Too small to succeed? Firms still can't get loans they need | McClatchy

Too small to succeed? Firms still can't get loans they need | McClatchy

Capital is the oxygen that a small business needs to survive and thrive, yet across the country, the air's pretty thin, as business owners from coast to coast complain of huge hurdles to getting badly needed loans.

Jim Collins, co-owner with his wife Arlene of Quantum Energy Solutions, has been in business in Sacramento, Calif., 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.

..."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."

Small businesses account for 65 percent of U.S. employment, so it's a serious matter that the credit is crunch squeezing these firms.

"If we're going to come out of this recession and get people back working, it's going to because we give small businesses the support that they need," said Mills, whose agency has guaranteed more than $22 billion in loans to small firms since early last year.

Blame for the crunch doesn't fall on banks alone. Large banks had $4.4 trillion in unused credit lines outstanding in 2009, as consumers and businesses shunned borrowing to pay down debt. A 32 percent increase in U.S. bankruptcy filings last year suggests that plenty of borrowers simply aren't creditworthy. FDIC data show through December that lenders in three major banking cities — Chicago, Kansas City and San Francisco — had more than 5 percent of outstanding loans late 90 days or longer.

"Lenders aren't saying we don't want to lend. Lenders are saying we'd like to lend, but loan requests are down, and also the bank regulatory agencies are scrutinizing loans at a much higher level than they have been in the past," said James Ballentine, the senior vice president of government relations for the American Bankers Association. "That, too, is understandable, because you want to make sure that all guidelines are being followed and the collateral is there, and that's a problem for many businesses as well."

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