04.03.08
The Tightening of the Money Belt
Businesses across the U.S. are feeling the impact of the housing crisis, a slowing economy and the stock market’s roller coaster ride in many ways. Increasingly, more small to medium-size businesses are finding it tougher to get loans. Available credit from commercial lenders appears to be drying up as lenders hesitate to extend credit, particularly to small business owners who tend to use their homes as collateral for their businesses. With foreclosures reaching a record high, lenders apparently do not want to roll the dice and take the chance of ending up with another home should that small business owner default on their loan.
Small business — defined as those with 500 employees or less — represents 99.7% of all employer firms and generates 60 to 80% of the new jobs annually, according to the Department of Commerce. I would think given the down turn in the economy and the push to turn things around that the last thing lenders should be doing is cutting small business owners off at the knees.
True, lending guidelines and regulations have to be tightened in all quarters. The subprime meltdown was a painful lesson to learn for most lending institutions. However, now is not the time for lenders to scream the sky is falling and slam the door on entrepreneurship. Due diligence on the part of lenders and a solid business plan and financial statements should continue to rule the day, not panic and fear of what may happen.
