CFO magazine ran an interesting but brief article on SEC plan to encourage and assist capital formation for small mid-size businesses (SMB’s).
In light of all the gyrations in the credit markets and the rush to aid investment and money center banks (see Risk Rap Post 4/10/08, SMB’s TBTF), it is heartening to know that the capital needs of our country’s most important economic sector is not being over looked by the government regulatory bodies.
The access to capital is critical for small businesses. The SEC plan to expand capital access to the segment will help SMBs cope with stringent credit policies, the effects of the economic downturn and the pressure on asset valuations due to the falling real estate and public equity markets.
An interesting side light to this initiative will be how community banks and private equity firms position themselves to take advantage of this SEC initiative. It bears watching and this could be an important program to align the interests of cash rich private equity firms and capital stressed community banks.
We’ll post more on this subject in the future.
Risk: SMB, Regulatory, Private Equity, Community Banks, Market, Credit
SMEs are too big to fail (TBTF)
During last weeks Senate Banking Committee meeting with Bernanke and the Treasury Under Secretary, Chairman Dodd made an interesting almost off hand comment on the Feds move to pump liquidity into the credit markets. To paraphrase Dodd, he observed that the liquidity being pumped into the markets is going to prop up the capital ratios and balance sheets of banks. Its not like its going to small businesses.”
He said it. Or something along those lines.
Give us credit (pardon the pun), we are astute enough to know that if bank’s have a strong balance sheet they will be in a position to provide credit and other funding products to small and mid-size businesses (SME). But Chairman Dodd raises a sore subject that will certainly command much more attention as the banking crisis continues to play itself out.
Little has been said about the impact of the crisis on SME’s. But if you measure the extent of SMEs contribution to the nations economic development, job and wealth creation and as a principal source of tax revenue the needs of SMEs must be a central tenet of any proposed recovery strategy.
As the banking sector realigns and reconfigures this is a great opportunity for community banks to fill this pressing need.
Risk: SME, Banking, Community Banks, Credit, Political
You Tube Video: Lightnin’ Hopkins, My Starter Won’t Start This Mornin