Now that we have been through Armageddon on Wall Street, the question is: What effect is all this turmoil going to have on the rest of us — specifically, those of us who depend on bank loans to finance our companies’ growth? My crystal ball is broken at the moment, but I do have some experience in these matters. It seems pretty clear that we are heading back to the time when banks preferred to lend money to those who didn’t need it and it took a good deal of ingenuity to get any loan at all. Listen, small-business banking goes in cycles. Even before the latest meltdown, it was clear that we had moved from one cycle to another. Already, I had begun to feel nostalgic for the good old days. Not so long ago, you could still get what bankers affectionately referred to — in private — as an “air-ball loan.” That was a loan based not so much on your assets but almost entirely on your relationship and history with the bank. Yes, the bank would glance at your company’s earnings and cash flow, just to be sure you could make your payments and weren’t about to go bankrupt, but the relationship mattered most.
What the Financial Crisis Means for You