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Financing is not an answer to this problem. 1. Banks may not choose to finance small businesses at all, because they can finance bigger businesses which are a

Financing is not an answer to this problem. 1. Banks may not choose to finance small businesses at all, because they can finance bigger businesses which are a lower risk. 2. If banks do finance small businesses, they charge them higher interest rates than a larger business, again, because a larger, more established business is lower risk. A small business that has to finance at a higher interest rate will have to make larger gross profits to pay their financing costs. 3. Larger businesses may have enough cash on hand that they don't require financing at all, which makes it even harder for small businesses to compete. I wasn't ignoring financing when I said that high up-front costs and low long-term costs create the ideal conditions for large businesses to drive out small businesses. Financing simply doesn't solve this problem.

jessaustin 11y ago
If you're talking about the general problem, that society is bent in many different ways to favor large firms managed by professional executives and owned by clueless investors, then yes, I agree that financing is not the solution. At times I despair that any solution short of large-scale violence and reappropriation may be found. On the more particular issue of capital goods requiring up-front investment, don't lose hope. This phenomenon has inhered in the capitalist system for centuries, and certainly longer than "banks" as such have. Over that whole time, however, small nimble innovative firms have regularly thrived and even grown large, lax, and lethargic themselves. Part of the problem is the assumption that banks control all business lending. (They love that otherwise smart people assume so!) I know an investor who is currently dissatisfied with real estate opportunities available to occupy his considerable wealth. For several years he has been financing, among other things, consumer purchase of water softeners. He actually has to hire someone to examine long lists of loans of several hundred to a thousand dollars! He would love to be able to help a few firms purchase a dozen self-driving tractors apiece, once insurers figure out how it will work. Various entities have nibbled at the margins of "bank" business for decades now. This is not a phenomenon that will cease before banks themselves do. They only exist because we believe they must.

jessaustin 11y ago

If you're talking about the general problem, that society is bent in many different ways to favor large firms managed by professional executives and owned by clueless investors, then yes, I agree that financing is not the solution. At times I despair that any solution short of large-scale violence and reappropriation may be found. On the more particular issue of capital goods requiring up-front investment, don't lose hope. This phenomenon has inhered in the capitalist system for centuries, and certainly longer than "banks" as such have. Over that whole time, however, small nimble innovative firms have regularly thrived and even grown large, lax, and lethargic themselves. Part of the problem is the assumption that banks control all business lending. (They love that otherwise smart people assume so!) I know an investor who is currently dissatisfied with real estate opportunities available to occupy his considerable wealth. For several years he has been financing, among other things, consumer purchase of water softeners. He actually has to hire someone to examine long lists of loans of several hundred to a thousand dollars! He would love to be able to help a few firms purchase a dozen self-driving tractors apiece, once insurers figure out how it will work. Various entities have nibbled at the margins of "bank" business for decades now. This is not a phenomenon that will cease before banks themselves do. They only exist because we believe they must.