Entrepreneurs Turning To Online Communities For Funding
Traditional global credit markets have frozen, and they’re proving difficult to unstick. Under-capitalized banks are not keen to lend out what’s left on their balance sheets—not even and sometimes especially not to each other—and the value of the U.S. currency has risen steeply relative to those of other nations as banks around the world hoard greenbacks to shore up their reserves.
Few consumers are yet being hit hard enough to hurt except those who let the euphoria of easy credit tempt them too far. But the largest danger for the national economy lies in the companies large and small that provide employment, many of which depend upon short-term credit to fund their day-to-day operations.
Corporations that would normally issue commercial paper to finance their capital needs have been disappointed lately, as the market for such short-term debt fell by 11% over the past four weeks, according to the Federal Reserve. Granted this is a volatile data series; however, a fall of U.S. $22 billion in one month is still painful. Research conducted by Greenwich Associates reports that 45% of large corporations and 67% of medium-sized ones have located fewer buyers for their CP, while companies which have been able to sell their debt report that the cost of doing so has risen, in some instances significantly, to further increase the already steepening cost of doing business. Whether the Fed’s plan to bulwark the CP market will bear success remains to be seen. Read full post.
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