Needed Now More Than Ever: A Bank for Retailers

The SBA is extending its incentives to banks to lend. What will it take for those funds to be available to retailers? They sure haven't been so far.

Many independents need to replace their legacy POS system. Upgrade other technology. Remodel. Create a more exciting "customer experience." Add in-store video/digital signage. Switch to different merchandise categories and vendors. Provide more training for their staff. Conduct data-mining of their customer lists. Redesign their website. Add e-commerce capability. Well, you get the idea: retailers must catch up to retailing in 2010!

Each of these things creates or sustains jobs, both for the retailer and their suppliers and service providers. All of them and others have to do with the on-going reinvention that must occur in retailing.

However, it seems that retailers continue to NOT be on the safe, defensible list of credit-worthy businesses. Why? Isn't there at least one bank somewhere that will fill this vacuum?

The economic meltdown of 2008 occurred at a particularly punitive time for retailers, who already had their Holiday merchandise purchased. They had no alternative to deep, deep discounts, with the resulting losses. (Seasoned retailers know, when you have to choose, cash is ALWAYS better than profits. "Halitosis is better than no breath at all.")

Then, as 2009 wore on, retailers tried to recover, but many found their oxygen supply cut off. That is, banks slashed their working capital lines ("Look at these losses each month," they would say in June, July, August, September) as the retailers struggled to weather the Great Recession.

So, just when retailers needed to be purchasing for Holiday 2009, their ability to buy was further stifled. Holiday sales (and profits) were constrained, placing even more financial pressures on them going forward. The historically slow months of the winter and spring of 2010 cannot make up for the lost opportunities of the Holiday season.

In our experience, retailers have done a fine job of focusing on "the controllables" in their business. That is, they have better managed their inventory, cut expenses, and otherwise shown great "street smarts" and survival instincts. In particular, they are highly motivated to continue to provide jobs for their employees.

However, it is the uncontrollable variables that continue to punish them. Chief among these uncontrollables is access to working capital...from any bank, anywhere!

In our view, there are retailers who deserve to be the Poster Child for the SBA. Where are the banks who can recognize that promise?