San Fernando Valley businesses hit by credit crunch
By Gregory J. Wilcox and Tony Castro, Staff Writers
Article Last Updated: 10/01/2008 09:44:37 AM PDT
Caught up in the financial crisis roiling Wall Street, San Fernando Valley business owners say they find themselves struggling for credit as well as cash to survive the economic downturn.
SoCal Business Bank had set Tuesday as the target date for raising the $20 million it needs to open its operation on Van Nuys Boulevard. But founders have found it tough to sell the $10 shares in their enterprise and are only one-third of the way to their goal.
"We've faced unexpected head winds," said Charles E. Fenton, a director, president and chief executive officer at the fledgling bank that now hopes to open by the end of the year.
Those same economic pressures have made it difficult for Tony Czarnecki to restock his inventory at All American Sport Shoppe, which has sold athletic gear in Canoga Park for more than 30 years.
"Small businesses in the Valley are among the hardest hit by what's going on with the economy," said Czarnecki, 59, who also had to lay off his part-time staff and cut his health insurance.
"Our business is down 20 percent from a year ago," he said. "Does this threaten our business's future? Of course it does."
The impact of the financial turmoil is evident at the Valley Economic Development Center, a nonprofit business incubator based in Van Nuys.
VEDC President Roberto Barragan said requests for help are booming, especially for so-called micro-loans - those of $35,000 or less. Using money received from government grants, the center has loaned about $1 million to small businesses in the past four months.
"In the last few days we've been making a micro-loan a day, which is four times our usual rate," Barragan said.
That's because businesses that need short-term financing to launch, expand or just operate have been unable to get loans from conventional or commercial banks.
"When banks started cutting their lines of credit, businesses are unable to expand, and even borrowing on your (home) equity becomes more difficult," Barragan said. "It becomes like buying a new home."
Barragan mentioned a client in Chatsworth who recently bought a business financed by a bank that is no longer able to extend him the line of credit he needs to operate.
"He's bought a company but can't afford to run it," Barragan said.
City Councilman Richard Alarc n, who represents the Northeast Valley, said he has heard stories from constituents attempting to deal with both personal and small-business issues created by the financial crisis.
"One business owner told me his employees offered to go on four-day workweeks to avoid layoffs," Alarc n said.
Small grocers and other food-related businesses are among the most vulnerable, said Rodney Canter, a certified public accountant in Chatsworth who said some of his clients are reporting a 20 percent to 30 percent drop in customer traffic.
"The economy has hit them hard because they rely so much on the public," Canter said. "When disposable income goes down, their businesses suffer."
Although banks have tightened applicant requirements for mortgages in the wake of the credit crisis, it hasn't yet been extended to customers seeking auto loans or charging purchases on their credit cards, analysts say.
But that could change if banks remain reluctant to lend to each other, said Greg McBride, a senior financial analyst at Bankrate.com., a Web site that tracks financial markets.
"That needle hasn't moved much in the last week and a half," he said.
"But it sure has moved a lot in the last year and a half," he said.
greg.wilcox@dailynews.com 818-713-3743
Jerre Reimers
Vice President, Government Relations Committee
Chatsworth / Porter Ranch Chamber of Commerce
( 818-586-8681
Pager 328-6721
:
jerre.reimers@pwr.utc.com
