Banks May Need More than the Stimulus

Banks still may need extra help despite the stimulus

Businesses may be dependent on installment loans for longer than they think. Despite the $767 stimulus package, banks may need more to pull them out of the slump they are in. According to the Obama administration, some “big banks will need more bailout bucks.” The nation’s 19 largest banks are going through testing to determine their economic prowess, as an indicator of how the banking industry as a whole is fairing. While testing is happening and after assessments are made, small businesses will be left to find their own ways through a suffering economy.

Testing of the 19 largest banks

The testing of the USA’s largest banks is currently happening. It’s their balance sheets that are being scrutinized and tested against economic disaster, such as job losses and home price-to-value decline. It needs to be assessed whether or not the banks, at the financial state they are currently in, could hold up to continued stress. When the testing is done, there is a listing of three categories for each bank to fit into:

1. Banks in need of additional capital
2. Banks that are in good financial standing
3. Banks that will not survive

That’s not to say that the government will be providing the additional capital needed, or taking over the banks that are failing. Additional capital may be from the private sector, rather than governmental help. And banks that are failing may need to close without further assistance.

More important to Obama is the transparency this testing and assessment will bring to the American public. “I believe that the American people and the markets can handle the truth,” he stated. In addition, it also is a way to regain public support and trust, which is something Obama has been upfront about wanting to rebuild from the start of his presidency.

What this means for small businesses

Small businesses used to look to banks for funding. Because of the state of banks, most are closing the doors on requests for money, or at minimum putting them on hold. Installment loans may be the answer for businesses looking to steady themselves during the economic strain.

The results of bank testing

Although testing of the top 19 banks should be done soon and results made public in the beginning of May, it has yet to be seen how many will fall into the “will not survive” and “in need of additional capital” categories. Some analysts predict that only about a third are financially stable, making it approximately 6 banks that are capable of functioning. If this is the case, another plan needs to be made to fund banks in need of capital. Chief of Staff Rahm Emanuel stated that some banks will need resources but “we believe we have those resources available in the government as a final backstop to make sure that the 19 are financially viable and effective.”

Installment loans still available

Banks are in uncertain situations now, with the testing and categorization project still playing out. It has yet to be seen which ones, and how many will come out on top and be able to return to normal functioning. Until then, small businesses need to look to installment loans to tide them over. An installment loan is quick, convenient and easy. If a business owner is qualified, he or she can have an answer to a financial need within a few short hours. It definitely is a stable option in a very unstable market.