No money to meet payroll!

[Sapiens]

Heard that some regional banks will not be able to keep credit lines open; they are to advice their clients that unless Congress passes the bailout there will be no funds to meet payroll!

[Sapiens]

Corker: 'Wall St. bailout' is really for Main St.

Corker: 'Wall St. bailout' is really for Main St.
http://www.tennessean.com/apps/pbcs....80/1006/NEWS01

Things in Washington are continuing to evolve. I hope as you read this we are working in a bipartisan manner to pass legislation that provides oversight, protects taxpayers and solves one of the greatest financial crises of modern times.

Americans are furious about a proposed rescue plan. The worsening financial crisis and resulting damage to the broader U.S. economy were avoidable. Wall Street, regulatory agencies and policymakers in Washington failed America — and let's face it, too many Americans borrowed money for houses they simply couldn't afford. Now the nation faces a choice between bad and much worse. Americans are angry, and they should be.
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Sorting out how this happened and how to prevent it in the future is complicated and will take time. As a member of the Senate Banking Committee, I'll do everything possible to ensure an honest and straightforward debate and that the resulting policies hold accountable those who have endangered the jobs and savings of Americans. But today we are facing a grave crisis that must be dealt with decisively and swiftly. It's tempting to think about Wall Street and Main Street separately, but such thinking is misguided. Main Street would collapse without the money and credit that banks and financial institutions provide.

Starting and expanding businesses, buying homes, sending children to college, and other entrepreneurial enterprises require money — investment capital. Money and credit are the lifeblood of any economy's strength, and financial institutions are responsible for circulating that lifeblood to the businesses, consumers, home buyers and students who need it.

There is a record shortage of credit in our nation's economy and the situation is growing worse by the day. If the credit markets continue to deteriorate, and credit provided by our country's banks and lenders is no longer available, businesses will no longer be able to secure short-term loans, forcing them to lay off workers because they can't meet payroll. It will become impossible for individuals to secure car loans or mortgages — leading to more foreclosures, pressure on housing prices, and a worsening of the credit crunch. In a worst-case scenario, credit cards may no longer function and the ability to even cash a paycheck may no longer exist. This is how a financial crisis becomes an economic calamity that will have an effect on every American and Tennessean.

Regardless of how we got here, the troubled financial system must be stabilized. This is not a "bail-out of Wall Street," but an unprecedented effort to avert a catastrophe that would devastate Main Street. If our resources are invested properly, the federal government will get all of its money back and taxpayers may even see a return on the investment. That's what we are trying to ensure as we continue these negotiations.

If the right rescue plan can be negotiated, we can restore stability and confidence to the credit markets, and enable the financial system to continue financing the needs of American businesses, consumers, homeowners and students.

United States Senator Bob Corker, Tennessee

[sn1p3r]

Re: No money to meet payroll!

I'm sure there is some truth to this but what I don't understand is why are companies relying on credit to meet payroll?

[sn1p3r]

Re: No money to meet payroll!

sorry to answer my own question but in case anyone else was curious about this here's an article on it

http://money.cnn.com/2008/09/28/news...ion=2008092811

in simple terms it seems that businesses use short term credit to bridge the gap from accounts receivable to payroll. this doesn't seem like much of a crisis but i guess that all depends on how big the time gap is from AR to payroll. can anyone elaborate on the details?

[LabMonkey]

Re: No money to meet payroll!

On another board that I post on, a well respected member there said that the company they work for had actually experienced this just a day or so before Ben and Hank went to Congress.

[kingcopper]

Re: No money to meet payroll!

sorry to answer my own question but in case anyone else was curious about this here's an article on it

http://money.cnn.com/2008/09/28/news...ion=2008092811

in simple terms it seems that businesses use short term credit to bridge the gap from accounts receivable to payroll. this doesn't seem like much of a crisis but i guess that all depends on how big the time gap is from AR to payroll. can anyone elaborate on the details?

Sadly, the American is so good at welching and waiting that businesses end up borrowing as a bridge. Most of the small business owners I know charge a premium because of the risk inherent with maybe never being paid by customers.

[sn1p3r]

Re: No money to meet payroll!

It seems as if we have gotten to the point where as long as we have an IOU on the books from someone it is "money in the bank"...I suppose years and years of a FIAT currency and loose accounting has made this acceptable but I can't help but smile a little thinking about how sometimes the invisible hand reaches up and smacks the snot out of those who ignore it.

[jtabeb]

Re: No money to meet payroll!

I suppose years and years of a FIAT currency and loose accounting has made this acceptable but I can't help but smile a little thinking about how sometimes the invisible hand reaches up and smacks the snot out of those who ignore it.

Also called "Objective Reality"

[The Outback Oracle]

Re: No money to meet payroll!

sorry to answer my own question but in case anyone else was curious about this here's an article on it

http://money.cnn.com/2008/09/28/news...ion=2008092811

in simple terms it seems that businesses use short term credit to bridge the gap from accounts receivable to payroll. this doesn't seem like much of a crisis but i guess that all depends on how big the time gap is from AR to payroll. can anyone elaborate on the details?

Any business running on this basis is damn near broke anyway and destined to fail! So let 'em go.

[BrianL]

Re: No money to meet payroll!

It seems like this has been used as a partial alternative to a proper investor or funding for various startups. There are plenty of stories about founders using personal credit cards to buffer bad months while a company is starting out.

This is probably my software industry background more than anything else speaking, but this could definitely be a blow to some of these newer companies. I'm not arguing the desireability of operation this way - it definitely happens though.

[Wild Style]

Re: No money to meet payroll!

Any business running on this basis is damn near broke anyway and destined to fail! So let 'em go.

A lot of BIG companies are broke and destined to fail then. NPR did a report on this the other day. The number of big companies operating like this is scary.

[Jeff]

Re: No money to meet payroll!

I've worked at a lot of startups, and more than once, as senior management, I was asked to accept a late (sometimes very late) paycheck. It's something that's just understood. Comes with the job. The only real a$#hole situation I was in was when management had a $60,000 balance in checking and handed out $70,000 in paychecks. Not a pretty sight. For months afterwards people would RUN to the bank across the street and cash their paycheck, just to be sure.

It did a lot for morale, too. Not.

[Wild Style]

Re: No money to meet payroll!

I've worked at a lot of startups, and more than once, as senior management, I was asked to accept a late (sometimes very late) paycheck. It's something that's just understood. Comes with the job. The only real a$#hole situation I was in was when management had a $60,000 balance in checking and handed out $70,000 in paychecks. Not a pretty sight. For months afterwards people would RUN to the bank across the street and cash their paycheck, just to be sure.

It did a lot for morale, too. Not.

My question then becomes, as all this economic mess plays out will we have a extreme amount of companies closing their doors then? It seems like a very large portion of companies were over extended. The difference being those who could get credit to cover their short comings and those who couldn't.