There is a common belief that you have to have money to make money. This idea was obviously one shared by Adam Smith, who states, ‘Money, says the proverb, makes money. When you have got a little, it is often easy to get more. The great difficulty is to get that little.’
DEFINING IDEA…
Money is the seed of money, and the first guinea is sometimes more difficult to acquire than the second million.
~ JEAN-JACQUES ROUSSEAU, PHILOSOPHER, WRITER AND COMPOSER
Gaining access to funds has always been difficult for business. In order to access funds, a business must demonstrate a track record of successful trade, secure the loan against some fixed asset such as property and/or provide personal guarantors who will assume the risk. Even a successful business wishing to expand may struggle to secure lending under such conditions - and that was before the credit crunch began in mid 2007.
Yet business is the lifeblood of any economy. In an effort to address this serious funding challenge for growing and fledgling businesses, the UK Government introduced the Small Firms Loan Guarantee scheme in 1981. Since then it has provided much-needed funding for more than 88,000 businesses. The scheme, which sees the Government secure up to 75% of the loan with the lender, was comprehensively reviewed in 2005 following reports that the process was needlessly bureaucratic and complicated. Changes were made, but just how effective they will be in the face of global credit problems remains to be seen.
If business does not have access to the capital required for normal operation, how can they possibly survive during difficult times? Without access to funds to help weather the storm many businesses will fold, leading to increased unemployment and thus making a bad situation far worse. According to that logic business must be supported through difficult times, not to make excessive profits but just to tick over so that jobs may be kept and the economy bounces back sooner rather than later.
The irony of money is eternal: those who have access to it don’t need it while those who do, can’t get access! At least not without paying through the nose for it.
Smith says, ‘When the law does not enforce the performance of contracts, it puts all borrowers nearly upon the same footing with bankrupts or people of doubtful credit. The uncertainty of recovering the money makes the lender exact the same usurious interest which is usually required for bankrupts.’
Exacting usurious interest rates is not, however, confined to the back streets of housing estates where loan sharks rule with an iron fist. The banks themselves have made a great deal of money lending to subprime lenders. As the name suggests, subprime simply means lenders below the ideal lending criteria, who were then penalised for that fact through higher interest rates.
HERE’S AN IDEA FOR YOU…
First, ask yourself if you really need whatever it is you are desperate for. If the answer is still yes, then bargain hunt. Search online and consider using sites like TrialPay (https://merchant.trialpay.com), where you can get what you need for free, provided you buy something else. Recently I needed some anti-virus software and could get this for free if I also bought some printer cartridges (which I needed, anyway).