Whether San Diego small business can survive the current credit crunch may depend more on each business’s determination and grit than on the Obama administration’s attempts to ease credit. Some established businesses with excellent credit may not feel the impact of the current credit crises, but new businesses, start-ups and other businesses struggling in this current recession have to find ways to stay in business. Typically, new and struggling businesses fund themselves through difficult times with loans and credit cards. When credit dries up, businesses are left to fend off failure by cutting costs in whatever creative ways they can dream up, including sometimes laying off employees.
Unfortunately, there doesn’t appear to be any immediate relief in sight. President Obama’s administration is struggling to ease the credit crunch as part of his recovery plan but so far with little practical effect. Recent announcements regarding TALF (the Term Asset-Backed Securities Loan Facility act) reflect a promise to cure some of the TARP deficiencies. TARP (the Troubled Asset Relief Program) was the centerpiece of President Bush’s Emergency Economic Stabilization Act. However, it appears that most lending institutions cannot or are not participating in TALF, at least not so far. This is not to say that President Obama’s overall plan has failed or will fail. At this stage, it is simply too early to tell. There are some promising signs for small business. For instance, the Small Business Administration has temporarily raised its size requirements making more businesses eligible for small business loans (Reuters “U.S. makes more businesses eligible for loans”). The only thing certain for now is that credit to business remains tight.
The solution for small business today – ride out the recession and credit crunch. This is easier said than done of course particularly as struggling businesses typically turn to credit during recessions. Nonetheless, American entrepreneurs are resilient and often exhibit their greatest potential during tough times. First, businesses shouldn’t assume that the credit crunch means there are absolutely no loans. Businesses should exhaust all potential sources before giving up. The San Diego Daily Transcript, a good resource generally for small businesses in San Diego, offers some financing tips. Small business owners can also use their personal credit card lines, and if necessary look to family and friends for short term loans. More importantly, smart business owners will look for creative ways to cut costs and strive to maximize an efficient use of business resources.
One powerful tool available to businesses during a recession is to lessen profit margins by discounting goods and services and then aggressively marketing these “good deals” to the ever increasingly cost conscious consumer. Letting customers know that your business is sensitive to the hard times of others often sets businesses apart during recessions. With grit and determination, creative business owners can ride out the current credit crunch while simultaneously building brand loyalty. Whatever the methods of survival, keeping San Diego small businesses alive during these tough times is good for all San Diegans.