Getting money for a small business is not easy for many reasons.

First of all, owners and prospective owners need to cut through the sales hype.

Advertising my say the President has ordered banks to loan money to those who qualify, but in reality, the President can’t simply do such actions.

Banks have internal business practices and structures just as any other business operates. Did you know some banks won’t loan on start up businesses or until a business has operated for two years? Some banks won’t make commercial loans under $200,000. Not all banks or credit unions do commercial lending.

Not lending is not always a bad thing. When we put money in a savings account, for example, we want our money protected. In order for our money to be protected and safe, we should want to bank to make prudent lending decisions, not risky loans. Risk is more for investors and with the added risk, investors should reap the rewards knowing the potential losses could be great.

In addition, a bank or credit union has regulations to meet before a loan can be approved on top of their standard operating procedures. If a loan falls outside the lender’s normal business practices, or parameters, but wants to do the loan, the bank can seek the assistance of the SBA. The SBA has guidelines determining lending activities too.

Next, take secondary market issues. Many loans are sold on the secondary market. What may make lending difficult in the future, as we have seen in the past couple of years , is obviously related to people making money on investments. The market has been in the tank starting in 2007; therefore, no one wants to investing losing propositions.

Moving right along, consider taxes. In 2011, tax laws revert back to pre-2003 levels. Dividend rates will go back up to 39%! Higher taxes and less profits on investments may lead to lower values on investments due to lack of demand, thus people once again losing money.

Investments and dividends are not just for the wealthy or Wall Street execs, but also the average Joe’s IRA and 401k accounts, mutual funds, exchange traded funds, etc. (Check out my article, “Kissing retirement money goodbye“.)

So when looking for money, according information derived from the Small Business Development Center, only about 4% of the money for start up business comes from the bank – approximately 55%-65% comes from personal finances or relatives.

Other forms of money comes from selling assets, home equity loans, partners, investors, etc.

Grant money is for another topic, but basically there is not any grant money “for profit” businesses and the government isn’t a direct source of funding (or cash) for business, which is not a bad thing either; but I’ll go into this at a later time. In the meantime, consider what our taxes would be if the government provided loans to everyone.

In summary, the business idea and creating a business plan may take the least amount of time, but finding money could take months so be prepared and possibly be creative.

Whether a bank is privately held or nationalized, loans still work the same way.

A 30 year fixed is a 30 year fixed, and so are 15 year fixed rate mortgages as well. However, there is more to it than what is the rate, what is the payment. You can read what I mean in Barking With The Big Dogs. I’ve posted several chapters.

What may be different in the private sector banking versus socialized banking are limited loans types, such as an interest only.

I’m not suggesting that everyone get an interest only mortgage, but it is not a stupid loan as some would say. It’s actually a very good loan. You just have to see beyond the hype, or negative hype.

Limiting products is good for the bank, not the borrower.

With all of the problems in the financial world today, the pay option mortgage is said to be the problem that started it all. I would disagree.

The real problem is when the government passes laws and regulations, such as the Community Reinvestment Act of 1977 under Jimmy Carter, basically forcing banks to lend to risky borrowers. Also, lack of education in our schools.

I was watching a person talk about these pay option mortgages on his website and he made this point over and over about the cause of the meltdown which started the financial crisis a couple of years ago.

He used lots of graphs and charts that were overwhelming and compelling. However, on his very own site, an article (that he put up) went on to say that these loans were very good for the borrower and lender for the last 20 years!

It should be clear that the loan is not the problem, but rather the problems are much deeper.

It’s not a particular loan, but the action of people and businesses that create the problem.

I’m not sure who actually said it, but the quote was something like this, ” it takes more knowledge to borrow than to save.” Possibly Robert Kiyosaki.

Maybe having more knowledge is tough and is why the “get out debt” or “all debt is bad” people are so popular…it’s easy for everyone to talk about, and easy for some people to sell – such as a talk show host. If a person has a degree in finance, why would that person not teach what he knows versus saying debt is dumb? The answer, debt is dumb is easy to sell the masses.

In actuality, borrowing is the simple side to finance and very easy to understand, it’s just made very complicated.

Not all people should borrow money. Not all loans are meant for all people. But for those willing to learn how the banking game is played, they can come out winners of tomorrow.

Therefore, the real key to success and building wealth is knowledge.

The following video is from the movie, The Color of Money starring Paul Newman and Tom Cruise.

What makes the song, It’s In The Way That You Use It, by Eric Clapton so appropriate is when borrowing money – it’s in the way that you use – is a key component in banking, borrowing and investing. Think like a bank.

You’ll see the paradigm shift leading people from being a traditional borrower to a savvy money person contained in the chapters, such as Hammered or Hammering?, of Barking With The Big Dogs; and you’ll be able to unlock the secrets the mega machines use everyday versus the information and so-called education the rest of the crowd blindly follows.

The odds are always with the house, or the bank. I was playing poker with my son. We are simply playing a game of cards, but it is fun to win. (And yes he won too.) Someone wins and someone loses, that just the fact of life. It doesn’t matter if it is checkers, cards, football, baseball or whatever. However, we have the choice to play or not to play games.

But in the game of life, we don’t always have choices when it comes to playing with our money.

No, I’m not talking about poker or any other game. Rather, I’m talking about taxes, inflation, loans, insurance or the stock market. These are “games” that we play everyday. If you don’t learn the rules of the games, the house has the odds.

Have you ever noticed the size of the financial institutions or government monetary figures? Sure you have.

$900 billion or a trillion, such as in the bailout figures.

These institutions use debt and loans all of the time even if they do not use the terms debt or loans. For example, a certificate of deposit at a bank is really a loan from us to the bank. The bank pays CD holders interest and uses the money to turn around and make more money.

The thing about it is that it is not necessarily the debt that causes problems as the debt free pundits proclaim, but rather the actions the action people take when buying items and spending money regarding the financial decisions made. What I mean is did money get spent on vacations, jewelry, boats, or whatever? I $100 or $200 here and there starts to add up. Or, is money invested at random just because some said buy this stock or mutual fund rather than research the markets, trends, etc. Another example might be to buy and hold instead of selling at the appropriate times.

In reality, who has more money, the institutions that use debt properly or the people who tell tell you to get out of debt?

Some banks will go broke, as we have seen, and some will win big. Some win. Some lose. But these players know the game and are playing against other experts.

Most homeowners, and I have made mistakes in the past too (as a result, I have decided to delve into the real estate and banking business rather than just take someone’s word for it), are really not an expert in real estate. Neither are many realtors or bankers that I’ve come across for that matter either. To give you an idea of what I mean, is a house really an investment? The property can be, but in most cases it’s not – except to the realtor (or person who loves real estate) giving the sales pitch, or the people who write the tax laws, such as capital gains. More on this in Barking With The Big Dogs. You can also get an idea of housing from my post dealing with the property being a hedge against inflation by reading here.

Therefore, keep your poker face on when it comes to looking for a house.

Even people who preach getting out of debt don’t always tell the whole story. Maybe because they don’t want to tell you or because they don’t know the game itself.

Similar to playing poker, if you are playing poker, you don’t show your hand. You bluff and make it look good if your hand is not very good.

When listening to a show on getting out of debt, or all debt is bad, how much would you put in their “pot” just to sit at the table and learn what you already know… such as don’t spend more than you make. I would hate to have a 15 year mortgage and lose a job just simply trying to avoid debt. That’s pretty risky. Are you willing to bet the house?

Losing income is much more damaging than having debt. But if you do lose income by all means you do want to get out of debt as fast as possible provided you do not give up additional income in the process, i.e. liquidating income producing assets. Rather, if you are not making money, then it’s time to walk away from the table.

Before you sit at the table in a bank or at a real estate office (or wherever), you had better learn the rules of the game so you can level the playing field. Otherwise, they may just clean house.

  Copyright secured by Digiprove © 2010 Mark

Many people realize banks borrow money, i.e. CD’s, savings accounts, etc., and turn around and make loans from those funds. The savings rate is lower than the loan rate. This spread between the rates is just one way the bank makes money.

Another way banks make money is from deposits as well. Sure, savings accounts and CD’s are deposits, but so are free checking accounts. (I describe this in my book, Barking With The Big Dogs, got into the process much deeper than I do on my post on my website.) Free checking is generally free as long as you keep a balance. Therefore, the bank uses the money as well to make money.

I do not have a problem with the bank making money. After all, how could I make money from investing in the financial institutions (or any other business) if they do not make a profit? I couldn’t.

What I don’t like is a practice in making money, which happens, by holding my money longer than necessary and penalizing me when I could be using my money.

To explain, when deposits are made, money is not always available for immediate use. First the bank needs to protect itself to make sure other checks (deposits) clear coming into the bank. Next, this also protects me.

No problem so far regarding holding the money. In addition, on larger deposits, only a portion may be available for use and the bigger portion may be held for a week for example. Holding money in this fashion doesn’t really bother me since I know some funds are available and when the remainder of the money will become available for me to use.

However, I made a deposit and the portion that was supposed to be available along with the date the remainder balance was to become available didn’t happen. Yes, I had a receipt, but the bank decided to do something different…and didn’t tell me.

Where the story gets interesting is that I wrote some large checks based upon the information I was given. What I wasn’t given was notice the extended hold was put in place. My wife and I noticed something wasn’t right and called people we had written checks to and asked them to not deposit our checks until I found out what was going on at the bank.

When I went to the bank, I spoke with the branch manager. I explained I knew how banking works. She even said she didn’t want to waste my time, since I knew what I was talking about, and got right down to business.

The lady (at Chase) stated the “back office” decided to put an “extended hold” on my deposit and the initial amount to be used was not available. I was going to have to wait another week.

Therefore, I had discovered while meeting with the banker I had some NSF check fees. The banker stated Chase went ahead and paid the checks.

By now, I was not very happy at all. I showed the manager my receipt and a copy of the check I deposited. I told her the people who had assisted me in the previous transaction and assured me of what to expect. The manager stated Chase would pay on any check and refund the fees. I also demanded a letter stating the actions and errors that occurred or may occur are the fault of Chase, and not my own. I wanted this letter from the bank in case something negative showed up on my credit report and I needed a document to justify the transactions.

While sitting at the manager’s desk, she made call to see if my deposit from the previous week had in fact gone through and if the funds were available. Guess what, the money was there.

I stated that I knew what Chase is doing is floating my money. (Before electronic banking, people could float money using the time delay of the mail system. Not anymore. Only I wasn’t doing it, the bank was doing it to me.)

Instead of making it available when they said it was, an extended hold was placed so they could use the money longer. She smiled, but the smile was one of those “I just got caught” kind of smiles.

The manager requested a release, and guess what? My money was available within minutes. The manager also credited back may fees as mentioned.

Here is the kicker. Chase Bank put an “extended” hold on my money to use for a longer period of time while charging me NSF fees to earn money when the deposit had actually cleared and should have been in my account to begin with – or else they wouldn’t have paid my checks since I’m not set up for loans. Fortunately, I know enough about banking not to just to let things slide and wait another week…

…and Barking With The Big Dogs will let the fat cats know the game is up.

  Copyright secured by Digiprove © 2010 Mark