Business futurist, award-winning author, speaker and columnist
As you know, the U.S. banking system has been challenged this year. Three large “regional” banks collapsed, and not a few experts have opined that there will be more banking-sector bloodshed going forward.
As you may remember, in our online poll last week (see below) we asked about concerns for your bank and the U.S. banking system with this question: “In light of the 2023 bank failures, have you been concerned about your own bank?” [Continue Reading]
Right now, and likely for a while longer, there’s a lot of stuff coming out about challenges in the U.S. banking system. Sometimes it’s difficult to sort through the range of comments, from the smart to the stupid. But if you’ll give me five minutes, we’ll find some clarity so you can not only make better banking decisions for yourself and your business, but also for our country.
Watching a segment of a business news program recently, the conversation was about the impact on the banking system from the dramatic collapses of two very large San Francisco banks, Silicon Valley Bank (SVB) and Signature Bank. One of the guests, a celebrity “financial expert,” made this statement about the future of banking: “America no longer needs 3,000 regional banks, since most of us do our banking online.”
This stupid comment pulled off the hat trick: ignorant, inaccurate, and dangerous. On its face, the statement is factually incorrect – no American bank sector corresponds to the number he used. It’s ignorant from a marketplace standpoint because it assumes all banking is done online. And in the Digital Age, when inaccuracy and ignorance come out of the mouth of a so-called expert in a single comment, it can become dangerous.
So, let’s establish some clarity and avoid the danger by thinking of America’s three commercial bank sectors in the context of [Continue Reading]
Not that long ago, there was a lot of noise and some clarity about the concept of crowdfunding, which is using technology to aggregate the funds of donors/lenders/investors for a specific recipient/business.
During that period, I tried to be part of the clarity by writing several articles about the three different kinds of crowdfunding, which are: contribution fundraising, business lending, and investment acquisition. Today I want to revisit the lending model, with some new information. [Continue Reading]
The first sentence in the job description of every CEO should be, “Secure and manage the capital your company needs.”
Webster defines business capital as, “any asset, tangible or intangible, including cash and hard assets held by the company.” Capital blended with operating cash flow becomes the financial fuel your company’s engine uses to operate with and fund growth.
A small business has three primary sources of capital: [Continue Reading]
One of the most interesting relationships in the Main Street economy is the one between business owners and their banks. It is at once powerful and essential. Let me tell you a short story about where this dynamic has been in order to explain where it’s going.
Unlike our big business cousins, small firms have limited capital sources. Indeed, the lion’s share of our growth funds come from a bank loan, with almost 60% being made by a community bank (ICBA). Yet, since 2008, more than half of small business CEOs have consistently reported not needing to borrow money (NFIB).
A dozen years ago, a kind of perfect storm began for Main Street businesses: the 2007-09 recession was made “Great” by the Wall Street-induced financial collapse, which was followed by our economic lost decade during the Obama administration. In survival response, small businesses tightened their belts and deleveraged on a scale not seen in generations.
This deleveraging phenomenon resulted in small businesses retaining more earnings which, by definition, produces stronger balance sheets and reduces loan demand. And it produced a silver lining we didn’t know we had or needed – until last year.
This is the ninth edition of my New Regular series, dedicated to helping small businesses cope with the one-two punch of the coronavirus pandemic and associated economic constraints. Normal was just sighted in a homeless shelter in the north of France.
The subject today is a serious and troublesome one. No amount of lipstick will make the bankruptcy pig pretty. But as we roll into the post-pandemic era, we should improve our understanding of it.
You can be technically bankrupt without being legally bankrupt. At some time in their existence, most businesses will experience an upside-down state of negative net worth, where liabilities exceed assets. It’s likely that such a condition will pass unnoticed, possibly even by the owner, because the business might not be insolvent.
Insolvency is a pre-bankruptcy state of financial distress when near-term payment obligations exceed cash-generating ability. This condition is not only noticed, it’s consuming. If you dig yourself out of insolvency and avoid bankruptcy, that becomes a badge of honor. Yes, your humble correspondent knows something about that.