You're a small business owner. Your revenues are falling. Your profits are nearly gone. Your banker can't do for you now what he did for you a couple years ago. You're staring at a stack of layoff notices which you'd rather burn than give to your five newest employees. But those notices are staring back at you anyway. And now your credit cards, the last source of financial wiggle room, the temporary cash flow solutions you don't like to use but will if necessary...they're closing in on you too.
Almost three-quarters of U.S. companies with fewer than 500
employees are experiencing a deterioration in credit or credit-
card terms at a time when half of them depend on credit cards as
a primary source of financing, according to a December survey of
250 firms by the National Small Business Association, a trade
group with more than 150,000 members. ...
Bank loans are drying up as an estimated 70 percent of U.S.
banks have tightened standards for small-business loans, based
on a Federal Reserve January survey of senior loan officers.
Financial institutions may slash $2.7 trillion in credit-
card lines by the end of 2010, according to a report published
last week by Meredith Whitney, chief executive officer of
Meredith Whitney Advisory Group LLC in New York. Small-business
owners often use business and personal credit cards, with 41
percent relying on a combination of both, based on data compiled
by the NSBA.
In some areas, interest rates are exceptionally low right now, most notably in the prime mortgage market. In others, such as credit cards, interest rates are climbing, lending standards are tightening, and existing lines are being reduced. These cold, hard facts of financial life make even the sort of sensible/necessary risk-taking Daniel Gross called for a few days ago that much harder to muster.
We've written on "the financialization* of everything" in this space. Today the WSJ's Justin Lahart riffs on what de-financialization* might look like. (*Forgive the funky terms...they're unorthodox, but they just feel right in this context.)