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Small businesses create more than half of the jobs in America, yet these same businesses, who drive America's economy forward, continue to experience barriers in accessing credit.
If your business has been adverseley affected by the credit crunch take a moment to share your story with us today.
Below are just a few of the stories of small-business owners who have fallen victim to the credit crunch.
Marilyn Landis
Basic Business Concepts, Inc
Marilyn Landis, 56, a small-business owner in Pittsburgh, says that in the past year she "hunkered down" to cut her card balances. As she did so, one issuer lowered her card limit by $5,000 — to $100 above her balance — without citing a specific reason. Then another issuer sent her a letter saying that because her credit score had dropped, it was lowering her credit limit. (She didn't check to see how much her score dropped.)
"I'm paying my balance down, and the end result is that I end up with a worse credit score and less credit availability," says Landis, whose firm analyzes businesses' balance sheets and inventory systems. "That's a lousy cause and effect."
Licata & Associates
Louis Licata has
shelved plans to hire three more employees for his Cleveland law firm. “I’m a
business in a bad time that wants to expand,” said Mr. Licata, who added that
he had been unable to get loans at Cleveland’s banks since the recession set
in. Recently, the limit on three of the credit cards he uses for his law firm
was slashed by a total of $60,000, he said, dousing plans to enlarge his
business.
Rick Snow
Maine Indoor Karting,
Rick Snow, co-owner of indoor go-cart business Maine Indoor Karting, says American Express recently cut the credit limit on his OPEN small-business credit card to $3,500 from $10,000. Snow and his wife, also a co-owner, are using their personal credit cards to help cover business costs. While they have the stress of paying for expenses such as gas, Snow says, there's much more at stake than just keeping the go-carts going.
"There are 13 families depending on (the employment) we provide," he says. "That's significant."
Tom and Terry Stephens
Edutronix LLC
The strain is worsening, leaving business owners like Tom Stephens and his wife Terry facing tough choices. The couple formed educational software and equipment firm Edutronix LLC in 2001. Based in the Detroit suburb of Troy, Edutronix sells computer-aided design packages and cutting-edge products like three-dimensional printers to schools and colleges to "prepare students for the jobs of tomorrow." But last autumn, as Wall Street panic and job losses grew, Edutronix's orders dried up as customers feared budget cuts.
"At the end of the third quarter it became clear that things were not going as expected," Tom Stephens said. "That left us with no choice but to make some necessary cuts."
With 2008 sales down 40 percent, Stephens cut three of the company's eight staff and nonessential expenses. "I'm not going to wallow in despair because long term, the prospects for spending in education are great," he said. "It's just a matter of waiting this out."
Stephens also said he has not even tried to get a loan.
"We have a great relationship with our bank," he said. "But all we have heard from inside and outside the banking community is that right now, everything is on hold."
Electronic Data Payment Systems
William L. Treciak has spent the entire 20 years of his working life in the credit card payment-processing industry. Five years ago, he founded his own company, Electronic Data Payment Systems, which is based in Dover, Ohio, and processes credit card transactions for merchants. He found it ironic that even he was ensnared by escalating credit card interest rates.
Mr. Treciak said he was offered a small-business card with an interest rate of 11.99 percent in mid-2006. That was lower than interest rates on his company’s bank credit lines at the time, so he took the deal. But then, he said, the card company raised his rates six times, to reach 34.99 percent this spring.
“Obviously, I paid the balance off and shut the card down,” said Mr. Treciak, who added that he had never been late for a payment and had never given the company any other cause to raise his rates. “I grew up in this industry, so I knew better.”
Dave Booth
Allstates Refractory Contractors
Dave Boothe, who owns Allstates Refractory Contractors, in Waterville, Ohio, said his bank closed his credit line after a difficult year in 2005, when he suffered his first loss since buying the business in 2002. In early 2006, Mr. Boothe’s bank said it was closing his $50,000 revolving credit line and issuing him a five-year note for the balance of $47,000. This debt had a fixed interest rate of 10.5 percent, which he said was two percentage points higher than the credit line.
Mr. Boothe said that his business, which fixes industrial furnaces, had become profitable again over the last two years and that he had tried to open another credit line with several banks, to no avail.