National Credit Awareness and Resolution Association, Inc.

NCARA believes we live in a time where individuals, families, and small business owners are increasingly under serious stress and great pressure, or will be for the foreseeable future. The burden and crushing effects of heavy debt are likely to increase over the next decade or two;  who doesn’t expect there to be other stressors or crises? It’s well past time for everyone to stop and understand the true condition of their finances, where they are headed, and how to successfully manage and repay the same. 

 

NCARA simply assumes that there will be long periods of economic downturn at least through the 2020s, together with new opportunities, perhaps even more than ever before for small business that isn’t highly leveraged. That said, debt levels are very likely to become increasingly unsustainable, especially as a result of the unfolding economic downturn from the COVID-19 pandemic. 

 

Pull up and look at debt levels in the U.S. or throughout the world and ask if such levels have not reached unsustainable levels; if not now, when? What if economic demand materially or permanently shifts or drops, and top line performance (revenue) is materially impacted for your business? What are you going to do about it? What can you do about it? Are you prepared now to negotiate with your lender reasonable repayment terms? 

 

Can we be reasonable for a second as we take a deeper dive? Take a close look at what has happened in the past 30+ years in financial services; think of all the remarkable innovation that has taken place. Potential borrowers can be reached anywhere, literally, and funding can take place in hours, or a few days. All anyone talks about is getting the money out, but little is said about getting it back. Creditors have heretofore taken the lead in that arena because, after all, they are owed the money. But times are changing, or about to change. 

 

Despite all this wonderful progress, events regularly come along that cause real economic stress. Take the ‘economic forest fires’ during the 2008 Great Recession, and the current fire underway from the COVID-19 pandemic that started in 2020. These fires were or are supposedly being extinguished by massive monetary and fiscal maneuvers by central banks throughout the world. Debt levels everywhere, all the time, continually reach new records, and small business is caught up in the heat, if not the flames when shocks come. 

 

The world’s so-called economic prosperity in the last few years has largely been made possible, not as much through equity, but primarily by a debt-fueled rocket engine. NCARA believes that ‘show’ can’t last forever. It’s reasonable to ask if long-term near zero percent interest rates haven’t created asset, bond and equity bubbles, and question whether any economy could weather an increase of short-term interest rates to, say, four percent. Governments already borrow money just to pay the interest on other borrowings. Really? Debt is routinely just ‘rolled over’ or refinanced, but ‘refinance risk’ increases as debt levels increase and with the potential of increasing interest rates – at some point in the near term, rates are going to increase. Why? Because of there being too much debt and other unknown events; it’s clearly unsustainable. 

 

To those who say it is sustainable, just wait for the next big ‘storm’ or two, or three; they will come. Unfortunately, we continue to see constant storms of one type or another. They undoubtedly keep coming and one of these times, or probably for some other reasons too, interest rates will increase and then what? In all this, don’t you think balance sheets everywhere need to show a tad bit more equity to weather ‘storms’ on their own? Governments almost seem to not want or expect their citizens to fight the fires on their own, and many citizens don’t want to fight, but rather – because of their lack of preparation – feel a sense of entitlement and now largely look to the government for the next bail out. Why? 

 

Because their ‘planes have already flown too far past the point of no return’, right? They’re not prepared; they’re naked and the tide has gone or will go out – they’ll be exposed. How wise is that? Just depend on the government, right? Now, if you argue that without government intervention, everything would crash, well then, you’ve made the point. Debt cannot and will not be the answer to put out of all these fires, so let’s just be reasonable and acknowledge that we have or will someday have, a debt crisis, among other things. 

 

It’s okay to start and have this discussion because it’s long overdue. It’s more important to begin a new paradigm shift by empowering the debtor to come up with his own best-effort debt repayment solutions. Do you agree it’s about time? If you do, then you’re invited to help out; your help is needed and requested. 

 

To drive the point home, the current economic environment, together with who knows what will come next, leaves small business exposed, don’t you agree? Who doesn’t think that something, somewhere, will trigger yet another event that will add to life’s burden? It’s like we live in unusual times, and wave after wave keeps coming. The remedy is, what? We need ‘more’ government spending and oversight, right? Maybe, but where is all this headed? And, what will the misery index look like when government can no longer effectively take care of the people? If not already, somewhere between now and a season of default and restructuring, small business is going to be hit hard; there’s only so much working capital and financial sponsorship to endure troubled times.