Small Business Players Struggle in Recession

Ryan Fochler, a successful small business owner in Arlington, had his line of credit killed by two major credit card firms overnight. "I was sick to my stomach," he said. Fochler has been unable to expand his pet-care business while he looks for a bank loan.

He's not alone.

Small business owners are getting crunched by the lack of available credit while banks are suffering from high loan delinquency rates. Meanwhile, the Small Business Administration is trying to remedy the problem with its own set of tools.

Unfortunately, all parties are in the same leaky economic boat.

Small businesses are "getting hit from both sides," said Sandy K. Baruah, acting administrator of the SBA, because even the companies that have long relationships with financial institutions and are in solid financial condition are no longer getting new loans approved and are having existing lines curtailed.

"The other side of the coin is the raising of credit standards, declining credit scores of individuals and small businesses getting hurt because of the slow economy," he said.

Banks say they're suffering because the delinquency rates on SBA-backed loans are so high and potential borrowers have declining credit scores.

For more on Fochler's story and others, read Tight Credit Squeezing Small Businesses.

By Sharon McLoone |  December 9, 2008; 7:19 AM ET Economy Watch , Funding
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