We’ve heard every talking head go on about Wall Street’s effect on Main Street. We’ve all been scared to death that the credit markets are going to freeze up. I don’t know about you, but I’m still getting credit cards in the mail. So how exactly is this credit crunch really affecting small businesses across the country?
The Credit Crunch is Real for Small Business
According to a recent survey of senior loan officers by the Federal Reserve’s, the majority of banks are restricting or decreasing credit for companies with less than $50 million in revenue. That sure includes small business! Anyone associated with housing in any way is perceived as extra risky. This could be a mortgage broker or a carpet seller.
Even the Strong Are Being Denied
Many small and family owned businesses rely on generous lines of credit to finance day to day operations. Banks are cutting back on this type of credit. And according to Dayton bankruptcy attorney who spoke to Business Week,
“It’s not just sick businesses. These are healthy businesses, and that’s the surprising thing.”
Banks are looking at scores over 720 and companies at least two or three years old. This is particularly bad news for brand new ventures. According to the Business Week article, small businesses may have better luck with smaller, regional banks that specialize in small business lending.
The Domino Affect
What happens when a small business goes under? Even of the banks recoup their loans, what about all those accounts at the other small businesses who supply the one that can’t make it? One business failure affects many.
According to Small Business Administration estimates, small businesses employ about half the non-government employees in the United States. Without adequate credit, small companies can’t meet payroll.
It takes money to make money. When an opportunity to grow presents itself, small business owners need cash in hand or else those chances can be lost forever.
Has your small business been affected yet? Business Pundit wants to hear about it!