Small firms still struggling to acquire affordable loans

By Eric Ruth, The News Journal

Months after the "credit crunch" clamped down on the national economic machine, many small businesses in Delaware and around the country still are scrambling to get loans crucial for day-to-day operations, needed expansions and, in many cases, sheer survival.

As a result, the recovery's most critical unmet element -- job creation -- is at risk, experts believe. As banks cancel credit lines, toughen lending standards and demand early loan repayments, business owners are turning more frequently to credit cards and other forms of risky financing, making it ultimately even harder to qualify for affordable loans.

The consequences could be far-reaching, advocates contend, because 99 percent of all firms are small businesses, and they employ half of all private-sector workers. Small businesses also are credited with creating the bulk of new jobs over the past decade.

"The business of America is small business," says Ralph Citino, senior vice president for small-business banking at Wilmington-based WSFS Bank. "Without small business, this economy will not survive."

The forces behind the persistent credit crisis will only partly ease when a full recovery gets under way, because federal regulators are committed to keeping close focus on the practices of banks, which have adopted more prudent approaches that seem likely to linger.

Stricter lending standards could help prevent a repeat of the 2008 global meltdown, but also could prevent entrepreneurs from fulfilling their dreams. More businesses may go under, observers worry.

"They're on a very fine line of whether they're going to make it or not make it," says Jim Wolfe, president and CEO of the Delaware State Chamber of Commerce.

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