 2010

Small Business Lending Restricted By Market Forces

Average people and many small businesses needing working capital are finding their usual lenders have no money to lend them, severely crippling job growth in this slowly recovering economy. Why? Because the megacorporations who really don’t need to borrow are in fact borrowing and hoarding huge sums merely because they are able to issue debt at amazingly low interest rates. While Microsoft and other huge borrowers are placing huge bond issues at interest rates so low any of us would gladly have them instead of our current historically low home mortgage interest rates, these companies are not investing the borrowed funds in new, factories, equipment or payroll expansion. Instead, they are hoarding the cash until the economy improves, effectively drying up sources of working capital for the smaller business which would love to hire and grow of only they had working capital to fund their expansion.
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