APRIL LCT: The platforms can be a great tool for connecting but can also explode over posts that were not thought out.
NEW YORK — As Wall Street quaked this week, small and midsize businesses prepared to feel the aftershocks in the form of tighter credit and tougher borrowing standards.
The financial crisis is the latest blow to small businesses, which have suffered through a tough year. As consumers pulled back on spending, these companies have faced more-stringent requirements from bankers, higher rates on credit cards and other loans, and the loss of funding sources from real estate, such as home-equity loans.
Now, the environment looks grimmer. Small and midsize companies are likely to see tougher requirements from their bankers in coming months.
"If you're seeking a new line of credit, [the effect] will be instantaneous," says Andrew Zacharakis, professor of entrepreneurship at Babson College in Wellesley, Mass. Interest rates will move higher and the bank-loan approval process will be more rigorous, he predicts.
Some businesses with solid credit histories and long track records will probably be only slightly affected, predicts Scott Shane, an entrepreneurship professor at Case Western Reserve University in Cleveland. But many start-ups with no financial track record and those with less-than-stellar credit histories will have trouble borrowing money to run and expand their operations.
The crisis may also affect companies' plans. Already, some small businesses are delaying big purchases and putting big projects on hold because of the uncertainty in the economy, says Raymond Keating, chief economist with the Small Business and Entrepreneurship Council, a small-business association.
Tom Markel, CEO of iBank.com, an Irvine, Calif., company whose Web site helps match small businesses with lenders, is seeing the effects of the crunch firsthand. In mid-March — before the Bear Stearns Cos. collapse — potential lenders were viewing about 65% to 75% of the postings on iBank.com. That has dropped to a low of about 22%, Markel says.
He predicts that more small businesses will approach credit unions and community banks, which many borrowers may not have considered before. Already, some small businesses are turning to alternative nonbank lenders, pledging assets or accounts receivable as collateral.
In the past three to four weeks, Shelly Karras, president of Fordham Financial Services Inc., a nonbank lender in Northbrook, Ill., has fielded more calls from bankers looking to unload credits that they consider risky — primarily those that belong to debt-laden small businesses.
A year ago, Karras says, he would have considered seven to eight referrals from banks in a month's time to be "outstanding." In the past couple of months, bankers have passed along between 10 and 15 referrals each month — and the companies tend to be more stable businesses than in the past, such as a furniture importer that has been profitable for four straight years.
Chuck Doyle, managing director of Business Capital, which offers restructuring services and lending to small businesses, thinks many more entrepreneurs will be facing that harsh reality.
"Lots of people believe they're bankable. They've always been able to get financing," says Mr. Doyle, who is based in San Francisco. "But when those credit lines come up for review, they're going to find they're not wanted and they've got to find another source."
Sterling Energy Resources Inc., a small oil-and-gas producer based in Overland Park, Kan., lost about $2 million in uninsured deposits when its local bank -- Columbian Bank & Trust Co. -- went under in late August. Under Federal Deposit Insurance Corp. rules, the company can offset those losses against a $6 million loan that Sterling had at Columbian.
But in order to realize that offset, Sterling has to find another bank willing to take on the loan-which in this environment is very difficult. "I'm having to go out in the worst credit crisis in the world to find a bank to take that $6 million loan," says CEO Reid Scofield.
Meanwhile, the company had to lay off four of its 15 employees, and is trying to manage on the $100,000 that the FDIC insured.
Source: The Wall Street Journal
Instead of seeing AI as a replacement for human endeavors, try to see it as an enhancement of them.
APRIL LCT: CTA Worldwide Chauffeured Transportation succeeds by meeting the growing demand for group transportation.
The passenger pounded on windows after the driver pulled off the highway, locked the doors, and said they were going to a hotel.
The Bill Faeth-hosted event answered some burning questions for operators.
eNews Exclusive: Kevin Polite has joined forces with veteran operator Robert Alexander to provide Washington, D.C. area clients with #RMAperfect rides.
May Issue Preview: Get ready to learn about an exploding, untapped source of clients.
The NLA responds to the first judicial decision on the classification of drivers under federal law.
APRIL LCT: These vendors have got your back for operating securely and legally.
APRIL LCT Cover: The nation’s largest maker of wedding and historic streetcar-style buses has seen a surge in demand since 2015.
The comedian's chauffuer-driven SUV was side-swiped by another car in Los Angeles.
APRIL LCT: Chicago operator George Jacobs shared his deep motorcoach knowledge at LCT’s “Bus Marketing 101” webinar.
Uber has been dogged by reports of drivers accosting passengers, including lawsuits alleging sexual assaults.
APRIL LCT: Tammy Carlisle and Clarence Carr fell for each other and for providing creative luxury transportation service in Atlanta.
eNews Exclusive: The new president of the Colorado Limousine Association urges members to move beyond old ways.
The world's No. 1 online marketplace and trader for professional chauffeured and chartered vehicles, including all types of motorcoaches, buses, vans, stretch limousines, sedans, SUVs, exotics, and classics. New and used vehicles are available from sellers across the nation.
The best online networker to find quality affiliates worldwide and market your company.
Click on any state to see the latest industry news and events in that region.