A somewhat recent business finance article on the New York Times online discussed what we all know from watching the news — it’s getting harder for business owners to obtain credit / financing needed for growth.

The article’s first paragraph sums it all up:

“Credit flowing to American companies is drying up at a pace not seen in decades, threatening the creation of jobs and the expansion of businesses, while intensifying worries that the economy may be headed for recession.”

You might call this a ripple effect. Much of this began in the housing industry, and it goes back several years in true “time bomb” fashion. You know the story by now:

Lenders gave easy-credit subprime mortgage loans to poorly qualified home buyers … the rates were adjustable … the rates reset and caught the homeowners by surprise … record-breaking foreclosures … mortgage meltdown, etc.

Well, this initial pebble that fell into the financial waters of the mortgage industry has rippled elsewhere in our economy. Lenders of all types are under increased scrutiny from on high, which causes them to revisit (and often retighten) their lending standards.

What does it all mean? It means that it’s a lot tougher for growing businesses to obtain business financing / credit these days.

What will it mean in the future? Well, for the time being, business owners have to grin and bear it. Many business owners in certain industries are also turning to working capital finance solutions, like the services that we provide.

As for the federal government’s potential actions, it seems that the writing is on the wall. Said the New York Times piece:

“Just yesterday, the Fed’s vice chairman, Donald L. Kohn, said that the latest market turbulence appeared to be reducing credit to businesses and consumers, hinting that the central bank, in response, was prepared to cut interest rates further.”

This entry was posted on Wednesday, December 12th, 2007 and is filed under Business Financing.