When it comes to banking and finance matters, some small-business owners will need a reality check in 2010, says Thomas W. Kelly, president and CEO of BankNewport.
Much has been made in recent weeks and months about the lack of available credit for businesses and how that might slow the economic recovery, but Kelly says many of the small businesses looking for loans at his bank are just too risky.
“So many of these businesses have been based on discretionary spending, heavy discretionary spending,” Kelly said. “A lot of these businesses – like spas and bed and breakfasts – are under pressure and they might not be coming back for a long time.”
With many banks earning less than 1 percent on their assets, Kelly argues that banks – particularly community banks such as BankNewport – have little room to make mistakes.
“We’re not venture capitalists, and we’ve never been,” he said. “You can’t give away a lot of things. That’s a huge misunderstanding with the public. It doesn’t take much to get into trouble.”
Yes, small businesses create jobs, but Kelly said there is a lot of “churn,” with some companies failing and other starting up.
So small businesses that need subsidies to get through the downturn should “realistically examine” their viability in 2010, Kelly said.
“That’s something a lot of small-business owners don’t do to begin with,” Kelly said. “They tend not to strategically look at their business. But that’s what they have to do now.” •
