The credit crunch has reached crisis proportions for small businesses in Colorado. A longtime business consultant told NewsHour producer Terry Rubin and me that this is the worst business climate he’s seen in more than thirty years.
Take Barbara Kantor, as one example. She moved to Boulder two years ago after running a successful fashion design business in Southern California. Looking for a change, she set up a new corporation to manufacture and sell “Pop Bands” — highly reflective plastic bands that can be snapped around pedestrians’ arms and legs so motorists can see them at night. She also markets reflective dog collars and leashes. The products are popular, and demand started to build.
Like most small businesses (and large ones, for that matter), she depends on loans to pay the factory and maintain inventory. But when the recession hit, her sources of capital began to dry up. She cut costs, giving up her office space to work out of her home. Her living room is now her office and mail room, with stacks of boxes lining the walls. Inventory is stored in a public storage complex that’s 45 minutes down the road. She transports it there in her own car. We shot video of her one frigid night, stacking and tracking boxes in the unheated garage-like space, pulling items for shipment. She’d like to have more merchandise on hand, but last week her bank cut her line of credit by 90 percent.
Collin Shattuck is another example. He has four stores that sell motor scooters in the Denver metro area. A year ago, when gas prices were high, he couldn’t keep them in stock. But when gas prices fell, he found himself with a lot of unsold inventory. The showroom floor of his Englewood store is jammed with brightly colored, highly fuel efficient scooters that he can’t sell right now. He approached the bank he’d been doing business with for ten years about getting a Small Business Administration-guaranteed loan, but the banker, who is his personal friend, told him that filling out an application was a waste of time. He has since had to lay off several employees and is wondering if he can survive long enough for the recession to end. Don Childears, the president of the Colorado Banker’s Association, told us local banks aren’t loaning because they’re getting conflicting signals from the government. He says the White House and Congress are pressuring banks to loan more money, but that federal regulatory agencies are telling them not to make these kinds of loans. You can watch an excerpt of that interview here:
When we asked SBA Administrator Karen Mills about that, she told us her agency has “gotten $16 billion dollars into the hands of small business so far,” and says the guaranteed loan programs are a success. We also talked to Ken Coors, a retired Colorado businessman who now counsels small business owners in the area, about the problem:
On Monday, President Obama meets with executives of the country’s 12 largest banks in which the administration is expected to press the industry to increase lending, especially to small businesses. And you can see more on our story about small businesses on Monday night’s PBS NewsHour broadcast. *With video contributions from Terry Rubin.*