Bankruptcy trend among small firms stuns lenders
- Thread starter ByLoSellHi
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Well if they know the cause of cancer, shouldnât they be able to figure out the solution? Cause and effect! Come on how many billions are spent on cancer research yet they canât find a definitive cure yet they know the cause?
This is what leads me to believe all you do is sit and listen to Sean Hannity all day and have never actually owned a business. First off, why does he need to be selling something that everybody within 100 miles needs? There is a McDonaldâs and grocery store practically on every block in America. Clearly people do not need to purchase from these particular establishments, yet they are generally profitable businesses. There is competition all around yet they are still there. Consequently I was selling a name brand product in the local mall a few years ago. I had no competition probably for 1000 miles around, yet my business didnât last and I closed up. I sold the rest of my inventory on ebay where I had a ton of competition, yet I beat them all online. So much for your analogy.
Secondly, you obviously have never run a business because you donât realize that you canât always prepare for the future exactly as you want. For instance if you sign a 7 year lease somewhere and in business is just fine for the first 2 years and then all of a sudden it dries up and you are now losing money, what are you supposed to do. This happened to my friend. He dried up his 10 years of savings paying 12k a month in rent. He has no employees to lay off because he already works 7 days a week to save money. He canât just pack up and leave like an employee can. He has contractual obligations and inventory and such.
You have never worked in a bank because you would then know that 80% of all subprime loans were given out by banks that had little or no regulation under the Community Reinvestment Act. Another one of your theoryâs that is utterly false. Anyways banks donât lend money, they print it out of thin air and then charge interest on the money they just created. But the only way to pay back the loan with interest is to borrow more money to pay the interest because the interest doesnât exist yet. Itâs a perpetual cycle meant to keep people in debt or have the bank take over their possessions. In other words, itâs a scam.
The solution to homelessness, tomorrow, is to give everyone 1 million dollars. Just because we know a solution to something doesn't mean it's realistic. Move to the middle of nowhere, live off the land and dramatically reduce the risk of cancer from processed foods/cell phones/asbestos exposure/the next thing that will be like asbestos/etc. Radiation causes cancer, so it makes sense that minimizing exposure would reduce cancer rates, but do you want to give up your cell phone? Didn't think so. Me either. (/me goes to get a red bull..)
You just proved my point. People still spend money on dumb shit. Why? Marketing. You can either have an enormous organic edge with a product/service or market the shit out of something - in the US both produce similar results. Did you have a good market for your products? Besides not having competition around, maybe there was a reason there was no competition? Did your target demo have the resources for your products? Obviously not, but it sounds like once you targeted a broader audience online, you found success. And, as mentioned earlier, I don't watch Fox news.
Umm - why did this person sign a 7 year lease if they didn't already have the capital to support it? Your argument fails in the first sentence: DON"T SIGN THE 7 YR LEASE IF YOU CAN"T AFFORD IT!!! Is it a shock to you that there are still people that pay cash for their house? (i.e. no mortgage) I'm really not trying to be an ass so please don't take it that way, I just see every argument you're making built on a false foundation: don't make commitments you don't already have the resources to meet.
As stated previously, I worked on the pricing models for a business bank. Incidentally, though they do consumer lending, they didn't do sub-prime loans and had a _very_ small amount of residential mortgages.(mostly did dealer floor plans, bridge loans, commercial RE, etc.) Banks do lend money hotshot - the treasury/federal reserve print the currency. Yes, fractional reserve banking means they lend more then they have, but that's the beauty of fiat currency. Which brings up a good point: if I was some right-wing nut, wouldn't I be all for the Gold standard and other ridiculous crap like that?
Karl, you are krazy. You do not live in reality whatsoever. I imagine you are still living off of daddyâs trust fund. My friend had built a successful business in the same mall for more than 7 years. At the time of the lease he was well capable of paying the rent. His sales were were over 600k a year. Are you suggesting that if he didnât have $12,000 times 84 months cash in the bank that somehow he was making a stupid decision? Thatâs completely unrealistic. Even McDonaldâs wouldnât have enough money to do that. If we all did things your way, nobody would be doing anything all day long because nobody would be able to afford it. This is just like a mortgage, when you make an obligation like this, you are assuming that the business will obviously pay for itself and your cash reserves are just for emergency purposes. Unfortunately his sales have dropped to less than a couple hundred dollars a day, which is not enough to support the business.
Iâm sure now youâll do your typical Republican judge everything after the fact thing and say all this shit about how he didnât run the business right which caused all this, but really nobody cares what you say.
The gold standard is not a Republican thing. Most people, Republicans included, donât even realize what a complete scam fractional reserve lending is. Once Democrats realize that the poor are poor not because the rich are not taxed enough, but because they print money out of thin air and keep it, they will be the ones calling for monetary reform. You donât even need a gold standard, you just need a fixed monetary supply.
It amazes me how many Ron Paul people are on these boards and when something about Michael Moore comes up, they bash him to no end. Listen to what they both say, they agree on a lot of points. They just differ on how to solve them. This is not a rich vs poor thing, itâs a people against the Man problem.
Maybe he should have accepted defeat, close up shop and saved himself a lot of pain say one year ago. Obviously I don't know the specific situation and I am just generalizing, but I have seen people who were running businesses well after the point of no return because they simply just can't realize a mistake, take the loss and close up shop. Because that would mean accepting defeat.
I believe it may have to do with the psychology of "sunk costs". People pump their kids college fund into their ailing business and then are mentally too frozen to actually give up when it would be the right business decision to do so. "I just want to recoup what I put in last year, I just need one good year". So there goes the 2nd kids college fund. It's like gambling.
They end up throwing more good money into a black hole betting things will turn around eventually. So in essence, yes, I believe many small business owners are at fault for bankrupting themselves and their families. They don't realize that there is a point when it's better and safer to take a loss and move on.
Very similar to trading actually.
I don't like the poster but he is right and you are wrong.
The signs were clear. If you are a business owner that does not make it his duty to understand how the economy works in the nation you are in, you only have yourself to blame when the obvious happens.
Most of these small businesses were unsustainable by a long shot. Besides their customer base being dependent on credit, they were heavily dependent on credit as well just to finance day to day operations. Also, their profit margins were low, way too low to justify their debt/equity model.
I don't think you live in reality sometimes and your friend's business is obviously a by-product of the mortgage/credit bubble. Where did all his customers go? Obviously they don't have the credit lines to buy his goods anymore. Obviously his goods teer toward luxuries rather than necessities.
And your friend should have been ready to close shop or have capital reserves if he wanted to wait it out. The bottom line is that if he plans to profit from credit driven artificial demand, he should be smart to put away enough profits to either move on without a problem or carry his store through the lean times. But something tells me his profit margin was low.
Anaconda has it right. You can't expect a telegram telling you about the gathering storm clouds right in front of you. The reason most of these businesses were unsustainable is that they never had a business model that worked in anything but boom times. Those who have been KO'd in these early rounds were not even close.
Some pretty good business people will be hurt before this debacle is truly over but the reality is those that are down in this first round were not really well trained for the match.
Road work. And then more road work.
Some pretty good business people will be hurt before this debacle is truly over but the reality is those that are down in this first round were not really well trained for the match.
Road work. And then more road work.