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National and Global, United States

Thursday, September 24, 2009

Being cute and fluffy doesn’t give you any special rights

"Poor Yang Yang and Kou Kou and Lun Lun," said Britain's The Independent. BBC wildlife expert Chris Packham told Radio Times magazine Monday that we spend a fortune trying to save the giant panda, largely because it's cute, but the money would be better invested helping other species. He said the panda has "gone down an evolutionary cul-de-sac" and "I reckon we should pull the plug."

So too the American corporation as we know it. An 'evolutionary cul-de-sac'. The money too, would be better invested in helping other 'species' like the independent small business firm. And in today's economy, many of those are in trouble.

According to an article in Inc. Magazine: "When big business giants fall, it's usually loudly in a much-publicized frenzy. For smaller businesses ending their operations, it's been a quieter storm--but a storm, nonetheless, as more owners short on cash must shutter their stores."

"It comes in dribs and drabs," says small business lending analyst Robert Coleman. "It's not as shocking to our system when they close--when it's one local gas station, a little gift shop--but it's happening every week now."

He found that defaults on Small Business Administration loans increased dramatically in the last year. For the past half-decade, loan defaults have been on the rise--from 2.4 percent in 2004 to 8.4 percent in 2007. But in 2008, the failure rate climbed to 12 percent, and it's worse in 2009.

"The numbers are brutal, they're ugly," Coleman says, because behind each default is another small business that's closed its doors. When a business defaults on a loan, the bank liquidates any collateral--sometimes houses or other personal assets.

High failure rates are problematic for those businesses that are still viable too. Already skittish lenders have grown even more hesitant, leaving more small business owners starved for capital. The economic stimulus plan includes increased guarantees on Small Business Administration loans in an attempt to make this type of lending less risky.

Coleman views the relief as a much-needed lifeline. He says, "It might give those businesses that are still around a fighting chance to survive."

On the other hand, as Darwinian as it might appear, I really would not mind being 'cute and fluffy'. Nor would I mind living on a cul-de-sac, thank you.

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