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Give credit where it’s due

Hal Brown
Dolan Media Newswires

Portland, OR – Much has been written about the breakdown in the national credit markets. Nearly every day we hear banks are not lending and credit is nonexistent. As long as the myth of credit unavailability is perpetuated, potential borrowers will aggregate in a holding pattern. This credit paralysis stunts economic growth and impedes the activity necessary to spur recovery.

The reality is that much of the credit crisis can be attributed to the downfall of nontraditional lenders such as Lehman Brothers and Bear Stearns. These and other Wall Street players in the shadow-banking system, particularly those focused on the securitization markets, have frozen a significant piece of the credit markets that is critical to our free-enterprise system.

But that does not mean the well has run dry. For the majority of American businesses, credit is available from local institutions.

How can we jump-start the economy and encourage increased market activity? We can extend credit to the sector that contributes most to an economic rebound – creditworthy small businesses.

Bolstering small businesses by facilitating credit can have a major trickle-down effect. Providing qualified small businesses with credit will lead to jobs, lower unemployment rates and increased spending on retail goods, homes and autos.

The good news is strong community banks are lending and remain in the best position to help local businesses. Statistics show lending by traditional banks expanded nationally by 12 percent from 2007 to 2008.

As we move into 2009, community banks must work in concert with clients to provide the credit they need to keep business on track, community members employed and cash circulating in the marketplace.

Community bankers know the local business climate. They have personal relationships with local entrepreneurs and have a vested interest in strengthening the local economy. By lending to creditworthy enterprises, they can help community-based businesses use credit wisely and leverage it to expand opportunities that will generate activity.

The wisest move for business owners at this juncture is to focus energies on preserving one of their most precious investments – their businesses. Owners should tighten up their business plans, strengthen sales and marketing efforts, identify means by which to minimize expenses and improve productivity. They should not let the myth of credit unavailability discourage them from doing what’s best for their businesses.

The bottom line is we must overcome credit paralysis. The secret is to help small businesses lead the economic turnaround. And let’s give credit where credit is due – to our well-managed local businesses.

Hal Brown is chief executive of Pacific Continental Bank based in Eugene, Ore.

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