“Banking and SME Financing in the United States” Review Essay

Introduction

The paper is looked at as a research paper. Every research paper is expected to present a problem or a research question. The paper aims at providing a solution to this research question. Similarly, the research would have selected a standard method for data collection, analysis of data, and then for interpretation. Based on the interpretation, solutions are reached by the researcher and presented in the paper. In this paper, a paper is selected for analysis. The selected paper is: ‘Banking and SME Financing in the United States. This paper is also looked at from the presentation point of view, in terms of coherence of information, the structure of the paper, and the way references are used along with the methodology adopted for concluding. This paper presents my observation of the research paper cited.

Basic Structure of the Paper

The paper aims at presenting a working paper on the status of SME financing particularly from the point of view of banks. However, the author is not specific about any problem or research issue which he is trying to solve using this research. Therefore, the paper can be looked at as an informative piece primarily, aimed at grouping the information, collect them, and present them statistically, helping those who might be interested in such data. However, there is a minor aim of the paper and that is to identify the major loan markets for small businesses in the US and in ascertaining the increased cost of funds for the small businesses. The paper also wants to point out the level of competition between the banks in funding small and medium enterprises.

In the introduction, the paper presents a broad overview of the small and medium industry segment and its financial status. It also briefs on the funding needs of the SME industries as well as what are the major sources of funding for them. However, the author does not reinforce his target which is in identifying the loan market for the SMEs. The methodology adopted by the author is certainly noteworthy. He has taken information from various bank sources and surveys. Since the US Small Business Administration is a major source of all the information, and the author himself working in that, there is no dearth of data input for him. He has collected all relevant data through various means. Mostly quoting from other surveys and research works carried out by the organization. He has also gathered reliable information from the Federal Government on many of the small industry-related statistics. This includes the Department of Commerce, Bureau of Census, Department of the Treasury, and the Internal Revenue Service. Data collection methodology and data collection itself have been meticulously done and presented.

While doing the analysis, the author has done trend analysis of the data and has also employed statistical methods. Since most of the information he has collected is quantitative, statistical methods could be easily employed. However, there is specific qualitative information. Typically, the author observes that small industries still have noticeable failure and bankruptcy cases. Though noted, the exact reasons or the influence of such qualitative and fuzzy observations have been largely ignored. There is no qualitative analysis of the information received whereas the quantitative analysis has been done excellently and in line with the latest trends and statistical approaches.

The body of the paper can largely be divided into Financing patterns of the Small industries, Major credit suppliers, Development in the banking sector, Competition, and performance. The grouping has been done on the functional aspect. It starts on the small industries in a broad spectrum and zooms down to the required topic of funding to the small industries. It also analyses the cause and effect of such things as bank mergers and thereby, consolidating the bank operations. The impact of such consolidation on the small industries has also been analyzed and brought forth. The paper also compares the different lending systems like the leasing system with the mortgage lending normally done for the owner funding. It also looks at how the funding is being done for the small industries and the criteria normally adopted by the banks.

Finally, the paper in the conclusion, clearly states the outcome of the research. It says that the commercial banks are the ones that contribute heavily to the funding of small and medium enterprises. It also brings forth the issue of the cost of the funding into focus. It compares the cost of funds in commercial banks and other lending agencies. Most importantly it also concludes on the reason for the decline in the cost of the funding. The research indicates clearly as a parting statement, that it is not because of the competition between the banks that the lending rates have fallen, but because of the high liquidity that the banks have been having in the last few years.

Presentation

The paper structure is comfortable for a working paper. It is a presentation of the data that is more important in this case. The survey outcome has been presented with all the details as they were received. Most of the decisions are left to the reader to conclude. This data could help some people draw their conclusions depending upon their needs. The information is presented in a gradually flowing form from the small industry status in the US to their financial status. The paper goes on to elaborate on the funding position. The information presented does not appear to have any specific prejudice at any point in time. There is neutrality visible through the reporting that has been adopted. This is achieved by reporting not just the positive data but also the bankruptcy rates and the negative information as well.

The style of presentation is more a reader-friendly style; made more for an executive read rather than for the consumption of the scientific community. That is why the information given by the researcher wherever possible has been in the form of tables and form charts. The charts and tables are easily readable and also present the information in a more comfortable and identifiable form. The author has collected through the survey, information on various aspects of credit funding in SMEs and their status. He has also presented the information on the security or collateral provided by the SMEs and the number of times, an SME can pick up a loan on itself. On most occasions, the loans to SMEs are done through the owner. This way the banks were securing themselves hold on the company and the owner of the company. The author has not used excessive words to explain the points required. He has been very optimal in the usage of words and has also not passed any unnecessary comments on any of the stakeholders in the business. This only reinforces the idea that he has no prejudice or bias while conducting or reporting the results of his research work. The format of the article might not be the one that a research paper might appear as. However, the data has been presented in a way that the interest of the reader is captured and he gathers the information he is seeking for. With lots of quantitative data and analysis in the picture, the reader is flooded with lots of information.

Conclusions reached

The conclusions reached using the statistical analysis for the purpose. A time-series analysis has been conducted by the author to ensure that he gets to the trend analysis of the lending rates over a specific period. Using this information, the author has used appropriate conclusions in all the set targets. The original target was to ensure that the paper reflects the status of the industry to the reader, which has been achieved. At the same time, the author also aimed at presenting the type of bank that dominates in the SME lending market. He was able to not only provide that information; he has also brought out that the fact that there is continuing competition between the banks for the market. However, it is too small to cause any major change in the strategies of the banks. He also concludes on the other important factor, cost of funding, and the reasons behind it are also explained.

References and others

Adequately referred, the paper has taken most of the information from government sources. This includes the author’s department which is also into the business of gathering information and data on the small and medium industries. The author has also picked up information from other government sources as already indicated. He has also picked relevant information from other researchers’ papers, particularly, on the methodologies adopted and the analysis methods that could be employed in this particular case as well. Supporting his concept and research methodology with appropriate academic reports and methodologies helps the author to substantiate his claims on the neutrality of his analysis and data. He has adequately referenced in the paper. Though the author did not start with the objective stated in the introduction, he ends with it in the conclusion.

Conclusion

Based on all these points, we can come to the following conclusions:

1. The author failed to state the purpose of the paper in the initial pages of the paper. Typically, he has not mentioned anything on the target or aim of the paper in the introduction or a specific subheading.
2. However, the author makes up for it by mentioning these in the conclusion.
3. The structure of the paper is more in line with the needs of the management and executive of companies rather than aimed at the research community.
4. The methodologies employed are all scientific and in line with the research methodologies in practice.
5. The information and data presented are very well collected and organized. There is also an analysis that is powered by scientific thought and process.
6. However, qualitative information has been ignored, of whatever few that has occurred.
7. The conclusion and the references / bibliographic information are all in place to meet the needs of the paper. There is no excess citation nor too low or no citations. The author has used other citations to support his argument efficiently so that all his requirements are met.

The overall observation is that the paper serves its purpose of providing excellent information to the reader.

References

1. Charles Ou, 2006, Banking and SME Financing in the United States. US Small Business Administration – Office of Advocacy.
2. Nell Meriwether, 1996, 12 Easy Steps to Successful Research papers. NTC Contemporary publishing company.