Ed Connolly, an Ellicott City liquor store owner, hasn't forgotten the reaction when he asked his banker for a $25,000 line of credit. "I was laughed at."
He's not alone. Business people across Maryland have the sound of "no" ringing in their ears. The "credit crunch" is here, and it's not going away any time soon. Bankers, the life of the economic party during the 1980s, have turned stuffy again.
"There used to be a time when you would walk in and talk to a loan officer and walk out with a loan," Mr. Connolly, co-owner of Jason's Liquors, laments. "Now they just open up the manual. They're just a glorified bank teller, in my view."
The credit crunch is difficult to quantify. It takes many forms, and even the Federal Reserve has only the crudest tools to measure it.
But businesses recognize it in the extra paperwork that accompanies even the most straightforward loan, and in the increasing demands for appraisals, audits and collateral.
Small businesses are "spending more time looking for banks than looking for business. Normal operating credit is just not available," says Howard Groebel, a Rockville lawyer who specializes in business finance.
To some extent, tighter lending standards are a long-overdue return to financial sobriety after the savings and loan and banking debacles of the past several years. But even the guardians of the banking system wonder whether the pendulum has swung too far.
"At first we thought it was a reasonable response," says Joseph R. Clyne, a spokesman for the Federal Reserve. But sometime during the first half of 1990, the Fed "came to the conclusion there was a little more tightening than needed."
Not much has changed since then, he says. Total commercial loans were down 4.9 percent from June to July and 4.3 percent from July to August.
Still, it's hard to say how much of that decline can be attributed to tighter lending standards. The credit crunch is so intertwined with the recession that even banking experts can't tell where one leaves off and the other starts.
Whether the credit crunch is the cause or the effect of recession, Maryland businesses are feeling the pain. From manufacturing to retailing and from high technology to real estate, you can hear the howls:
* "We always had a very good credit rating," says Carl G. Hecht, president of U.S. Tag & Label Corp., a Baltimore manufacturer, "but the banks are very, very sticky. They won't even talk to you, even if you sign your personal name. . . . We deal with some of the strongest banks, and they are all that mean."
* Chip Smyth, who owns a jewelry store in Ellicott City, says getting credit these days involves "more paperwork, more signatures, more to-do about everything."
* Al Grimes of American Personal Communications, a Baltimore-based cellular communications consultancy, says, "We're finding that unless a deal is almost a no-brainer, banks are not yet in thelending business. . . . They all made some bad moves, and now they're holding tight even when they have a good deal in front of them. They're all afraid. It's really ugly out there."
Not every business echoes these sentiments. For instance, at Prosser Co., which designs and builds chemical process plants, chief financial officer Jim Prosser says flatly: "We do not know of any credit crunch."
Many auto dealers, whose financing needs are often met by manufacturers' finance subsidiaries, feel only indirect effects. In businesses such as trucking, where the recession has curbed expansion plans, there's been little reason to ask for a loan.
And for larger companies with strong balance sheets, borrowing is less painful than it has been in years. The reason: Interest rates have dropped during the recession.
"We have no problem in terms of borrowing money for our normal business," said Louis Denrich, chief executive of Valu Food, a Baltimore-based regional grocery chain.
However, Mr. Denrich said, the company is feeling the effects of the crunch in an indirect way.
Plans to open new locations have slowed because developers )) can't get loans to build shopping centers, he said.
At March Funeral Homes in Baltimore, Vice President Erich March faces a similar problem.
His bank didn't hesitate to finance a purchase of new limousines and hearses. But it has let Mr. March know it would prefer not lend money to buy land for a new cemetery.
He says, "Real estate is a bit of a no-no right now with a lot of banking firms."
No industry in the Baltimore-Washington region has been more severely affected by the credit crunch than commercial real estate, which already was beset by a space glut and the well-publicized bankruptcies of some major developers.
Bankers are looking at projects of all kinds more skeptically, even when they seem to be perfectly solid deals, said Bill Struever, president of Struever Bros, Eccles and Rouse Inc.
"It's definitely a lot tougher . . .," Mr. Struever said. "It's been getting tighter in terms of equity, loan guarantees and preleasing."