8 ms·

Over 80% of small business loan applications are rejected. SBA loans in the US take 6 months - 1 year to get and still require cash down. Leasing companies hate

by rrggrr 9y ago

Over 80% of small business loan applications are rejected. SBA loans in the US take 6 months - 1 year to get and still require cash down. Leasing companies hate start-up businesses. Landlords want financials and personal guarantees. In short, there's very little liquidity available for most start-up businesses in the general economy. Got cash? Great. Most high growth areas are short STEM graduates, short trades-people, but long on large companies who can outbid you for talent. Got cash and talent? Awesome. Large companies have more than you and pay less vig for it. If you're lucky your business is likely to be acquired as it hits critical mass. If you're unlucky as the eye of Sauron notices you - all that easy big company money will crush you. Oversimplified? Sure. There are exceptions, success stories and counter-examples. But understand that small business and small business job creation is not a priority in the US. https://fred.stlouisfed.org/graph/?g=cAYh https://fred.stlouisfed.org/graph/?g=cAYh https://fred.stlouisfed.org/series/LNS12027714 https://fred.stlouisfed.org/series/LNS12027714 In agriculture the USGOV is literally paying farmers NOT to farm in some areas. The priority is wealth preservation and predictable returns for baby boomers and special interests who vote, and who control votes. You know who wants to change this? Who wants to repatriate 2-4 trillion in liquidity back in the US where its very likely to benefit small business growth? The only high profile person I've heard championing this issue is Trump. He appears to be fighting hard for it in upcoming tax reform legislation. Opinions about this guy aside, if he gets his way on dollar repatriation there's going to be a lot of money available for investment.

TAForObvReasons 9y ago
> Who wants to repatriate 2-4 trillion in liquidity back in the US where its very likely to benefit small business growth? The last time there was a tax holiday, the money was basically paid back to investors in the form of dividends and share buybacks. Unfortunately the WSJ link is 404'ing, but https://web.archive.org/web/20140117143531/https://online.wsj.com/news/articles/SB10001424052970203633104576623771022129888 https://web.archive.org/web/20140117143531/https://online.ws... you can see the first paragraph: > The 15 companies that benefited the most from a 2004 tax break for the return of their overseas profits cut more than 20,000 net jobs and decreased the pace of their research spending
- rayiner 9y ago
  That’s a cutting your nose to spite your face argument. Even if every penny of the repatriated cash goes to dividends for investors, that’s strictly better than the money sitting abroad.
  - existencebox 9y ago
    That seems untrue. If the margin of benefit to non-shareholders is so small as to be negligable, one can very reasonably not want to "reward" these companies for tax-dodging business practices, and seek reconciliation that actually ensures some sort of effective outcome instead of just hoping; especially given past repatriations as the parent poster notes. To suggest otherwise seems to lead that Trickle Down can be effective, which I believe history has well and truly laid to rest. As a holder of invested capital, I will still speak out against efforts that I think would exclusively benefit that class and not the core participants of the working economy. The latter historically seems to motivate much better long term trends.
    - rayiner 9y ago
      > That seems untrue. If the margin of benefit to non-shareholders is so small as to be negligable, one can very reasonably not want to "reward" these companies for tax-dodging business practices, and seek reconciliation that actually ensures some sort of effective outcome instead of just hoping; especially given past repatriations as the parent poster notes. There is no effective outcome. Countries are engaged in a race to the bottom where it comes to favorable tax treatment for international corporations. We either bring the money back here, or it'll just stay over there.
      - existencebox 9y ago
        By that logic we set corporate tax rate to 0 and throw our hands in the air. Having missed out on some percent of corporate tax revenue does not mean to me that our entire regimen is worth discarding, but could be adapted.
Alex3917 9y ago
> In agriculture the USGOV is literally paying farmers NOT to farm in some areas. If unfarmed land provides a benefit to the public and it costs the landowner money to provide that benefit, how is that different than the government contracting to provide any other service to the public?
janekm 9y ago
But what makes you think that any of that money would be any more easily available to small businesses than now? We’re talking about money owned by Apple and similar multinationals here (and banks no doubt), and of course by the Trump organisation.
prgmatic 9y ago
That, plus a bit of over-reliance on the US Census Bureau's way of measuring new startup activity. It's now easier than ever for individuals (read: not registered businesses that reporting agencies typically count in their studies) to start up and run experimental ventures, especially online. (edit: typo)
KGIII 9y ago
80% of businesses don't survive their first year, though the number goes up if you have employees. However, the percentages have been pretty consistent, year over year, for quite a while. This isn't a new trend, it wasn't better in the past. It was like this even before the current situation where there is 2-4 trillion needing to be repatriated. Here are some numbers and a bit about how these numbers have been largely unchanged for a long time: https://www.fundera.com/blog/what-percentage-of-small-businesses-fail https://www.fundera.com/blog/what-percentage-of-small-busine... Blaming it on boomers and wealth preservation seems all too simplified, considering it has been like this for quite some time. It's not that a lack of capital isn't a problem, it is - and that's the primary reason for failure. It's that trying to pin this on boomers is a simplistic way of looking at this problem and doesn't solve anything. The problem existed long before the off-shoring of capital. The numbers have been pretty similar, for quite a long time.
- WalterBright 9y ago
  The failure rate of new businesses is mostly due to the entrepreneurs having no idea what they're doing. It's a learning process; many start many companies one after the other until they figure it out.
  - KGIII 9y ago
    They cite lack of capital. I take that to mean they ran out of money. They'd do that if they didn't know what they are doing, so I suspect you're right. Many, many people are very good at what they do. Being good at what you do doesn't actually equate to having good business sense or management skills. Being an expert craftsman doesn't mean they know how to find customers, read contracts, deal with logistics, hire employees, manage money, or any number of things. When people ask how I managed to start my business and keep it successful, I usually tell them that it was mostly dumb luck. I was just getting good at it, some fifteen years later, when I sold it. There was lots of work involved, but a whole lot of luck.
    - deleted 9y ago
      [deleted]
ecshafer 9y ago
I can't be the only one that would love to start a business, or join a riskier small business, but due to a combination of health insurance and student loans it is not feasible.
- zaroth 9y ago
  Both health insurance payments and student loan payments go to zero as income goes to zero. So what's the problem? If you find yourself with no income you will also find yourself with no monthly payment on your loan and free health insurance.
  - mdorazio 9y ago
    I think you're assuming that people have enough money saved to start a small business with zero income for an extended period of time, which I highly doubt is a common case. And what about the employees you have to pay enough to cover those things for?
    - zaroth 9y ago
      Not at all -- I would not expect someone without savings to work for nothing at a startup, or try to start their own startup without outside funding and a salary. But it's important to recognize that both health insurance and Federal student loans have programs in place to support people who have no income.
  - lovich 9y ago
    Student loan payments do not go to zero as your income goes to zero. You still accrue interest if you aren't making oayments. Additionally if you have any sort of cosigner, which is not uncommon, then the banks go after your family for those loans if you cannot pay. I know I have turned down risky startuo jobs because my parents credit would have been hit had I been unable to make payments
    - zaroth 9y ago
      Good points -- interest still accrues, and some loans are private and you don't get access to all the pay-as-you-earn and income-based/income-driven repayment options. But for Federal loans with IDR, you absolutely can get a $0 monthly payment without any impact to your credit score, and this is not at all uncommon.
usrusr 9y ago
First the problem is startups getting crushed by the cash available to large companies, then the solution is repatriating those same large companies' offshore cash hoards? I'm not exactly convinced.
ComradeTaco 9y ago
Trump appointed Ajit Pai to the FCC whose doing his best to gut net neutrality for big communications. You have Pruitt whose dropping regulations for his big oil pals. You have Steven Mnuchin whose goal is destroy Dodd-Frank so financial firms can get too big to fail. This administration is the most nakedly oligarchic and monopolistic since Harding was president. To peddle this idea that Trump will be a savior to the small business owner and the working man is nothing short of a lie.
- lovich 9y ago
  I don't like Trump and his administration, and I think they are doing bad things like you have outlined. However, I don't think they are doing anything new other than being blatantly obvious about it. We had Eric Holder under the Obama administration who was supposed to be in charge of the arm of the government that focused on the rule of law. Instead he "... considered the economic fallout that could result from prosecuting major banks for their role in the financial crisis..."[1]. Before that we had Dick Cheney and Haliburton under Bush. There are countless other examples of naked oligarchism under both administrations and that covers the past 16 years, and I would not be surprised if you found other examples of this magnitude under Clinton, Bush 1, and Reagan. Someone born the day busy was elected would be months away from voting right now. We are undisputedly an oligarchy and are on no path to change that [1]http://www.pbs.org/wgbh/frontline/article/holder-big-banks-clout-has-an-inhibiting-impact-on-prosecutions/ http://www.pbs.org/wgbh/frontline/article/holder-big-banks-c...
petra 9y ago
Let's talk about small businesses,not startups. Is any of the things you mention different today than before the recession ?
beebmam 9y ago
If you think that Trump opposes wealth preservation and predictable returns for baby boomers, you're delusional. If anything is certain about Republicans, keeping generational wealth inequality is one of their most important issues.
prostoalex 9y ago
If you're a business with tons of cash in foreign accounts, you will have good credit rating. If you have good credit rating, raising debt will cost you next to nothing in today's low-interest environment. Both Google http://www.telegraph.co.uk/finance/markets/8517781/Google-taps-bond-market-for-first-time-as-rivalry-heats-up.html http://www.telegraph.co.uk/finance/markets/8517781/Google-ta... and Apple https://www.cnbc.com/video/2016/02/16/apple-taps-bond-market.html https://www.cnbc.com/video/2016/02/16/apple-taps-bond-market... have sold bonds. The creditors know that if the worse comes to worst, there's always the stash of cash that can be brought in during downturn years when there're losses that can be offset. Repatriation is a red herring sold to the masses as a silver bullet solution to every economic problem. The money that could be put to use has already been repatriated, the rest can be repatriated on a relatively short notice, given the liquidity of the high-grade corporate bond market.

by rrggrr 9y ago

TAForObvReasons 9y ago

> Who wants to repatriate 2-4 trillion in liquidity back in the US where its very likely to benefit small business growth? The last time there was a tax holiday, the money was basically paid back to investors in the form of dividends and share buybacks. Unfortunately the WSJ link is 404'ing, but https://web.archive.org/web/20140117143531/https://online.wsj.com/news/articles/SB10001424052970203633104576623771022129888 https://web.archive.org/web/20140117143531/https://online.ws... you can see the first paragraph: > The 15 companies that benefited the most from a 2004 tax break for the return of their overseas profits cut more than 20,000 net jobs and decreased the pace of their research spending

rayiner 9y ago
That’s a cutting your nose to spite your face argument. Even if every penny of the repatriated cash goes to dividends for investors, that’s strictly better than the money sitting abroad.
- existencebox 9y ago
  That seems untrue. If the margin of benefit to non-shareholders is so small as to be negligable, one can very reasonably not want to "reward" these companies for tax-dodging business practices, and seek reconciliation that actually ensures some sort of effective outcome instead of just hoping; especially given past repatriations as the parent poster notes. To suggest otherwise seems to lead that Trickle Down can be effective, which I believe history has well and truly laid to rest. As a holder of invested capital, I will still speak out against efforts that I think would exclusively benefit that class and not the core participants of the working economy. The latter historically seems to motivate much better long term trends.
  - rayiner 9y ago
    > That seems untrue. If the margin of benefit to non-shareholders is so small as to be negligable, one can very reasonably not want to "reward" these companies for tax-dodging business practices, and seek reconciliation that actually ensures some sort of effective outcome instead of just hoping; especially given past repatriations as the parent poster notes. There is no effective outcome. Countries are engaged in a race to the bottom where it comes to favorable tax treatment for international corporations. We either bring the money back here, or it'll just stay over there.
    - existencebox 9y ago
      By that logic we set corporate tax rate to 0 and throw our hands in the air. Having missed out on some percent of corporate tax revenue does not mean to me that our entire regimen is worth discarding, but could be adapted.

Alex3917 9y ago

> In agriculture the USGOV is literally paying farmers NOT to farm in some areas. If unfarmed land provides a benefit to the public and it costs the landowner money to provide that benefit, how is that different than the government contracting to provide any other service to the public?

janekm 9y ago

But what makes you think that any of that money would be any more easily available to small businesses than now? We’re talking about money owned by Apple and similar multinationals here (and banks no doubt), and of course by the Trump organisation.

prgmatic 9y ago

That, plus a bit of over-reliance on the US Census Bureau's way of measuring new startup activity. It's now easier than ever for individuals (read: not registered businesses that reporting agencies typically count in their studies) to start up and run experimental ventures, especially online. (edit: typo)

KGIII 9y ago

80% of businesses don't survive their first year, though the number goes up if you have employees. However, the percentages have been pretty consistent, year over year, for quite a while. This isn't a new trend, it wasn't better in the past. It was like this even before the current situation where there is 2-4 trillion needing to be repatriated. Here are some numbers and a bit about how these numbers have been largely unchanged for a long time: https://www.fundera.com/blog/what-percentage-of-small-businesses-fail https://www.fundera.com/blog/what-percentage-of-small-busine... Blaming it on boomers and wealth preservation seems all too simplified, considering it has been like this for quite some time. It's not that a lack of capital isn't a problem, it is - and that's the primary reason for failure. It's that trying to pin this on boomers is a simplistic way of looking at this problem and doesn't solve anything. The problem existed long before the off-shoring of capital. The numbers have been pretty similar, for quite a long time.

WalterBright 9y ago
The failure rate of new businesses is mostly due to the entrepreneurs having no idea what they're doing. It's a learning process; many start many companies one after the other until they figure it out.
- KGIII 9y ago
  They cite lack of capital. I take that to mean they ran out of money. They'd do that if they didn't know what they are doing, so I suspect you're right. Many, many people are very good at what they do. Being good at what you do doesn't actually equate to having good business sense or management skills. Being an expert craftsman doesn't mean they know how to find customers, read contracts, deal with logistics, hire employees, manage money, or any number of things. When people ask how I managed to start my business and keep it successful, I usually tell them that it was mostly dumb luck. I was just getting good at it, some fifteen years later, when I sold it. There was lots of work involved, but a whole lot of luck.
  - deleted 9y ago
    [deleted]

ecshafer 9y ago

I can't be the only one that would love to start a business, or join a riskier small business, but due to a combination of health insurance and student loans it is not feasible.

zaroth 9y ago
Both health insurance payments and student loan payments go to zero as income goes to zero. So what's the problem? If you find yourself with no income you will also find yourself with no monthly payment on your loan and free health insurance.
- mdorazio 9y ago
  I think you're assuming that people have enough money saved to start a small business with zero income for an extended period of time, which I highly doubt is a common case. And what about the employees you have to pay enough to cover those things for?
  - zaroth 9y ago
    Not at all -- I would not expect someone without savings to work for nothing at a startup, or try to start their own startup without outside funding and a salary. But it's important to recognize that both health insurance and Federal student loans have programs in place to support people who have no income.
- lovich 9y ago
  Student loan payments do not go to zero as your income goes to zero. You still accrue interest if you aren't making oayments. Additionally if you have any sort of cosigner, which is not uncommon, then the banks go after your family for those loans if you cannot pay. I know I have turned down risky startuo jobs because my parents credit would have been hit had I been unable to make payments
  - zaroth 9y ago
    Good points -- interest still accrues, and some loans are private and you don't get access to all the pay-as-you-earn and income-based/income-driven repayment options. But for Federal loans with IDR, you absolutely can get a $0 monthly payment without any impact to your credit score, and this is not at all uncommon.

usrusr 9y ago

First the problem is startups getting crushed by the cash available to large companies, then the solution is repatriating those same large companies' offshore cash hoards? I'm not exactly convinced.

ComradeTaco 9y ago

Trump appointed Ajit Pai to the FCC whose doing his best to gut net neutrality for big communications. You have Pruitt whose dropping regulations for his big oil pals. You have Steven Mnuchin whose goal is destroy Dodd-Frank so financial firms can get too big to fail. This administration is the most nakedly oligarchic and monopolistic since Harding was president. To peddle this idea that Trump will be a savior to the small business owner and the working man is nothing short of a lie.

lovich 9y ago
I don't like Trump and his administration, and I think they are doing bad things like you have outlined. However, I don't think they are doing anything new other than being blatantly obvious about it. We had Eric Holder under the Obama administration who was supposed to be in charge of the arm of the government that focused on the rule of law. Instead he "... considered the economic fallout that could result from prosecuting major banks for their role in the financial crisis..."[1]. Before that we had Dick Cheney and Haliburton under Bush. There are countless other examples of naked oligarchism under both administrations and that covers the past 16 years, and I would not be surprised if you found other examples of this magnitude under Clinton, Bush 1, and Reagan. Someone born the day busy was elected would be months away from voting right now. We are undisputedly an oligarchy and are on no path to change that [1]http://www.pbs.org/wgbh/frontline/article/holder-big-banks-clout-has-an-inhibiting-impact-on-prosecutions/ http://www.pbs.org/wgbh/frontline/article/holder-big-banks-c...

petra 9y ago

Let's talk about small businesses,not startups. Is any of the things you mention different today than before the recession ?

beebmam 9y ago

If you think that Trump opposes wealth preservation and predictable returns for baby boomers, you're delusional. If anything is certain about Republicans, keeping generational wealth inequality is one of their most important issues.

prostoalex 9y ago

If you're a business with tons of cash in foreign accounts, you will have good credit rating. If you have good credit rating, raising debt will cost you next to nothing in today's low-interest environment. Both Google http://www.telegraph.co.uk/finance/markets/8517781/Google-taps-bond-market-for-first-time-as-rivalry-heats-up.html http://www.telegraph.co.uk/finance/markets/8517781/Google-ta... and Apple https://www.cnbc.com/video/2016/02/16/apple-taps-bond-market.html https://www.cnbc.com/video/2016/02/16/apple-taps-bond-market... have sold bonds. The creditors know that if the worse comes to worst, there's always the stash of cash that can be brought in during downturn years when there're losses that can be offset. Repatriation is a red herring sold to the masses as a silver bullet solution to every economic problem. The money that could be put to use has already been repatriated, the rest can be repatriated on a relatively short notice, given the liquidity of the high-grade corporate bond market.