Wall Street might be in turmoil, but plastic-container manufacturer Maryland Thermoform Corp. is having a great year. Forget contraction - the Baltimore company is looking into equipment and software upgrades.
The thing is, those purchases require financing. That's where Wall Street's troubles become Maryland Thermoform's problem.
As major banks and investment houses fail, small businesses are finding financing harder to get - never mind if they're growing and didn't have anything to do with mortgages, credit-default swaps or any of the complex financial vehicles bringing big companies down.
"In the past, I'd only have to talk to one or two people before I could find a home for a loan. Now it's five or six banks," said Jeff Peisach, who as principal of Spectrum Finance in Owings Mills works as a commercial loan broker for small businesses.
"A lot of times, you see a tough economy and it's the borrowers that are struggling, not the banks. This is unusual. Now there's creditworthy businesses but a lot less banks."
Two-thirds of U.S. banks told the Federal Reserve in a survey released in August that they had recently tightened their lending standards for small businesses, the biggest percentage in at least 18 years. All signs suggest it is worse now. And uncertainty about the fate of the $700 billion financial bailout, voted down Monday by the House, is one more reason for institutions to hoard cash.
President Bush called the situation "urgent" in a speech yesterday.
The Association for Financial Professionals, saying yesterday that short-term credit markets "have effectively seized up," released a survey in which 40 percent of 326 finance executives said their companies have less access to such financing than they did a month ago.
The problems have rocked big companies dependent on a steady flow of credit such as Baltimore's Constellation Energy Group, which agreed to sell itself two weeks ago. Now the ripple effect is reaching small firms, too.
Drew Greenblatt, president of Marlin Steel Wire Products in Baltimore, thought it was bad in August when he asked his bank for a $175,000 increase in his line of credit. Sure, he said he was told - if you take out a $175,000 certificate of deposit with us.
"And they said it with a straight face," said Greenblatt, who wanted the financing to buy more steel to fill big orders.
