The sandwich shop owner appeared on TV screens around the world. His shop was on Wall Sreet and he was being asked how the credit squeeze affected him. It was, he said, making it difficult. He was having problems borrowing the funds to pay wages, and to buy stock.
Hey! Time for a reality check: if a sandwich store owner has to go into debt to pay wages and buy his fillings, then we are all facing disaster. This is the true cash business. Buy bread and butter in the morning, sell it at lunchtime and pocket the profits in an afternoon. The founder of the Subway empire, so legend states, needed only a thousand from a friend to get not only the stock but the equipment he needed.
Of course we now have a new definition for “market trader”. It means the denizens of Wall Street and their ilk around the world who believe in derivatives and that you can sell things before buying them. The true market trader is of the kind who had a stall in London's Petticoat Lane or on Portobello Road; he or she had a simple business plan: buy, markup, sell, buy again... There was generally no place in the expenses which had to be covered by the markup for loans to run the business.
Loans exist to provide capital. Sometimes that capital is of a short term nature. I recall from my own past of going to see the bank manager because we had planned a trade directory and the idea had sold so well that we did not have enough money to print it; the ads we had sold more than covered the print cost and we had an advance order from a government department for a couple of hundred copies, but none of that money would come in for at least two months and the print bill had to be paid on delivery. We'd actually done quite well in getting prepaid ads but the print bill for a book a lot larger than we had envisaged was therefore way above what we had budgeted.
The manager, in a major bank in London's Fleet Street, heard our tale, looked at our figures and allowed us the few hundred pounds we needed. He chatted about our plans for a magazine in the same field as the directory and then told us he had to leave for a meeting with another client who had a similar problem. We might even read about it next day.
We did. Rupert Murdoch bought the News of the World.
Our tale is a good example of what banks and other means of getting credit are for. They are not to provide daily running expenses. Unfortunately many people seem to have forgotten that.
Afterthought: We wonder if the conversation between journalist and Wall Street sandwich shop owner really went like this:
J: You must be hit by this credit crisis...
SSO: Well, maybe a little. It'll cut our sales if the businesses upstairs cut their staff.
J: How about I bring our cameras in and we'll do a piece on how this affects the little guy. You'll get your face on screen and everyone around here will recognise your shop in the background.
SSO: That's be good. Yes, I can say I need credit... I've got wages and I have to buy the bread. That's it, I need bread for the bread.
J: We won't go overboard! But the news director told me not to come back without some man-in-the-street footage.
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