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My employer is headquartered west of China, in Europe, so is probably part of "the west" as you call it. Banks are absolutely not centered around mortgages (onl
by xwolfi 3y ago
My employer is headquartered west of China, in Europe, so is probably part of "the west" as you call it. Banks are absolutely not centered around mortgages (only): this is what YOUR life is centered around, the middle class is composed mostly of employees savings for their home, the main source of their wealth. It is the case in the "non-west" like in China, very much so, but is not the only business of banks.
My dad had a small business in France, and all banks were ready to lend to him, no problem, with a competition on the rate. They would ask him for his business plan, discuss a bit, try to time the loan with their own need, increase the rate if it was a riskier plan. He did re-negotiation, emergency loans, growth-centric new loans, renovation loans, in several banks for over 30 years until he died last year and... one of his employees took a business loans to buy back the business for a million euros from us, his heirs.
How do your bakers, dentists, auto-shop people finance their business ? It cannot be cash-only, family-only, or lying on fake mortgage applications... Maybe your country is really special ? One thing maybe... I don't think banks advertise these very much on their website or whatnot, so maybe you have the impression it doesn't exist ? Usually people with small businesses have some accountant contacts first, then start having contacts in every bank's business loan division and they just meet directly to discuss. At least that's how my dad always seemed to do, when he did his "bank tours" to finance a new project.
- anonymousDan 3y agoAre you then personally liable for the loans? Or are they made against the business assets? In other words, if you fail to repay the loan will you typically lose your house?
- bux93 3y agoTypically, business loans are secured against the assets of the company as well as the personal liability of partners (even if it's a limited liability company). But if the company borrows tens of millions of dollars, the home (which itself will already be financed, so realistically only the home equity) of the founder/owner of the company is small compared to the company's financing needs. Banks will prefer that the management 'have skin in the game', but from a purely recovery perspective ('loss given default', to the bank) it's negligible. So, non-recourse loans will be typical for large corporations. Unless they're owned by a billionaire. This is why you and your spouse have a prenuptial agreement that keeps your finances separate, and the house out of reach of your creditors.
- thelastgallon 3y agoI'd assume most of these loans are backed by a govt program: SBA loans, farm loans, etc. Same as Fannie Mae for mortgages. Banks don't want to take any risk, only risk free profits.
- ElevenLathe 3y agoBanks in the US are still happy to make business loans (to established businesses with existing revenue and assets), though a lot of that business is shifting to private credit. What they are definitely not willing to do is fund risk ventures with no collateral. I don't know that they've ever really done that, but some of these rose tinted stories from midcentury suggest maybe they did? I honestly don't know. The MITS case in particular seems borderline: this is an established mail-order model rocket business, but also the loan is for an unproven scheme in a barely-related business. Maybe that's replicable in today's business environment, maybe not.