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Anyone counting on a meaningful economic recovery will be greatly
disappointed. How do I know? I follow credit, and credit is
contracting. Access to credit is being denied at an accelerating pace.
Large, well-capitalized companies have no problem finding credit. Small
businesses, on the other hand, have never had a harder time getting a
loan.
Since the onset of the credit crisis over two years ago, available
credit to small businesses and consumers has contracted by trillions of
dollars, and that phenomenon is reflected in dismal consumer spending
trends. Equally worrisome are the trends in small-business credit,
which has contracted at one of the fastest paces of any lending
category. Small business loans are hard to find, and credit-card lines
(a critical funding source to small businesses) have been cut by 25%
since last year.
Unfortunately for small businesses, credit-line cuts are only about
half way through. Home equity loans, also historically a key funding
source for start-up small businesses, are not a source of liquidity
anymore because more than 32% of U.S. homes are worth less than their
mortgages.
Why do small businesses matter so much? In the U.S., small
businesses employ 50% of the country's workforce and contribute 38% of
GDP. Without access to credit, small businesses can't grow, can't hire,
and too often end up going out of business. What's more, small
businesses are often the primary source of this country's innovation.
Apple, Dell, McDonald's, Starbucks were all started as small
businesses.
Read the rest:
http://online.wsj.com/article/SB10001424052748704471504574445470989162030.html?mod=googlenews_wsj
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