A Credit Squeeze for Small Business Owners

[Badgerman]

Source: NYTimes

Louis Licata has shelved plans to hire three more employees for his Cleveland law firm. Jeannie Macone, of Florida, is cutting back on inventory for her trinket and home décor business. In Ohio, Patrick Allen has slashed employee travel and begun paying cash for work dinners with clients of the marketing firm that he started from scratch.

A crackdown on credit limits by card companies is squeezing the nation’s 27 million small businesses, exacerbating the problems brought on by a stagnant economy.
...
Credit card companies became increasingly aggressive in soliciting new business. Many banks began offering their own credit cards to small businesses, in lieu of loans. And many small vendors began preferring, or even requiring, payments with credit cards.

Where small businesses had traditionally relied on bank loans, personal savings or relatives to help pay for their operations, credit cards provided additional flexibility and ease. Low introductory offers and rewards programs were icing on the cake.

Read more: http://www.nytimes.com/2009/06/19/business/smallbusiness/19credit.html?_r=1&hpw=&pagewanted=all

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At the same time that the goverment was making a trillion dollars available to shore up the big banks, no pressure or dollars were applied to the small regional banks to encourage or loosen credit to small business, or the better alternative of boosting the coffers of the SBA so that direct loans could be made. Small business in the aggregate is the largest employer left in the USofA. Yet the administration has completely ignored this important sector in favor of bailing out global corps who promply gave themselves raises, bonus's, and leveraged their stocks up with the taxpayers money.

The confidence I have in Obamas' economic abilities has reached zero, he is completely ignorant of the beast and is relying solely on the 'insiders' who created the mess.

[glowing]

1. I agree.. that save the home thing is a nightmare to be going thru.

If you make too much money or if you have too many costs, they won't consider modifying the loan. Most people, like my family, are just too squeezed and have fallen behind a bit. AND we also know in the two years we've lived at the location we've lost about $40,000.00 in value and we had purchased the home as a foreclosure to begin with. The bank we are dealing with is Chase. They are vultures. The person on the govt side helping us is only able to do so much. We are at the mercy of Chase... in the end, they hope that they don't have to do anything and that you will be able to cach up on the little bit you are behind on. Their gamble is a fail, as I see on the front page of USA Today, the modification idea is a joke... They want people behind to have thousands saved up to re-close on a loan.. hello, do you think people behind have any money to pay those type of fees if they are behind in the payments... its just one big duh.

[McCamy Taylor]

2. How can we have a small business credit squeeze when we gave billions to the banks?

Oh, I forgot, that money is supposed to be used for lobbying politicians prior to the next election and CEO bonuses. Silly me. Never mind.

[northofdenali]

3. My ex, a small business owner in Alabama

started feeling this "squeeze" months before November 4th. Business credit cards that had zero balanaces were arbitrarily cancelled by the issuing companies for "non-use" (although they HAD been used, often, just the balances had been paid on time). It's vital for small businesses to have credit for everything from stock and inventory to expansion and repairs; but they, as well as the middle-class were fucked by Obama's bailout. And yeah, I call it like it is. We're about to lose our house, can't pay for our taxes or fuel bill for next winter (our prices NEVER came down here), are behind on utilities, and here they give you 30 days period, and I haven't been able to find a job in 18 months of hard searching, despite 30+ years of experience.

I primarily blame Bush. However, I have seen not one ounce, not one iota of improvement to date. My ex is a good businessman, and will hopefully keep his doors open. He employs 3 others who depend on this business to support their families.

I agree "everyone's hurting" - except the Bush-made billionaires - but it hurts even worse when it's happening to you. We worked for years, saved for years - and wound up paying my father-in-law's debts when he died, and mortgaged the house (it was paid off) to do so. Now our mortgage is more than we make.

Our government says fuck you. I'm not ITT, ABM, Chrysler, Bank of America, Exxon, Big Agra, Big Pharma or Big Insurance. So I guess I'll find out what welfare, homelessness and severe poverty are all about.

/end rant

[Badgerman]

8. Not a rant at all from my view...you just stated the facts! N/T

[Greyhound]

10. I'm very sorry to hear this and it si no consolation, but you are not alone.

This has been coming for decades and is not accidental. Seven successive administrations have wrought this, and the new one is following exactly the same course.

There are some of us, small business owners and former owners and employees, that are finding each other and banding together to survive this abomination. Our main challenge right now is simply finding the work that needs doing.

BTW, 30+ years of experience is detrimental to your search.

[Autumn]

4. I think that the tarp money should

have gone to small business instead of the banks. It would have cost us a lot less and we would have gotten jobs out of it.

[w4rma]

5. Where are the cheerleaders, now? Many of us tried to warn them. (nt)

[PassingFair]

6. The real fucking came much earlier....

with the passage of the Bankruptcy Bill.

I well remember hearing the roll call on
THAT one. I remember the parking lot I
pulled into.

I work almost exclusively with small businesses,
and owned one, too. We had financed things with
credit cards, because it was FREE (zero percent)
and because we didn't have to get bank approval.

Most of the customers I have in my day job did,
too. I told my boss at the time, this will affect
us badly...and it has, worse than I thought.

[ColbertWatcher]

7. Single-payer would help! n/t

[Greyhound]

9. He is not ignorant, he is complicit. Each and every step he and "our" Congress

have taken has been the worst possible of all the alternatives.

I heard someone on the radio, a week or so ago, claim that small businesses now employ 50% of Americans. If this is true, it is a decline of 30% since 41 was in office and is truly frightening.

When Raygun converted the SBA into a corporate welfare scheme, many of us warned about just this scenario and the future looks very dark indeed.
:kick: & R