It’s getting to be that time of year again, all across America and even throughout the rest of the world, and banks are tightening their lending policies. Offshore capital is usually much easier to get than on-land funds. This is because U.S. banks are tightening their lending requirements and trying to cut back on non-performing assets. This means that they are now taking a harder look at making loans to people with bad credit. This is not entirely unusual, after all, banks are always looking for new customers.
One reason why banks are now looking to see more closely the amount of money that they lend to potential customers is because of the rising costs of doing business in the U.S., as well as the state of the global economy. If you take a step back from all of the economic details, just look at the job situation in America right now, and the number of jobs being lost or changed, you can start to get a pretty clear picture of where we are in the current economic landscape. Therefore, it only makes sense that banks are looking into more offshore funding options for their businesses.
In many ways, the whole idea of banks providing venture capital funding services is actually an antiquated one. Back in the seventies, venture capital firms typically consisted of banks, private investors, and credit unions. Today, most venture capital firms are private groups of individuals. But despite the recent trend towards offshore funding and smaller venture capital firms, banks are still doing business in many cases – providing loans, equity financing, commercial real estate loans and the like.
So what’s happening with banks that are suddenly looking at ways to cut back on their lending to businesses? In many cases, the answer is simple: dynamic discounting. Dynamic discounting means that banks are no longer loaning large amounts of working capital or even small amounts of consumer credit to businesses, as they have been doing for many years. Instead, they are limiting their lending activities to less than five percent of a company’s total assets.
Of course, a lot of business people aren’t buying this explanation, because they’re used to getting high-risk loans from banks for their companies. However, if a bank is loaning out more than half of a company’s tangible assets (which is what most banks are doing when it comes to working capital loans), then there’s an enormous imbalance of risk between the assets and the liabilities of the business. The bank isn’t taking any of the responsibility for the balance between the two. In other words, the bank is simply passing the risk of repayment of the loan to another party. When this happens, a business isn’t really getting much of a deal when it comes down to it. And when a company can’t get a loan – well, the rest of the business is in danger, because the only way that business can get a loan is if it has a very solid down payment – and if it doesn’t have a very solid down payment, then its liquidity stream is severely limited.
The situation looks even worse when you consider that many businesses have recently had to seek credit debt assistance from banks in order to continue operating. The result is a growing number of business people who are looking for help with their money troubles. There’s no wonder that banks are offering more money to businesses for these hard times. If you’re a business owner looking to take advantage of one of these loans, don’t forget that banks are still profitable institutions; in fact, banks make far more money than many people realize, and they don’t need to be giving it away. So get your free, informed business finance quotes today so you can see where you stand in relation to your competition!