SMALL US BUSINESSES FEEL PINCH OF TIGHTENED CREDIT
By Mike O’Sullivan
Voice of America
07 October 2008
Los Angeles
As the U.S. Federal Reserve System announced measures to ease the
credit crisis Tuesday, small business owners around the United
States say the tight credit market is hurting them. Mike O’Sullivan
reports from Los Angeles, the financial crisis is affecting nearly
all businesses, including car dealers, fast-food restaurants, and
retail stores.
Alfred Minas, an Armenian immigrant, runs a Los Angeles shoe repair
shop, and he says business is terrible. "Seems like people are
panicking. People with money, they’re holding back. People with no
money, still they don’t have money. Business is just going down day
by day," he said.
Economist Eduardo Martinez of the Los Angeles County Economic
Development Corporation says some businesses are feeling the squeeze
at both ends, with banks reluctant to lend and few customers willing
to spend any money. "Especially car dealers, people who are dealing in
furniture, they’ve been hit pretty hard by the downturn in consumer
spending, not having that many customers go to their showrooms, but
now, they’re having a hard time getting the funds to be able to order
products to fill their showrooms."
He says the downturn is hurting franchise businesses like McDonald’s,
which have been investing in new equipment to offer high end
coffees. Banks are reluctant to lend to franchise owners for the
upgrade.
Martinez says the uncertainty in European credit markets is also
hurting local business because major British, German, French and
Dutch firms have Los Angeles operations in entertainment, banking,
finance, and manufacturing.
Some business owners hope to ride out the storm. Brothers Peter
and Charlie Woo, immigrants from Hong Kong, founded Megatoys 20
years ago. The company manufactures toys in Asia, imports them to
the United States and exports them to Latin America. Chief executive
Charlie Woo says the company foresaw a downturn and took preventive
action by securing its line of credit.
"And also, we’ve got a very widespread customer base. We sell to large
retailers such as Wal-Mart and K-Mart, and we also sell to the small
mom-and-pops [family-owned stores] as well as export to Central and
South America. In general, everybody’s quite pessimistic, but we’ve
got a pretty big customer base."
He adds that a weak U.S. dollar hurts the import businesses.
Farhad Besharati Iranian immigrant Farhad Besharati offers tours
to Europe through his business called Atlantic Tour and Travel. He
says the credit crisis means empty seats on airlines. "When people
cannot apply for a loan or credit, definitely it affects all
businesses. Because before, they used to get home equity [loan] or
credit card or something and then they could travel and they paid
slowly, but now it’s impossible."
Economist Eduardo Martinez says most businesses need to borrow to
stay in business. And with banks reluctant to lend, even businesses
with low overhead expenses are faced with customers reluctant to part
with their money.