Small Business Fights to Stay Alive with Decreased Availability to Credit


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.

A National Small Business Association (NSBA) survey reported by CNN Money, revealed 67% of business owners had been affected by the credit crunch in August, up from 55% in February.

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.”

Tougher Standards

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.

Job Losses

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.

Lost Opportunity

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!

  • Nona

    I have to disagree with one point. If a business is healthy why would they need a line of credit to make payroll? I can see a loan for a large purchase like a piece of equipment that costs several hundred thousand, or expanding your facility. But for everyday type operations if a business can’t make those payments then they are doomed anyways in my opinion.

  • Small business owners during these tough times need to continue to work and look for alternative avenues to obtain new customers. While looking for new customers they should not forget about there current customer base. By ‘dropping by” your current customers locations, a quick hand written thank you note (not an email) or a quick phone call is always appreciated. Working through these tough times will really grow character. Thanks for your posting. Mike

  • Craig

    LOC’s are vital to many small businesses. I’ll give you a specific example: small start-up company with a seasonal business cycle. Low revenue months can’t always cover the payroll. This is where the LOC comes into play. During the peak of the season when revenues are high and cash is flowing, the LOC is paid off and not utilized.

  • Anna Smith

    Ask any small enterprise owner and he/she will let you know how seemingly impossible it is to raise credit for their business expansion. Hi, I am Anna Smith from Uniondale, New York, and I own a small cafe in the neighborhood. I had been planning to upgrade my cafe for a long time. But raising credit was becoming such a problem that I had nearly let go off the plan. This was till I found ‘Build Small Business Credit‘ ( The treacherous task of raising credit became simple overnight and soon with the help of their solutions, I was able to raise the right credit score without any problem. I am planning to start another outlet with the help of credit solutions from their full package. Go to ‘Build Small Business Credit’ and discover how easy raising credit can be if you have the proper guidance.

  • D. C.

    WE are an 85 yr old, 3rd Generation Manufacturing Business,
    We survived the Great Depression, but we are not going to be able to survive this recession. We see business picking up!! However, the last 2 years have finally caught up with us. We are unable to secure supplies from our vendors. With over $100,000. in orders in hand, we have gone to 4 banks only to be told that our cash flow is too low and our credit is too bad. SBA will not even look at our business plan. We are falling in a deep hole, unable to get out. Our valued employees are leaving us. We are the exclusive manufacturer of our machinery. Without us, our customters are unable to repair their machinery. They will have to shut down production. It is a terrible situation to be in.