Funding options decreasing
Short term loans are becoming a quick answer to consumers in need. With the banking crisis still in full swing, people are in need of bill payment options that are outside of the norm. It used to be that when people needed funding, they went to the bank. That is not the case anymore because more and more banks are tightening up funding and even high-credit applicants are having a difficult time finding underwriters.
Another problem with the economy comes from auto companies. The auto giants are suffering and governmental bailouts helped, but did not stop their problems. Although they are still trying to find a way to recover, auto companies are under heavy pressure and strict deadlines. Their struggle is contributing a lot to the faltering economy.
Chrysler trying to swap debt
Chrysler had a government imposed deadline to restructure by April 30th. Banks and hedge funds are proposing forgiving Chrysler of $2.5 billion in debt for a 40% share of the Chrysler-Fiat company. The government is expecting the car company to restructure using a debt swap, cutting labor costs or negotiating some alliance with Fiat Group. Should they be unable to do so by the deadline, they almost positively face total liquidation.
Right now Chrysler is managing by relying on $4 billion in loans and is hoping to receive an additional $500 million in funding. They are set to receive the additional monies, but only if they are able to meet strict deadlines and requirements of restructure as set forth by the government. A series of offers and counter-offers have brought Chrysler to the state it is now: under pressure to get the restructure done. They risk losing the money that was apportioned for their salvation.
“Taking equity is a risky proposition,” stated spokesperson for Chrysler-Fiat. “The goal is close to 40 percent of the equity.” Fiat CEO Sergio Marchionne from Italy is in the U.S. and participating in the negotiations. It is their hope to find a reasonable way out of this dilemma, reap the benefits of the government bailout and avoid complete liquidation.
Short term loans
With the auto industry still up in the air, consumers are suffering also. All major business entities are going through the same recession and their unbalanced positions in the market are affecting the economy drastically. With normal options on hold, short term loans are one of the few options consumers have left to find money to pay bills. Loan supporter Carrie Gillis of Portland Ohio stated, “I never thought short term loans would be so important to my family. But when those bills come in, we have no option but to extend payment until our payday.” Gillis is not alone. Many consumers are finding the short term loan to be a stress-free option when looking for cash.
Balancing the economy
It’s going to take a lot for the economy to balance itself out and without a lot of proactivity by the government, citizens and businesses, it will not happen easily. Industry giants are under pressure to meet the government’s deadlines and need to find quick and reasonable solutions. Consumers are under their own pressures of having to find money to pay bills as the recession holds the economy in limbo. Many are looking for short term loans as a quick and reliable answer. Hopefully once the dust clears and all are returned back to normalcy, the economy too will see a much-needed improvement.
GM is supposed to be right behind them. Industry experts have been saying for some time now, and it’s been picking up steam in the last few weeks after Chrysler filed for bankruptcy, that General Motors is most likely not going to be able to avoid a bankruptcy filing. The bigger they are, the harder they fall is certainly starting to prove true. GM will certainly be hurting if they pare down to the four core brands they want to focus on – they’ve already cast off Saab and shuttered Pontiac.