Monday, September 22, 2008

Small business (and personal) loans now wishful thinking.

A bit busy today, but here are two articles I thought were informative.

Smart Answers September 19, 2008, 10:46AM EST
Small Business Owners Deal with the Financial Crisis
Experts offer guidance for business owners on banks, credit unions, business loans, labor, pricing, insurance, and equity investments
by Karen E. Klein

...What if you're applying for a small business loan? Even before the financial crisis deepened this week, loans for small business startup and expansion were already drying up. Because of the fears of the banking community about home mortgage defaults, new loans are likely to be even more problematic. "Many small businesses are not eligible for loans because of their credit standings," says Paul Rauseo, managing director of George S. May international in Chicago. "About 20% of our clients are having their notes called. Out of the blue, they're receiving a letter either reducing their credit lines or calling in their notes." If you are an established customer with an excellent repayment record, you shouldn't have a problem with your loan. "Money will always be available to the very best small business credit customers, so if you're in the top 10% you'll still be able to borrow."

The rest of us need not apply.

How Worried Should You Be?
Insulating yourself from Wall Street's meltdown
By Linda Stern | Newsweek Web Exclusive
Sep 15, 2008 | Updated: 6:36 p.m. ET Sep 15, 2008

... The economy will continue to shake and quiver. Recession, recession, recession, says everyone except the official statisticians. Standard & Poor's is expecting economic weakness to continue through March, consumers are still debt-burdened and unable to shop the country into prosperity, and now banks and brokers are in the same tight spot...

And that "March" prediction presumes nothing else drags the market down in the meantime, and I wouldn't hold my breath on that if I were you. 2009 is not the year this mess is going away, not by a long shot.

...Oh, and you can forget about the raise you were hoping for. The best move for consumers during a recession is to line up protection:

Solidify your importance at work; sharpen the resume just in case and salt away cash for the rainy day, even if it's already raining. It makes sense to pay down debts like credit card bills...

Yes, by all means get out of debt if you can do so, even if it means using saved funds to do so. Savings you can replenish - interest payments may end up haunting you for years to come. And finally, your income will be stagnant, and living within your means is now more important than ever. That will probably means some personal downward mobility - so face reality now. Cut your expenses and use the money to get out of debt - or buy groceries, whichever is more needful.

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