Skip to main content

Small-business deposit program nears an end

Are large banks safer than small community banks? Should the Federal Reserve adopt Britain’s new plan for small-business lending?

These two seemingly unrelated questions could bump into each other later this year and impact, negatively or positively a dealer’s small-business payroll accounts as well as the overall lending to small businesses by the nation’s community banks.

Specifically, I’m referring to the little-publicized end to the current Federal Deposit Insurance Corporation program that provides unlimited insurance for the more than $1 trillion in non-interest-bearing accounts, the kind small businesses primarily use for payroll and similar recurring expenses.

Set to end this year, this program was instituted during the crash of 2008 specifically to reassure small-business owners that it was safe to keep their funds in small community banks. The fear, of course, was that businesses would move their funds en masse to the large banks because they’re perceived as safer (the too big to fail thing). If that were to happen, it would likely kill the capacity of community banks to lend to small businesses.

So if your money is safely in a community bank today, when the FDIC guarantee ends, what will you do? As you might expect, the Independent Community Bankers of America is lobbying for an extension, but the only thing certain in Washington these days is uncertainty. Moreover, most small-business owners are said to be unaware of the program’s pending demise. Now you know.

Meanwhile, across the pond in Britain, what appears to be an innovative idea to boost the British economy through small-business lending has surfaced and it’s a good one. In a nutshell, Britain’s proposal is to make about 80 billion pounds ($125 billion) worth of loans to small businesses and households in a move to boost the economy.

Dubbed “funding for lending,” the Bank of England would give banks cheap access to the funds, but only if the banks, in turn, lend the money to businesses and home buyers. Specifically, it ties the banks’ access to the plan directly to whether banks raise total lending to British firms and households. No increased lending means no access.

With signs the U.S. economy is sputtering and will continue to struggle this year, shouldn’t we be looking for new, innovative programs to spur a turnaround? Perhaps the Bank of England’s plan that essentially says “if you want access to lucrative funds, show us performance” is one innovative idea worth adopting. Let’s face it: so far the Federal Reserve’s program to buy up government bonds to keep interest rates low and increase lending hasn't exactly been a roaring economic success. Lending is still a huge problem in this country.

Moreover, a program like Britain’s would also help the small community banks and, perhaps, keep them in the small-business lending game regardless of the FDIC actions. Now that’s something we could live with.

Related

VOLVO-EARNINGS

Volvo Penta Reports Q4, FY22 Results

Net sales of $470 million for the quarter were a 33% increase compared to the prior year period.

Pulse-Report

DEALERS: Are You Improving the Service Experience?

Our monthly Pulse Report survey asks this and other questions about your dealership. Take the survey here.

NMRA-SCHOLARSHIP

NMRA Sets Scholarship Deadline

Students pursuing education in the marine trades can apply for the National Marine Representatives Association awards until April 1.

MARINE-PRODUCTS

Marine Products Reports Record Q4

The builder of Chaparral and Robalo boats reported net sales were up 42% for the quarter and 28% for fiscal year 2022.

1_SHURHOLD

Shurhold Appoints COO

Forrest Ferrari has years of management, business development, IT and quality-assurance experience.

MOBILE-CATCH-CENTER

RBFF, Pure Fishing Partner for a First Catch Center

Pure Fishing will equip a mobile trailer with tackle and gear to bring fishing experiences to areas of South Carolina where participation is low.

Norm

An Oft-Overlooked Sales Opportunity

A recent report from the Recreational Boating & Fishing Foundation showed that women comprise 37% of all anglers. If you haven’t tapped this segment, you’re missing out.

1. 2023 new boat retail outlook

Too Many High-Priced Boats

To wrap up 2022, marine retailers reported lower demand, expressed more negative sentiment and voiced concerns about rising inventory. Boat prices and the economy remained top of mind for dealers in December.

Soundings Nov 2022

New-Boat Registrations Continue to Slide

As the gaudy sales figures from the pandemic continue to return to more realistic numbers, the main segments of the recreational boating industry saw new-model registrations of 4,421 in November, a 30.3% drop from 6,340 during the same time in 2021. .