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Does Your Business Need Improved Access to Credit?

Posted by: Nick Leiber on March 25, 2009

In his column in today’s New York Times about the Obama Administration’s financial rescue plan, which is being sold, in part, as a way to fix the markets for small-business lending, David Leonhardt asks a rhetorical question: “Do you know many people who want a loan and can’t get one?” His answer: “Probably not… Indeed, if you try to come up with a single prominent victim of the credit squeeze on Main Street—as opposed to victims of the recession—you will have a hard time.”

He goes on to use the rental car industry as an example to illustrate the biggest problem facing most businesses right now: it’s not access to credit; it’s slipping sales. A car rental company simply isn’t going to buy more cars if rentals are down.

Leonhardt also argues that most small businesses are “afraid to be identified publicly as a spurned borrower. Instead, they are quietly cobbling together loans any way they can and hoping the squeeze eases soon.”

The latest National Federation of Independent Business survey (conducted in Feb. with 864 respondents) supports that thesis. In their summary about the state of credit markets, the authors write: “As the economy weakens, loan demand fades as fewer capital projects are planned and inventory investment falls. Thirty-six percent reported regular borrowing, up one point from January—typical of the past 20 years.”

In a poll that accompanies our ongoing coverage of Obama’s plans to spur lending to small businesses, we asked readers if their companies would benefit significantly from improved access to credit in 2009. A little over 40% have indicated that’s not the case, so far.

What about your company? Let us know by completing the poll or posting a comment below.

Reader Comments

Joan E.Licavoli

March 29, 2009 2:14 PM

I Toke out a loan to have someone to teach me ebay selling.They are going to want a payment in 10 days ,I tried to cancel but they only gave me 3 days to change my mind . Every thing I do wants money.I need more money to hold me of for about 6 monthsto start making meney to pay back .Joan


March 31, 2009 3:38 PM

I'm trying to start a new business and have really no hope of getting any credit lines. Having access to credit would enable me to get started a LOT faster and come out stronger, but I am not particularly optimistic. I was unemployed for most of last year, and while I have a steady job and good income now, I have a lot of personal debt, and so no one is willing to touch me with a ten foot stick. Even the fact that my last business made a ton of cash isn't important. All they look at is my credit score, which is now much lower since my credit lines were cut to within a few hundred dollars of the outstanding debt on them. Thanks, Chase! I am still going forward with opening my business, but am trying to save money as much as possible because it's pretty much just being paid for with whatever I can set aside out of my paychecks, and much of the labor is being done for free by my boyfriend, myself, and a friend. I'd love to hire some people to help us but what would I pay them with?

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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