I'm sitting here at the OSU-Newark e-lounge, trying to recollect everything I just told a reporter from the local newspaper. He was picking my brain on how I thought the state of the economy was affecting bank lending to small businesses.
I was just having this conversation with our local Economic Development Director earlier in the day. He had a little different spin, since they called him as well....and his thoughts pertained to what he's seeing in manufacturing and big-box warehouses. My answer (below) relates to what I'm witnessing as a small biz owner and my observations of being in the trenches with my clients on a daily basis:
The health of a large portion of our local economy depends on the vitality of the small business sector. Small business survival is dependent on continued access to credit on competitive terms. Since the fall quarter of last year, I’ve noticed declining credit conditions have caused small business lenders to tighten-up their portfolios.
Credit is still available, but at a higher cost, which affects the bottom-line cash flow position for small business owners. In the midst of this economic environment, many are finding it more difficult to get increased lines-of-credit and/ or new loans to keep up with the new higher cost of doing business.
On the contrary, many small business lenders are decreasing their credit offerings and increasing the amount of cash equity necessary to put down to get a loan. They’re also putting more emphasis on what types of business they’ll lend money to, as well as raising-the-bar on credit score limits.
Looking ahead, if small business assets and their real estate values continue to decline, it will make it even more difficult for them to borrow in the future. Small business loans will continue to be made, but just not as easily as we have seen the past couple of years.
People ask me everyday......"Hey Rando, how's it going? I'm honest and say,..."I'm surviving!" That's my goal for the next 2 years on a few of my projects....."survival". Of course, these are the projects I created when things were on the up-swing about 2 1/2 years ago and when I get through this challenging period,....I'll be just fine. Everything will work itself out, as I mentioned above,.....just not as easily as we've enjoyed the past few years.