Daycare Update

One of the perks of owning a business is not only do you get to meet interesting (and sometimes influential people) but you actually get a shot at getting into their network. Business people want to talk to other owners. Period.

So is the case with me these days. We'll see where it all ends up.

***

I'm nowhere near out of the woods and still find myself scrambling for more liquidity. On my long journey through the tight and arbitrary world of credit, I learned one thing: Retail banks have it all wrong. Not only that, it's a fun thing to watch them come up with more products allegedly to help small businesses while competitors scramble to copy the exact same crappy product. It's amazing how many times I was "referred" to a bank under the guise they do things "differently" only to find out they do nothing of the sort.

In daycare, they could care less of private daycare. They want to lend to subsidized daycare and all their smoke and mirrors. Besides, if they're subsidized why are they eligible for a loan? They already have the government backing them! So us private guys get whacked on both ends.

I can only shake my head as I leave their offices.

Banks and their minions are myopic. They are slaves to ratios and number signs that completely disregard the character of the applicant. It's not uncommon to have them say something like, "it's a nice project but we can't finance you (insert bull shit excuse here) no matter what our commercials say."

They have all sorts of conditions - some are logical and other downright illogical - before they lend.

In my case, my business is growing and when I asked my bank for a tiny extension just to get me to the next month, they said no. Think of that for a second. They basically are willing to let you sink and then seize all your assets. They could avoid so much stress and misery by lending a little cash to ensure a business that owes them money succeeds. It's win-win. Get this. I was told I needed to show $350 000 in revenues before I can ask for more money. Think of that figure for a second. Digest it.

I'm barely three months in and growing at a decent pace yet they slap an arbitrary bull shit figure on me. How about stepping outside of your tiny box and see my case for what it is?

Do you realize NOT ONE BANKER came to see my place? Not one. And these are the people making decisions? Actually, it's the credit department with all their neat mathematical formulas.

The head spins at the wrong headidness of it all.

***

The main reason a business fails is because of limited funds. Eevery other reason is to fill the pages and give professors a job.

When a business is clearly growing, there's no reason why a bank shouldn't lend. They are, in my opinion, in the wrong to lend some out and then tell them to meet an arbitrary figure before they get more. For example, if I reach $350 000, I don't need the banks. I need them in my most crucial hour and there they will not be present. But they have no problem giving me a business card asking for some business later.

Cash is king. And if you miss by one decimal. Good luck. I had to face major over runs in my construction that were beyond my control. By then, I was already commited to a lease (because I had to apply for a permit which demanded one). One of life's typical curve ball soon engulfed me. It was like Steve Carlton meeting Randy Johnson with a speeding curve ball.

It is said it takes up to three years before a business succeeds. So why aren't our business credit terms set up accordingly? If it were up to me, I'd do two things: On the government side, forgive (payroll etc.) taxes for start ups for the first year. On the private level, I'd end the 30-day foolishness to make payments. No wonder people run out of money, you're dealing within an institutional, group-think mind frame so short term oriented, you barely have a chance. 30 days for rent, for interest payments, telephone bills and so on. If I were designing these things, I expand the box a little and give people a fricken chance.

Overstretched, I continue to plough on but find myself looking to private investors for additional injections of cash. It's no big deal but it's a shame a bank, said to be there for small businesses and to make money, can't look beyond its finger tips to step in.

So after all this, what do I think? I think the enormous bureaucratic weight combined with the difficulty of getting credit and funding, make us exactly what I perceive us to be: A mediocre society to afraid to take chances and let our creative juice flow.

***

Congratulations to Nikk at SE. I had a nice conversation with an international wholesal private equity banker the other day (hey, gotta network), and much of what he told me about how money is created, the U.S. debt, and a host of other things, fall closer in line to what libertarians and your site stands against.

In his view, America is already not solvent. California first among states. The big players have already adjusted to an economic world where the dollar isn't king.