Small businesses likely to see credit get tighter
Dean Calbreath, The San Diego Union-Tribune
Even before small-business lending giant CIT Group filed for bankruptcy last weekend, entrepreneurs and mom-and-pop shops were having a hard time funding their operations.
So far this year, small-business loans have slid by 3 percent nationwide, or $113 billion, which is the first decline since 1993, according to the most recent data from the Federal Reserve.
With tight credit restrictions and a dwindling supply of lenders, many small-business owners have stripped their personal savings or funded purchases through high-interest credit cards in order to survive.
The downfall of CIT and such regional financiers as San Diego National Bank make it likely that credit will get even tighter. And as the year-end inventory season approaches, in which many businesses have to temporarily borrow to smooth their cash flow, the need for short-term credit will become more dire.
“There’s a lot of panic on Main Street,” said Paul Rauseo, managing director of George S. May International, a management consulting firm in Chicago. “Businesses are wondering how they’re going to fund their inventories in the fourth quarter and how they’re going to meet their cash flow in the first quarter of next year, or further beyond.”
Jim Swift chief executive of Cortera, a credit bureau specializing in small to medium-size businesses, warned that the deepening credit crunch could “handcuff our economic recovery because businesses won’t be buying new inventory, paying suppliers or hiring new employees.”
In San Diego County, small-business lending took a large hit last year. During the six months that ended March 31 — the most up-to-date information on the local Small Business Administration office’s Web site — $77.4 million SBA loans were extended in the county, compared with $164.1 million during the same period a year before.
The reduction in lending is having a ripple effect on businesses throughout the county. Even if businesses do not depend on loans for their operations, they often have clients or suppliers who do.
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