The jobs offered by small businesses comprise beyond half of the total working population in America. However, with the effects of recession burning up all sorts of funds here and there, small business owners have raised their voice to the scarcity of credit made available to them. Small business entrepreneurs are saying that banks are not giving them access to that much credit to work with. In turn, these entrepreneurs are saying that banks are literally a world away from extending the credit that they once extended to the real-estate companies that went bankrupt and pushed America and the rest of the world into this global recession we are now experiencing.
Apart from that, banks have also cut the home equity credit lines of small business entrepreneurs, as well as withdraw business credit lines and slash credit card limits to an unbelievably minimum figure. Interestingly, banks are doing major pullbacks from small companies and firms that are still very much profitable, which can lead to the American economic recovery being stillborn.
Small business owner, Carmine Ryan, a co-founder of San Diego's Ryan Bros Coffee comments that it seems the economy has gone back about 15 years into the past. Ryan further says that they have always been on-time payers of their debts and they are very much profitable. Yet, when they approach banks to apply for more credit, no bank would dare touch them. The banks seem to be content just sitting on their money. Harry Ryan, another co-founder of the caf¨│, says that this should not be the case today. It is completely understandable for banks to be wary of extending credit. However, they should choose which companies to be wary about, and Ryan Bros Coffee should not be one of those companies, since their track record has been spic and span throughout the years.
Just several miles from Ryan Bros Coffee is the online business Heart to Heart Gifts that is operated by Yi Ping Lai. Selling decorations and toys for young girls, she was able to earn sales beyond $1 million last year. With the economic recession reaching its all-time high, her revenue might drop by 50% this year, but this is still profit for her business. Yet, she received a letter from her bank just this August as notification that her business line of credit amounting to $55,000 will be canceled. Moreover, her bank is saying that her business has become a risky option, neglecting to see its still-profitable nature. Later on, her bank did restore her credit line, but this is just for $20,000, which leads to difficulties in developing her new product line.
If small companies are not given due access to credit, then they would be forced to stop hiring people and start laying off their people. No new jobs are created, the small companies lose more sales, and banks still would not give them credit. It's a vicious cycle affecting not just the Ryan brothers and Yi Ping Lai, but other small business owners all over the globe as well.