Small firms face credit squeeze as crisis drags
San Diego, CA – Small companies create more than half of America’s jobs, but the entrepreneurs who drive this part of the economy continue to complain that access to credit two years into the recession remains scarce.
Small business owners say banks remain extremely wary of risk and a world away from the carefree lending that inflated an epic boom in housing values that went bust and pushed America into its worst economic downturn in decades.
They say their home equity lines of credit have been cut, business credit lines withdrawn and credit card limits slashed. Still profitable firms complain of a major pullback by banks, which many warn will leave a U.S. economic recovery stillborn.
“It’s like we’ve gone back 15 years in time,” said Carmine Ryan, who founded Ryan Bros Coffee in San Diego with his brothers Tom and Harry in the early 1990s, using credit cards.
“We have a proven track record, we pay our bills early and we’re profitable,” he said. “But banks are so gun-shy now that no one would touch us. They’re just sitting on the money.”
The Ryans developed a wholesale coffee business and opened a second coffee shop earlier this year. After they opened it, they sought a loan of $120,000 to finance operations. Nonprofit lender CDC Small Business Finance was able to arrange a $90,000 loan. The rest they had to come up with themselves.
“This is not the way it should be right now,” Harry Ryan said. “Banks should be lending to people like us.”
