The failure of most banks to devote serious efforts to small business financing has made the title question a recurring issue during the past five years. From a public relations viewpoint, bankers have offered a series of explanations about their abnormal and low levels of commercial loans to the small business community. Initially blame was assigned to the failure of several major banking institutions. Then fingers were pointed at irregularities in the commercial paper market. Next banks suggested that they had no choice but to cut small business funding unless they received external help from bailouts provided by the public and Federal Reserve lending at zero or near zero cost to the banks. Even after receiving this massive financial support, small business lending deteriorated to historically low levels.

The most recent strategic bank explanations have evolved to statements that everything is fine and small business loans are again at a healthy point. This final perspective is widely doubted by both small business borrowers and independent observers. The opinions and reports from small business owners have been particularly negative and critical. If banks are saying one thing and small businesses are saying just the opposite, then an immediate conclusion is that something is not as it appears. Should we place more weight on what commercial borrowers are reporting or should we believe the bankers?

This is a good point to pause and inject a reminder that banks employ an army of professional lobbyists to portray their industry in the best possible light. A recent accounting of just how extensive (and expensive) this effort is noted that bankers have approximately ten lobbyists for every Member of Congress. Largely because these lobbying efforts have been successful in influencing their political targets, legal obstacles to risk-taking by banks such as the Glass-Steagall Act have been removed from the books. The high-risk trading of financial derivatives that took banks to the brink of collapse would not have even been permitted under earlier legislative restrictions. Despite massive losses due to excessive risks, it has been reported that derivatives trading has been resumed by banks after only a brief hiatus.

If banks have stopped making commercial loans to small business owners, it might be helpful to know why this has occurred. The answer would go a long way to revealing what it would take to get small business financing back to a normal state. Meanwhile it is also possible that banking has changed forever and that commercial lending will not be returning to earlier conditions despite all attempts to fix the problem.

Of course any attempt to determine why banks might have reduced and eliminated most variations of small business finance programs must be done without the implicit cooperation of the banking industry. As noted above, the current party line from bankers gives themselves two thumbs up and consistent reports that all is well in the banking world. It is refreshing (and helpful for getting at the truth of the matter) when an individual steps forward with a different viewpoint. This is exactly what happened recently when a banker published his resignation in a prominent newspaper to demonstrate what he thought was seriously wrong with both his (former) banking firm as well as banks in general. Hopefully there will be more voices emerging to further demonstrate the depth of the banking problem. In the meantime \”why?\” continues to be a big part of the question for small business owners in search of commercial loans.

Stephen Bush provides advanced finance negotiation strategies to business owners and delivers small business financing help throughout the United States. Steve is a business finance consulting expert who resolves difficult working capital and commercial loan problems.

Stephen Bush has delivered candid small business finance help to business owners for 30 years – http://www.squidoo.com/real-estate-finance-consulting – Steve provides commercial financing solutions throughout the United States – http://www.aexbush.com

Author Bio: Stephen Bush provides advanced finance negotiation strategies to business owners and delivers small business financing help throughout the United States. Steve is a business finance consulting expert who resolves difficult working capital and commercial loan problems.

Category: Business
Keywords: commercial loans,small business,business,finance,small business financing