Small Businesses Feel Credit Crunch Trickle Down

High rates, worry about economy keep many from expanding
By Jim O'Neill,  Newser User
Posted Oct 2, 2008 8:42 AM CDT
Byron Rodas works on the roof line of a modular home at the Westchester Modular Homes factory in Wingdale, N.Y. Thursday, Aug. 7, 2008.    (AP Photo/Craig Ruttle)
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(Newser) – Small businesses, which employ 40% of the workforce and account for half the nation’s output, are starting to be squeezed by the credit crisis, reports the New York Times. Many find themselves denied credit, offered loans at exorbitant rates, or too worried about the economy to borrow. “Small businesses are sitting on their hands,” a small-business economist tells the Times.

“Either they can’t get the capital or they don’t want the capital. They read what is happening, and frankly they are scared.” Small businesses are more vulnerable than their larger counterparts because they have less access to credit markets and don't have credit lines they can draw down as needed. Companies with even a hint of debt issues, if they can find funding at all, are looking at higher rates—up to 30%.