Room to Grow: Economic Trouble for Small Businesses (page 2 of 3)

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Photographed by Adam Taylor

Deborah Moore is mentoring her daughter, Mackenzie Milcarek, in small-business innovation as she tries to grow her medical-transcription company.

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Photographed by Tim Tadder

Lana Antonova's Web-design firm has done well. But she needs $25,000 to grow. So far, she hasn't found it.

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Photographed by Kevin J. Miyazki

Scott McIntosh has a licensing deal for his cordless band saw and an eager customer base. All he needs is a loan.

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Photographed by Tim Tadder

Lana Antonova's Web-design firm has done well. But she needs $25,000 to grow. So far, she hasn't found it.

Many banks are now so worried about their own survival that they're in lockdown mode. They have massive losses on their books from bad mortgages and investments that continue to lose value every week. That's why despite hundreds of billions of dollars in federal bailout money and widespread public outrage over their reluctance to lend it, the banks continue to hoard as much cash as they can. The tightfisted business strategy may help them stay afloat, but it also ensures that the recession will drag on. "It's always been hard for small businesses to get credit," says Marilyn Landis, a small-business financial consultant in Pittsburgh who also spent 30 years as a banker. "Right now, it's impossible."

It's a frustrating situation for entrepreneurs, like Lana Antonova, who are putting expansion plans on hold and watching opportunities pass them by. Antonova founded a Los Angeles-based Web-design firm called Web Vixxen in 2003 and has local clients like restaurants and interior designers, plus big companies like Electronic Arts and Ford Motor. So far, her revenue is comparatively small, with just $150,000 in annual sales, but not bad for someone who has relied largely on word of mouth to drum up customers.

Last year, Antonova was ready to take her business to the next level with a marketing campaign. But she needed $25,000 to do it. She tried four banks. A few places recommended taking a personal loan, but each application she filed put a tiny dent in her credit, and those dents added up. "It gets tagged onto your personal file, even though it's a business loan," she says. "It's a catch-22." One place finally approved her for just $3,500, but the 14 percent interest rate was too high. "I keep looking, but I think I'm going to hold off for now," she says.

Casey Hakenkamp of Lincoln, Nebraska, owns a trucking company with seven trailers and ten employees. He hauls refrigerated goods, mostly beef and pork from meatpacking plants in Nebraska, though he also has trailers that carry oversize freight. In 2008, his company did $1.3 million in sales. Hakenkamp recently got a call from a company coordinating shipments of wind turbines for GE. His experience hauling big cargo makes him a perfect candidate for a lucrative contract. "When you put up a wind blade, it has a 20-year life span, then they have to dismantle it and start over," he says. "It's a constantly evolving technology, and there's going to be a constant need for these trucks. If you can get the loan, you're in."

Unfortunately, Hakenkamp can't get the loan. The specialized trailers capable of hauling those blades cost $150,000 each. He can come up with only $30,000 on his own. GE Commercial Finance, another part of the corporate giant, has balked at lending to him, though he has borrowed from the firm in the past and always made his payments on time. "We bought five refrigerated trailers in late 2007," he says. "That was $272,000, and it took us two days to get approved for it, on a phone call."

Hakenkamp filled out 27 loan applications to buy a less expensive trailer and keep the rest of his business going. The banks rejected every single one. Ultimately, he and his wife bought the trailer under their own name. "We had to," he says. "It was the only way." Their personal credit score has taken a hit. But it's the cost of growing a business in today's climate.

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