Small Businesses Speak Out About Economic Woes
Small-business owners and association representatives spoke out about the current economic turmoil at a House Small Business Committee hearing yesterday. They expressed a mixture of frustration with the government’s reaction to the credit crisis’s impact on small businesses and outright fear that many businesses will close if they don’t get some relief – soon.
“Our members are angry that the federal government is giving taxpayer money to big companies that have been horribly irresponsible while small businesses are not getting the money they need to keep their doors open,” said Margot Dorfman, chief executive of the U.S. Women’s Chamber of Commerce in prepared testimony. Instead of just bailing out the big companies, the government should instead — with a “big billion dollar punch” — set aside money specifically to assist small businesses having trouble borrowing to keep their operations alive. She said several members of her organization have come forward in the past 90 days saying they’ve had trouble securing loans and the majority of them have downsized employees. Other members, she said, have reported having their credit lines slashed in half by major and denied credit when they needed money to cover payroll or other operational expenses.
She recommended that the Small Business Administration loosen its criteria on its lending programs in ways to aid small businesses right now, pointing to a marked drop-off in SBA-backed loans. But any federal aid to small businesses should just be given to banks and specifically designated to small-business lending.
A couple of small-business leaders relayed heartbreaking stories about the havoc the economic climate has wreaked on their companies. Thomas Franke, executive vice president of Riemeier Lumber Co., a Cincinnati family-owned lumber company founded in 1925, told how his company had reached 150 employees and a record $58 million in sales in 2005 due to the housing boom. But the company began struggling financially in 2006, with the housing market’s collapse. And about 10 months ago, without prior notice, the company’s bank (which remained nameless) claimed the company defaulted on its loan covenant and insisted the bank find another lender. Unable to find other financing, the company eventually had no other choice but to close for good. By this August, the business began notifying clients it was closing and recently started auctioning off all its assets. (You can watch Mr. Franke’s testimony on the YouTube video above.)
Mr. Franke ended his testimony: “There are five employees left, including Ken [his brother and another executive vice president], myself, and three accounting people to do collections until the last day we’ll be at the facility, which is slated for Nov. 6. We will then close our door forever.”
Are you experiencing credit issues with your business? Are you satisfied with the government’s response to the credit crunch?