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Value Creation Blog

Do We Really Have A Credit Crisis? – Enterprise Value

Posted by Victoria Gehlmeyer

credit card finance2If you believe everything you read in the media no one is getting bank loans and private business owners are not getting any credit.  The small circle that I associate with has shown me the opposite is true. 

The people I know are all getting credit and there doesn’t seem to be any lack of banks ready to loan.

The problem is that many of the people whining aren’t credit worthy.  I’m not sure where we started down the road that anyone who wants a loan is entitled to get a loan.  There’s a reason banks have a review process.  They want to get paid back for money they loan.

We haven’t learned our lesson.  We made and condoned bad loans to the real estate market.  Now we’re told that we should write down those loans because the value of houses have decreased.  And, we’re told that those of us who have paid our mortgages should subsidize those who haven’t.

Where is the fairness in this strategy?  If we’ve done what we’re supposed to do which is figure out how to run businesses profitably, we get loans.  If we haven’t were now supposed to give anyone who has an idea a SBA loan that is guaranteed by the government.  When banks don’t have to take responsibility for who they loan to, they make bad loans.  Who thought this was a good idea?

If we’re to right the fiscal ship of our country, we need to have the government stop meddling in the lending process.  It seems every time the government starts dictating loan arrangements, those who are responsible with their finances get stung.

We don’t need easier loans, we need more financial education.  The lack of financial education I see in private business owners is appalling.  Most of the people I run across can’t read all three of their financial statements.  Most can read a profit and loss statement, some can read a balance sheet and almost none can read their cash flow statement.

If we’re going to fix our financial situation and provide credit for private business owners, we should at least have those business owners learn the language of business.  Once someone learns how to interpret the financial information in their business they can make appropriate decisions about making their businesses more profitable.

When they make their businesses more profitable, they become more credit worthy.  I know this is a dream, but having business owners understand how credit works and how their business functions on a financial basis would go a long way towards businesses running in a more effective and efficient manner.

What do you think about the credit situation in the country?  Are the credit worthy people not getting loans you know?  Or, is it the people who should never have gotten credit in the first place who are whining?

I would love to hear your ideas.  Please either contact me at Jpatrick@stage2planning.com or click here to set a time for us to talk.

Josh Patrick

I’ve written a special report on using key metrics in your business.  I encourage you to download this report by clicking on the button below.  I believe you’ll find this report fits in nicely with the entry above.

  download-your-key-metrics-special-report

Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

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Topics: for business owners, enterprise value, private business owners, loans, credit crisis, financial education

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