You might have thought that banks were interested in lending to firms for investment in activities that create jobs. No, that's the role of the stock market, angel investors, government schemes, and lions. Banks lend to consumers where they can get a strong handle on the risk. They don't like lending to companies if they cannot get a superb handle on the risk.
Banks lent to the property market because they thought it was risk free. Banks want a return on investment of 35 percent so this limits their choice of risk taking somewhat. If you want 35 percent growth, you will look for three times that before lending at risk. There is not much new activity going on that will produce a growth rate of over 100 percent per annum.
Generally, small firms take a hit before they break even. Banks want the hit to occur very soon and the break even point to be within a short period, the shorter the better.
The truth is that banks are not really suited for lending for innovation. If they lend to an innovating company, it might just put another customer out of business, which is not what they want. Even if that customer banks with another bank, they do not want to put companies out of business.
Capitalistic innovation requires winners and losers so banks are not in the game of innovation.
They want to make loans for working capital after a revenue stream has been well identified and established. Then there is low risk and they act as an insurance lender in the event of a hiccup. The gamble banks take is that the winners will always outnumber the losers and the and bad loans will be very limited. The 35 percent growth on capital is quite sacrosanct and the charges banks impose reflect this need to make profits in excess of interest rates.
The high rates on consumer credit create bad loans, but this does not seem to phase banks, who create a sheltered pattern of approval for new lending that maximizes the return on capital even if it is at the expense of customers. Consumer loans for credit cards are a two stage process of profit taking. Make a profit lending to the lending credit card bank and also make a profit lending as the credit card bank!
Both make a return of greater than 35 percent on capital which is built into their charges. So choose only addicted customers who are so desperate for money that they always maintain an excellent credit record. That this excellent credit record comes from playing the field of lenders is unseen or ignored. Borrowing is a secret addiction and the most common one, ahead of alcohol, and it leads to stress and premature death.
Growth in credit comes from the demand of established customers for working capital be this consumption or investment. This is what banks are interested in.
http://www.guardian.co.uk/politics/2010/nov/01/david-cameron-difficulties-banks-lend-more?CMP=EMCGT_021110&
Will not time reveal the lasting importance of friends and mutual respect? Be kind to those who think well of you and those you know and try to add positive elements to your world. Promote peace in your heart and sunshine in the minds of those around you by your own good works. Elevate the level of discussion by thinking less of the issues and more of how you can reduce the tension of stress that arises with honest disagreement. Relax by breathing more deeply and consciously.
