An Untold Story Of The Credit Crunch

This post was written by Guy Campanile, a producer for the CBS Evening News.
The impact of the credit crunch on Wall Street, the real estate industry and corporate America is well documented. What's been given less attention is how severely small business has been affected in the past 12 months by the tightening of credit.

Florida small business has been hit especially hard in the wake of the real estate market collapse there. Regional and local banks burned by bad mortgages have become totally adverse to risk. Entrepreneurs eager to start their own business are finding it nearly impossible to secure loans of any size.

If you question the effect on the economy, take this statistic into consideration: small business represents 70 percent of the job growth in the United States. Without small business there are no new jobs. And if people aren't working, they aren't paying their mortgages – or buying homes. Many small businesses need loans to meet payroll or inventory. They too are being denied.

The Florida's Women's Business Center, which is associated with the Small Business Administration, is one of a number of advocacy groups for small business that tries to help entrepreneurs polish their business plans and get in touch with loan officers. Their advisors, who will spend hours working one on one with clients, have been stunned by the total drought in new loans. They say they have never seen anything like it.

Two women seeking the help of the FWBC, Adrianna Martin and Yolanda Goldwire, are typical of the kind of entrepreneurs being turned away by banks. Martin is a fitness trainer who specializes in working with pregnant women and new moms. Goldwire processes billing for area doctors. Both women are earning modest income from their micro businesses, but need about $50,000 in seed money to expand. Both were denied by numerous national and local lenders despite good credit and proven success in their fields. In Martin's case one lender offered terms at more than 20 percent interest! A few years ago she probably would have had very little difficulty in getting the money she needs at a much more reasonable interest rate.

Martin, who came to the United States from Venezuela a decade ago, is living in her father-in-law's house and hosts her clients in a screened in porch using old fitness equipment donated by neighbors. Goldwire tends to her two small children while working out of a home office that features a woefully outdated computer. It was really eye-opening to watch Goldwire holding her one-year-old in one hand while using the other hand to process medical billing for local doctors.

Despite their difficulties, both Martin and Goldwire are determined to keep making the sacrifices they need to pursue their dream. But for now they – and thousands of others – are stuck, until the credit markets get liquid again.

You can watch the full CBS Evening News piece featuring Martin and Goldwire on Wednesday's show at 6:30 p.m. EDT.