Banking on Local Relationships

Take a look at this blog post written by Alan Eason. He's an entrepreneur and writes about the current economic crisis and its impact on small businesses. He says:

"Local banks take local money and primarily invest it in the local economy, in giving loans to businesses like mine. There is accountability there. There is a relationship. We are business partners. I would often go over to the bank and just talk, get help, advice and wisdom; not just deal with money. There is a lot more to running a business (and life itself) than just money."

The fundamental problem facing businesses in this economic meltdown is access to capital. Almost all money in circulation is issued as debt - as loans to homeowners and businesses. Large banks, facing insolvency and watching as $1.2 TRILLION disappeared off their ledgers last week, are not lending the money we need to run our businesses and pay our bills.

Here's the good news about the problems facing banks and our economy: they're a reminder that money isn't real. Or at least, that money only has the value we give it. Our currency isn't backed by gold or silver or other assets, ONLY our agreement to use it for exchange. This is part of how inflation and currency devaluation happens: when we stop trusting the value of money, it's value decreases.

Okay, that may not seem like good news. That's because we still rely on money to keep the resources we need (especially the necessary ones, like clean water, good housing, clothing, energy and food), flowing between the people providing them and the people who need them. (And it isn't good news for the teachers and firefighters and grandparents who've worked hard and tried to provide for their future, and who are now seeing their investments disappear)

So we're stuck between a rock and a hard place. We need money to conduct business, to pay our debts, to get what we need. But now there's less money that what we actually need to keep going. What's the solution?

Eason suggests: "Perhaps it it time for the the entire nation - or even the world - to get the grandiose banking schemes out of their heads and return to investing in -and being accountable to - people they can sit down and talk with. Then we can all learn more - about money - and about life."

It is essential to us that we have access to the capital we need to keep commerce - the trading of goods and services - going. Now's the opportunity to strengthen our local capacities for generating community capital. Local banks and credit unions - institutions who have the capacity to issue credit and loans to us, are vital right now. The same is true of seeking additional ways to facilitate the movement of things we provide to the people who need them.

Think about this: as local business owners who build solid, long-term relationships in our community, we already do this. How many times have you extended a payment deadline to your customer? How often have you waived late fees and forgiven debt? Our ability to extend credit to one another is not limited to our relationships with banks.

So how about it, local biz? What's next? How do we keep things moving? Let's explore together new, creative ways to generate local capital for local businesses.  We can't sit back and wait for Wall St. or the government to provide for us. The only bailout for local business is going to be the one we create for ourselves.