By pitting a “good” lender against the “bad” banks, lenders inspired by a good cop versus bad cop mentality have realized that offering small business loans without banks can be a marketing success. To ensure that the main point (avoiding banks) is not overlooked, some lenders are using business financing slogans like “Think outside the bank”. In addition to the commercial advertising enticing commercial borrowers to leave their banker behind, this article illustrates why there can be a compelling business necessity to successfully obtain commercial loans without involving banks.
While there are more examples than we have room to talk about in a short article such as this, small business owners usually have two major reasons to avoid banks for their business loans. One is a desire to avoid a bank at all costs because of personal and professional antagonism for their past and present behavior. This is illustrated in part by the ongoing failure of banks to provide small business financing despite receiving taxpayer-funded bailouts designed expressly for banks to continue normal business lending.
For a second example, banks are failing at a rate that alarms most observers so logic dictates that small businesses should not book passage on a ship that is about to sink. This concern is compounded when small business owners realize that very few of the still operational banks are consistently providing small business loans. In the end small business owners have to judge whether their current bank is up to the task and then find alternative options for business financing quickly when they are not.
The idea of eliminating banks as a source of commercial loans has its roots in the increasing unpopularity of banks. As reflected in a quote attributed to Thomas Jefferson (“Banking establishments are more dangerous than standing armies”), bankers and banks have been unpopular from the very beginning of American history. The dramatic bank changes seen during the past ten years or so have simply served as a renewed inspiration to forego banker relationships whenever possible.
Banks have changed just as significantly as Chrysler and General Motors, although bankruptcy was not an option for the banks due to legal and governmental restrictions. It is hard to find anyone who talks fondly of the cold and mechanical approach adopted by banks other than to reminisce about memories of warmer and friendlier banks in bygone days. The earlier image of giving toasters away has been replaced by credit card fees and foreclosures.
While banks still prefer not to talk openly about derivatives trading, this has provided insights into how banks might mismanage financial oversight when external controls prove to be inadequate. While it is apparent that many politicians and bankers feel that the public does not deserve to ever know the real truth, more experts have come forward to talk about what a close call it really was (and most of these individuals also emphasize that we are not out of the woods yet). Maybe this kind of behavior does more than anything else possibly could to prove the accuracy of the earlier Thomas Jefferson observation.
