Looking for a job? If job seeking is a skill you get better at with practice – be prepare to get better at it:
“Small businesses are the drivers of innovation and job creation in our economy, and they’re being suffocated by banks and institutional investors that aren’t willing to lend,” says John Paglia of Pepperdine University in a recent study published this summer (2011) about the state of small businesses.
A U.S. Bancorp survey confirmed pretty much the same thing:
“Seventy percent have no plans to expand their staffs over the next 12 months, according to a recent U.S. Bancorp survey of 1,004 U.S. companies with annual revenue of $10 million or less.” (For Small Businesses, Recession Isn’t Over).
Peer Lending to the Recue?
Given that small businesses & entrepreneurs typically work with smaller banks for loans, you’d think that these smaller banks would be healthier than their larger counterparts who had so much invested in mortgage-related assets. However smaller banks were blindsided too by toxic mortgage-related debt, and while they didn’t take the hit the larger banks did, they didn’t get much if any TARP bailout (“relief”) funds either.
And forget about the private equity markets. The Pepperdine study shows they’re too busy shoring up weak stock market and real estate investments to be of much help to anybody: John Paglia says only 13% of privately held businesses last year reported getting funding from private equity. Given an economy that’s on the brink of a double dip, don’t expect a turnaround in the private equity markets anytime soon.
Do we have anything to look forward to? Honestly, right now, unless things suddenly and drastically turn around – not really. However, for very small businesses and entrepreneurs with small business needs, P2P, or peer-to-peer, lending is coming to the rescue. Because peer lenders typically cap their loans at amounts lower than traditional banks, P2P funding sources can fall short of a larger (but still small) business’s needs but these businesses are starting to become more open to the possibility of peer-to-peer funding to meet at least some of their business needs. And peer-to-peer lending is growing by leaps and bounds because it’s funded, not by banks, but by 1000’s and 1000’s of individual and independent investors.
Thus, in sort of an inverse of trickle down economics, where a few large and institutional market players drive economic growth, peer lenders may be the vanguards of a trickle up economics where many small independent & everyday individuals are driving small business lending, and that could start to fuel job growth. True, right now it’s not much, but right now any news is good news, and for the moment, any increase in peer lending for business needs might be one of the few positive trends we’re seeing in an overall gloomy job outlook.