May 17, 2009
Small businesses caught in a financial meltdown squeezeBy Michael

Portsmouth — Ken and Deborah Smith were caught in a classic business squeeze — they needed to expand their Maine-ly New Hampshire retail shop in downtown Portsmouth but the economic downturn last fall made credit to fund the expansion almost impossible to find.

“We had a chance to move across the street and triple the space we had from the 700-square-foot location we had,” Ken Smith said. “We needed an inflow of cash to expand our stock and bring on more vendors. If we didn’t, then one of us would have had to get an outside job to keep it going.”

Having exhausted traditional avenues of commercial credit, the Smiths turned to an alternative that is proving more popular with small businesses in a pinch. They applied and were approved for a $125,000 Small Business Administration loan.

After a rigorous and exhausting due diligence process, the loan — which 85 percent is guaranteed by the SBA and issued by a local bank — has helped the Smiths expand their business.

“Our friends thought we were crazy,” Ken Smith said about applying for a loan and expanding their business in the midst of an economic recession.

Crazy or not, the credit crunch has put SBA in the position of being a loan guarantor of last resort. As part of the federal stimulus package, the SBA began eliminating loan fees and raised their guarantee rates for loans such as those for the Smiths to 90 percent.

The result, said Wit Jones, the New Hampshire director of SBA, has been an explosion of applications from small businesses in new Hampshire. Jones said from March 16 to May 1, the number of loans issued jumped more than 68 percent from the same period in 2008 — from 67 to 113 — and the amount of loans increased 66 percent to $13,164,000 during that same time period.

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