I`ve been watching this situation with the housing bubble since back before anyone but a few rogue financial pundits were calling it that. I`ve been wondering more recently how it would shake out for small business since credit is so absolutely essential for so many things. The other day I found this article which has some pretty discouraging statistics.

I`m curious to know what others are thinking about it. Depending who you ask things are looking really dire, but is that really what people are experiencing? I don`t anticipate being affected by this personally much at all, except possibly indirectly, because I`ve been avoiding credit like the plague for about a decade now. What are your thoughts about it?

Thanks Marshall, I thought it was a good topic too... apparently no one else does though! Is no one here keeping an eye on these events?

The lenders you work with, did they lend money out to people to buy houses or something? Or are they losing money on unrelated real estate investments and have to make absolutely certain their other investments perform? I`m trying to understand why they would be tightening standards on small business lending, when AFAIK there hasn`t been any increase in defaulted small business loans.... except possibly ones that were backed by home equity.

—paula

• The losses on residential real estate loans has caused a lot of lenders to cut back their lending activities.  For a typical bank, each dollar of losses results in a reduction of almost ten dollars of loans unless they can raise another dollar of equity.  With over $200 billion of loans losses announced in the last six months, almost $2 trillion of loans can`t be made unless more equity is raised by the banks.  That`s why Merrill Lynch and Citigroup have had to sell equity.
• As you know, most of the residential real estate loans were packaged and sold by Wall Street to various investors.  When the residential real estate loan secondary market sunk into chaos this past summer, it cast a long, crippling shadow on the secondary markets for commercial real estate loans, leveraged corporate loans, credit card receivables, automobile loan receivables and now the student loan market.   In other words, for many banks there is no place to sell loans.  Without a secondary market in which to sell the loans, many loans are not getting made unless they are high quality loans backed by strong cash flow and collateral.  These high quality loans can be held by a bank on its balance sheet.

Marshall, thanks for your response. That actually clarifies a couple of things.

But what I`m still not tracking on why it is any riskier for private lenders to finance small business. I understand how banks would have a harder time, but private lenders aren`t operating on a fractional reserve system. Or are they? I assume you work with private individuals to arrange small business debt financing... do these investments get packaged and resold? Or am I making a wrong assumption about your work?

Thanks,
—paula

Ah okay, that makes more sense to me then. Thanks much for the clarification.

Hey everyone,

I have been talking with a woman who heads up the Main Street Program for a small, economically challenged municipality here in my area. One of her obstacles is convincing the merchants that having a web presence and utilizing online strategies like email newsletters is very necessary for attracting customers.

I am currently looking at drawing up a low-cost, entry-level online marketing package for my colleague to include in her "advertising cooperative" with other area media. It would be EXTREMELY helpful for me to have feedback from other brick-and-mortar businesses, positive or negative, regarding your experiences with online marketing to share with her — and also, so I can put together a package that delivers the most bang for the buck.

So what do you think? Has online marketing helped your brick-and-mortar business? What`s been the most useful to you, and the least useful? All feedback is most welcome!