Business World

Small companies create more than half of America’s jobs, but the entrepreneurs who drive this part of the economy continue to complain that access to credit two years into the recession remains scarce.

Small business owners say banks remain extremely wary of risk and a world away from the carefree lending that inflated an epic boom in housing values that went bust and pushed America into its worst economic downturn in decades.

They say their home equity lines of credit have been cut, business credit lines withdrawn and credit card limits slashed. Still profitable firms complain of a major pullback by banks, which many warn will leave a U.S. economic recovery stillborn.

“It’s like we’ve gone back 15 years in time,” said Carmine Ryan, who founded Ryan Bros Coffee in San Diego with his brothers Tom and Harry in the early 1990s, using credit cards.

“We have a proven track record, we pay our bills early and we’re profitable,” he said. “But banks are so gun-shy now that no one would touch us. They’re just sitting on the money.”

The Ryans developed a wholesale coffee business and opened a second coffee shop earlier this year. After they opened it, they sought a loan of $120,000 to finance operations. Nonprofit lender CDC Small Business Finance was able to arrange a $90,000 loan. The rest they had to come up with themselves.

“This is not the way it should be right now,” Harry Ryan said banks issue payday loans. “Banks should be lending to people like us.”

A few miles away, Yi Ping Lai runs an online business, Heart to Heart Gifts, which sells toys and decorations ranging in price from $6 to $100 for girls up to six years of age.

Last year, her sales passed $1 million. With the downturn, her revenue will end up about 50 percent lower this year. But she will still turn a profit, she says.

In August, she got a letter from her bank canceling her $55,000 business line of credit. She said the bank cited routine credit checks that had reduced her credit score.

“All of those credit checks were for legitimate personal reasons,” Yi said. “For instance, I move apartment and my landlord ran a credit check on me. I tried to explain that to the bank. But they said I was now a risky option for them.”

The bank later restored $20,000 in credit. But Yi said she is being hampered in developing a new product line.

“I need that cash flow for my business,” she said.

Susan Lamping, a senior community loan officer at the nonprofit CDC in San Diego, helped Yi obtain $35,000 in credit.

“Financing is extremely hard to come by and many businesses can’t get help through the banks,” she said. 

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