Thursday, December 4, 2008

Queens Small Biz Hurt By Credit Crunch by Joseph Orovic - Queens Tribune

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Retail stores in our borough are filled with “Sale” signs and car lots have seen more tumbleweeds than buyers. But for the last four months, the credit crisis’ impact has been intangible.

Finally, a numerical measure has been taken and the results are as distressing as you would expect. Congressman Anthony Weiner (D-Kew Gardens) and Congresswoman Nydia Velazquez (D-Brooklyn) released data collected from the United States Small Business Association (SBA). The City’s small businesses suffered a nearly 40 percent drop in guaranteed loans in comparison to last year. Queens took the biggest hit of all five boroughs with a 45 percent decrease. It represents a $48 million drop in funding for entrepreneurs in the borough.

“Access to loans is essential, and in many cases, literally makes the difference between a business that floats and a business that sinks,” Weiner said at a press conference. “These funds need to flow so we can restore confidence in the economy and create jobs.”

In an effort to ease the flow of money, the Federal Reserve and Treasury Department announced a $200 billion dollar program targeting consumer asset backed securities – essentially bundles of debt such as student, car and small business loans guaranteed by SBA. The Fed will lend holders of these securities up to $200 billion and take the debt off companies’ books. It is the Fed and Treasury Department’s first effort in the Federal bailout saga to ease small business woes.

“More needs to be done, but this a move in the right direction,” Velazquez said in a statement reacting to the plan.

But organizations like the Queens Chamber of Commerce remain uncertain about the plans’ prospects. According to the latest Federal Reserve Senior Loan Officer survey, over 75 percent of lenders have raised small business loan standards and over 90 percent have increased the cost.

“If this unloading of securities can free up the credit market, then it’ll certainly help small businesses get funding,” Vice President of the Chamber Jack Friedman said.

Until then, the Chamber and Queens Economic Development Corporation (QEDC) are helping businesses find money from a myriad of sources.

Among them, both organizations are helping entrepreneurs prepare when applying for a loan. Making their business plan and model as attractive as possible may be what makes or breaks a loan deal for many.

“Loan officers are human beings and they go by their gut as much as anything else,” Friedman said.

Both organizations also encourage the use of microlending to give entrepreneurs a booster shot in these difficult times. The loans of up to $50,000 can be a short-term fix until the economic waters grow calmer.

Finally, the QEDC has launched its third annual Start-Up Business Plan Competition. The top-nine winners will share a pie of $29,000. First place gets $15,000, and on down.

“It may not seem like a lot of money, but for a small business getting started it can be a big chunk,” the QEDC’s Entrepreneurial Assistance Program Director Franklin Mora said.

Neither Mora nor Friedman sounded optimistic about the near-future for small businesses in Queens.

No, “Going Out of Business” sales haven’t become omnipresent. But uncertainty is still king.

“We’ll really see the effect of all this in the coming quarter,” Friedman said. “Businesses will fight through the holidays. What happens in January and February, we’ll just have to see.”