As the economy rebounds, small business need more credit. At the same time, internal bank regulations and Federal scrutiny make it very difficult for them to get bank loans.
Hull Printing in Barre, Vermont, closed its doors, laying off nineteen workers. The firm had been in business since 1967. But the bank cut the Hull Printing’s line of credit. Unable to buy ink and paper and unable to pay employees while waiting for customers to pay invoices, the printer sold his equipment to pay off his bank loan, and that was that.
Hull Printing is not alone. Two-thirds of America’s small businesses have a credit crunch, according to the National Small Business Association’s September, 2010, survey. And one third said their bank had stiffened its terms when loans were available.
The Treasury Department estimates that lending across the economy shrank last year by $1.4 trillion – yes, trillion. Of course, not all of that shrinkage affects small businesses. But, Federal Reserve Chairman Ben Bernanke says small-business lending in the first quarter of 2010 dropped to $670 billion. That’s $40 billion less than when the economy was in freefall.
Your bank’s loan officer might love your plans to expand, or just to keep afloat, but his hands are tied. Banks have tightened their criteria for all loans. NSBA President Todd McCracken says, “”Based on what history suggests, if banks have to pull back, they’ll pull from small business loans first.” Federal regulators scrutinize loans to small businesses, too, making banks even more wary.
Across the country, small businesses are watching the economy rebound. You may need credit to pay for materials as orders ramp up. You may need extra cash to hire and train more employees. You may want to expand or buy new equipment. Maybe you need credit to tide you over, or let you keep key employees, until the recession ends for you.
Where can you look for the credit you need when your banker turns you down? Direct Capital is a small business lender with a long menu of credit opportunities for small businesses.
Are you among two-thirds of small business people facing a credit crunch?
Photo credit to highwing at http://www.sxc.hu/photo/1316485