Credit Tales from Main Street

by Giovanni Coratolo

We asked our Main Street business owners how the current situation in the financial markets is affecting them, and they let us know!  Now let Congress know, and tell them to "get off their butts." (Thanks Garnett!) Here are some of their emails:

Vanessa Baugh - Vanessa Fine Jewelry - Lakewood Ranch, Florida

The credit crunch on small business is not new just getting worse. I have had my line of credit reduced to the point that I have no way of cash influx in my business. Should I mention that my line of credit was through Wachovia. Now my business has been reduced to the point that we are 60% down from last year. The summer months in Florida are always the slowest, however, to be down 70% for the months of July, August and September from the same months last year with no cash influx has made it near impossible to buy inventory to get ready for any sort of Christmas season. People are not spending money because they are scared or have been laid off from their jobs. On top of that, cost of goods have sky rocketed. For the first time in my 10 years in business, I am wondering if we will have to close or file bankruptcy.

We must have some sort of regulation to get credit out there again. We have already reduced staff hours and my husband and I work six days a week in order to try to keep our cost down. To make matters worse, I was recently hospitalized and had surgery so now I have a hospital bill that I have to pay.

In April of this year, I testified before Congress on the credit crunch and how it was affecting small business. Congress obviously knew then that there was a problem with credit and, at least, they were attempting to investigate the depth of it. I thought sure that Congress was "on top of it". However, Monday, I watched like other Americans, as the bailout was voted down. I cannot understand how Democrats and Republicans can let party lines get in the way of helping the very Nation they were sent to Washington to represent. They spent all weekend supposedly working out the details to be ready for the vote on Monday. What happened?  I, for one, feel that Americans deserve to know the truth about the vote yesterday because, after all, "Main Street America" is the one dealing with trying to keep our lives together while they go back and forth as democrats and republicans. Also, make no mistake "Main Street America" has been dealing with this credit crunch for over a year. How many small businesses that you have known are now out of business?

We need help now!

Peter Water - CFO Dealer Tire LLC - Cleveland, Ohio

I am writing to express my concern over the current credit crisis and the impact it is having on our business (Dealer Tire LLC). Over the past eight years my partners and I have built a very successful business helping car dealers implement programs to provide replacement tires for their consumers. During this time we have created over 600 new jobs within our Company and provided a much needed new source of revenue for car dealers. The current credit crisis is threatening our business on two fronts:

The lack of vehicle financing available to consumers has dramatically reduced new car sales. In August U.S. light vehicle sales were down 25% versus prior year. We fully expect September’s numbers to show even a greater decline. Applying the trend for the last three months, light vehicle sales will reach approximately 14 million units in 2008 – for the prior six years sales have exceeded 16 million units each year. Already we are seeing declines in service department traffic at car dealers due to the reduction in new car sales. This has a direct impact on our business as our tire programs work in conjunction with the car dealers’ service departments.

We also will need to complete a recapitalization of Dealer Tire LLC within the next few months. Initially it was our intent to finance this transaction with a combination of senior debt and private equity. Just a few months ago we could have completed this at a very fair cost of financing and with a resulting capital structure that had ample capacity for continued growth. Several commercial banks and private equity groups are anxious to team with Dealer Tire as they believe we have a sound business model with continued good growth prospects. The current turmoil in the credit markets has caused both commercial banks and private equity groups to significantly tighten availability and increase the cost of capital. We believe we will be able to complete the transaction but the resulting capital structure will be at a much higher cost and clearly be a constraint to our continued growth – i.e. growth in taxable income and the creation of additional jobs.

Creative Associates International, Inc. - Stephen Horblitt - Director External Relations - Washington, DC

Like other medium and small businesses Creative Associates International, Inc. depends upon and benefits form a secure and stable line of credit. We also understand that our success and ability to provide employment, income generation, and tax revenues is connected to credit markets and the economic and social health of our city, our region, the nation, and the global economy. A failure to address the crisis in the credit markets by the U.S. Congress will represent a failure of responsible governance and threaten the economic and social well being of Main Street, our city, our region, the United States of America, and the global economy. Legislation that addresses the crisis in our credit markets is a matter of acute urgency for the common good and it needs to be done now!”

Michael Hughes - Chief Financial Officer - Spacenet Inc. - McLean, Virginia

We are spending a great deal of time moving corporate funds around seeking the most safe place to park them. Transferring money from bank CDs into US Treasury securities, $100,000 insurance on an account just doesn’t cut it. Treasury/FDIC needs to guarantee accounts which process payroll, customer payments and vendor payments (concentration accounts) so companies don’t have to move funds around (promoting stability and reducing fear of “runs” on banks).

A. Gregory Bachmann - President - Dymax Corportion - Torrignton, Ct

Already expenditures have been frozen such as capitol equipment and employee bonus. A hiring freeze is also now in place. Our board has set management’s top priority to come up with contingency planning to cut expenses based on economic uncertainty. One foreign distributor has informed us that they are taking their funds out of their US bank.

Don Finkell - Anderson Floors - Clinton, South Carolina

We make hardwood floors and employ about 1200 people. We have no problems running our operations because we are a Berkshire company. However, our customers are wholesale distributors who depend on bank credit to finance their operations. We had a very good customer in California last Christmas (5% of our total business) who had their entire bank line called on 3 days notice because the bank wanted out of all exposure to housing. They went out of business after 62 years despite making a profit consistently. We never recovered the business. I know we have other customers in the same boat. Our business is down 24%. Our customers are projecting further drops in sales for 2009. We will have to trim staff. I was waiting in hopes of the Bailout passing. Now that it has failed I will need to implement that cutback. Housing affects a lot of things. I could not be more disappointed in the Congress and their inability to put national interests over partisan and personal interest.

Garnett Hall - VEMAC - El Paso, Texas

In reply to your question, yes El Paso and its surrounding areas are being affected by the credit crisis. In the last several week projects through the private sector have been pushed back and even canceled unable to obtain loans for the projects. Just last week a Hunt Building Corp. was unable to obtain a loan for a master development plan (residential & commercial) in Northeast El Paso that they had been working with the City of El Paso and the El Paso Water Utilities, which owned the property.

As the House, Senate and White House are aware of the BRACK realignment, Fort Bliss is receiving thousands of troops. Based on this past week’s newspaper article, Fort Bliss is expected to grow 300% by the year 2012. Without new development (housing, retail, schools, recreation, etc.) with in the area, the existing services will be over burdened.

The House, Senate and White House need to get their priorities in order and keep their egos and big heads in check. Do I agree as a taxpayer of the bailout, No. However as an executive, I know without the bailout this country is headed in one direction, down.

So my opinion, the House, Senate and White House need to get off their butts and do what we pay them to do. Stop finger pointing and putting the blame on someone else. Resolve the issues at hand, put strict requirements in place and get the country moving forward.

Rob Alley - E. Roberts Alley & Associates, Inc. - Nashville, Tennessee

We currently have several opportunities to expand a division of our company - stack testing. These opportunities include both opening new offices and strategic acquisitions of competitors. This new office is due to 1) many requests from our clients to be closer to them (Arkansas vs. Alabama) and 2) new environmental regulations going into effect 1/1/09 that will significantly increase the amount of emissions testing required in energy production related sources.

In both cases, we would be aggressively looking to hire additional employees. Unfortunately, we are having to slow down our growth plans and not take advantage of the opportunities being presented us because of the "drying up" of bank capital markets. So while we are growing, and will be hiring, it is at a much reduced rate than we could if the capital/debt markets were still active.

I don’t want to complain - we are able to still grow, but are having to pass opportunities that we could have taken advantage of, if markets were not as tight

Dan Rice - Vice President - Corporate Affairs - PrintingForLess.com - Livingston, Montana

Our company has started a new and very exciting business unit that is showing excellent prospects. In order to pursue the opportunity we need to hire additional employees and will potentially need to carry additional accounts receivables. We went to our bank to arrange a revolving line of credit secured by our receivables. Our receivables are primarily with Fortune 500 companies, universities and large non-profit organizations. We have excellent credit, are profitable and cash positive (even in this economic environment) and carry cash balances with this bank of $1+ million at any one time. We were looking for an open line of less than $500,000 and were turned down.

As a result of this our company is now forced with the decision of whether to scale back our plans so that we can fund with internal cash flow or look for alternative equity financing.

Scott Kinsey - Chief Financial Officer - Kendermusik International, Inc.

Kindermusik International (KI) is a $16M company in Greensboro, NC. Our business is very seasonal. As a result, KI relies on a revolving line of credit for inventory purchases and operational expenses during non-peak sales periods. Without the line, KI would be unable to meet payroll and expense obligations in certain months of the year. KI has been in existence for 30 years and is a profitable, 100% Employee Owned business. If access to the line of credit is limited or not available at all, KI would likely cease to exist. The current situation is a concern like no other I have experienced in my 20 year career. There is plenty of blame to go around and I am not convinced that a bailout is the answer. However, congress must ensure enough is done now to stabilize the credit markets so that Kindermusik, and thousands of other privately held companies like us, can continue to operate for the benefit of our customers and our employees.

Comments

[Gerone Belk]

my business went down and i need help.maybe a new start.i like to restore old houses,and buy houses.

[Gerone Belk]

my business went down and i need help.mey a new start. i like to restore old houses, and buy houses.Gerone Belk Businessman

[John brown]

I own a family sheet metal H.V.A.C.busness and
had bid over 1,000,000 lbs of metal on three large jobs when metal was .32ct a lb, and had been this for years, and before I was able to get the metal it went to over .60 a lb due to the government tax impose on imported steel this is going to put my family out of business
and at this time I took all of my 401k plan out
to make payroll and try to make it, now the IRS has sent me a bill for this money plus interest
witch I can not afford to pay, so after being in business for over 22 years and paying taxes for over 30 employees I am now going to have to file for chapter 7 with having lost all my personal money trying to make this business work and do I get any help from the government NO, because I don't know how.
John Brown
President
B.J.Brown Sheet Metal INC.