Today, the Wall Street Journal’s Neil Hickey published a story about how the commercial credit crisis is impacting small business growth here in the United States. And, to illustrate the real world consequences, he spoke with local Washtenaw County business owners, like Tom Harrison, the CEO of the Michigan Ladder Company. Harrison, when asked how the credit crunch was affecting his business, indicated that he’d like to grow his company, which started here in Ypsi in 1901, and add another 20 or more jobs, but can’t because financing isn’t available. The video of Harrison, which you can see below, starts with the following narration.
“In Washtenaw County, Michigan, businesses are caught in an economic bind that’s playing out across the country. Businesses can’t expand… because banks can’t approve as many loans… in part because they’re taking heavy losses on existing loans. It’s a vicious cycle.”
I could have done without the depressing, slow motion, black and white footage of Michigan Avenue, but it was incredibly cool to see the Wall Street Journal covering something relevant to SE Michigan. And, who knows, maybe it’ll bring an investor forward to help Michigan Ladder finance their growth, and put another few dozen people to work.
Here’s a clip from the accompanying article:
Thomas Harrison, chief executive of Michigan Ladder Co., has a plan that would contribute to the U.S. economic recovery: Expand the 108-year-old company, adding at least 20 jobs in the process. His chances of getting the loan of $300,000 or more he needs to do so, though, depend in part on what happens to folks like home builder James Haeussler.
Both are customers of the same community bank, the Bank of Ann Arbor. Mr. Haeussler is struggling to repay $8.3 million he and a partner borrowed to build a residential community in nearby Saline, Mich. In this economic environment, the bank doesn’t want to take a chance on what it sees as a risky new loan to Mr. Harrison.
“In a world where Jim Haeussler makes it, Tom Harrison will make it,” says Timothy Marshall, the bank’s president. “But it’s not prudent to do both loans at this point in time. We’re in a more risk-averse mode”…
For a recovery to take hold, hundreds of thousands of small businesses must find the confidence to expand and create jobs. But when they get to that point, the local banks they depend on—worried about borrowers’ financial strength, scrutinized by regulators and slammed by souring real-estate loans—might not be willing or able to provide the credit they need.
While big companies have been able to borrow in bond markets, smaller companies rely mainly on bank credit, which has been shrinking. In 2009, total lending by U.S. banks fell 7.4%, the steepest drop since 1942. In all, the credit pulled out of the economy by banks since the downfall of Lehman Brothers in September 2008 amounts to about $700 billion, more than double the amount so far distributed under President Barack Obama’s $787 billion stimulus program…
[Thanks to Dan for letting me know about this.]