Mom and Pop Businesses: Are Lenders Labeling You Too Small to Succeed?

Exacerbated by the recent “Great Recession,” small business owners everywhere are not only facing high employee health care costs and lagging consumer and commercial spending, but also fewer credit options. While loans have always been the lifeblood of the small business, all across our great nation, mom and pop endeavors with even the most solid credit histories face tremendous obstacles in qualifying for much-needed capital.

In a recent McClatchy article entitled “Too small to succeed? Firms still can't get loans they need,” small businees owners—from California to the Carolinas—share their personal struggles behind the credit crunch.

“Jim Collins, co-owner with his wife Arlene of Quantum Energy Solutions, has been in business in Sacramento, California, since 1974. He has a $50,000 line of credit, backed by the U.S. Small Business Administration, through US Bank, owned by US Bancorp. He has a solid credit history and $30,000 in untapped credit. Yet when Collins approached the bank about borrowing at least $500,000 to expand his 12-employee firm — which retrofits buildings with energy efficient technologies — he was rebuffed, told that his company lacks resources and collateral. US Bancorp declined comment. Collins, 70, can't get the money he needs to hire five additional workers and ramp up marketing, even as the Obama administration promotes the "green jobs" of the future. ‘The credit crunch is still there. It really impedes our ability to grow," he said. "I'd put five more people to work tomorrow.’”

Because small business accounts for some 65% of employment in a nation already facing off-the-charts job losses, any squeeze on small firms is a serious matter—with last year’s disconcerting lending figures illustrating just how serious—for the long haul.

According to the Federal Deposit Insurance Corp, the United States economy made 7.4 percent fewer loans in 2009, the largest lending drop since 1942 and marking an estimated $1.5 trillion lending deficit. As McClatchy reports, “corporations are issuing bonds again, and large companies have access to bank loans, but it's still an uphill climb for the little guy. ‘There's a big gap in access to credit for small firms now, and it's a huge problem,’ Karen Mills, the head of the Small Business Administration, told McClatchy. ‘We have a sense that the banks are not back to lending the way that they need to be, going forward.’”

Another victim of the credit crunch—this time on the East Coast—is North Carolina's Bob Kingery, co-founder of Southern Energy Management in Morrisville, NC. While Kingery’s firm normally makes a good living installing solar photovoltaic panels for businesses throughout the Southeast, “in the past two years, about 15 projects have been scratched or delayed indefinitely as customers scramble for financing options. The tight credit market has tied up about $30 million in business, Kingery calculates.”

Based on last year's anemic lending figures and the continuing trend of evaporating loans for small business, many mom and pop endeavors are seeking shelter through the benefits of bankruptcy.

The truth remains, if you are no longer able to sustain or expand your business in your current financial situation, filing for bankruptcy may be your best bet. And, in this case, the best move a beleaguered small business owner can make is to consult an experienced bankruptcy attorney who specializes in small business cases. Skilled bankruptcy attorneys like those at The Law Offices of John T. Orcutt can get to work early, navigate any uncertain waters of bankruptcy court and work in your best interests during the duration of your small business bankruptcy. The attorneys at The Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-833-627-0115, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.