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Small US Businesses Feel Pinch Of Tightened Credit

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  • Small US Businesses Feel Pinch Of Tightened Credit

    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.
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