Now that the TARP funds are disbursed and there are some indicators that the economy might be improving, is credit flowing again? That question was posed to a pair of demonstrably effective business people in Ulster County and the answer appears to be that those who don”™t need credit can have it and those who need it are still finding it hard to get.
Karen Clark-Aidan proprietor of the Bop to Tottom gift shop in Kingston was recognized as the Small Business Person of the Year in Ulster County for 2008, and said that while she has not required any credit, she is aware of colleagues who have been denied credit within recent weeks.
“Not to toot my own horn,” said Clark-Aidan, but she said her business model has been successful enough that she does not need lines of credit. Which, she said, is a good thing based on what she is hearing from other business people in Kingston.
“Credit has not really loosened up, people are having a tough time,” said Clark-Aidan. “People”™s lines of credit have been reduced and people have been denied lines of credit.”
She cited a case of a business owner who two weeks ago needed a truck for the business.
“He has stellar credit and was denied financing,” said Clark-Aidan. “So that creates a jam, he”™s got business to conduct and needs another vehicle. That presents a problem.”
Frank Falatyn, President and CEO of Fala Technologies, won the New York State Small Business Person of the year in 2005. The company designs and manufactures custom electronics and semiconductor equipment. Falatyn is on the board of directors of the Solar Energy Consortium and is affiliated with the Council of Industry.
“Fala Technologies has had a good line of credit with some local banks for many, many years and we hardly ever touch it, but we are using it now,” said Falatyn. “I tell people even a high-tech company like Fala has had to go into our line of credit because of the economic time now.”
He said he is fortunate to have access to such credit, saying his connections in industry and banking lead him to conclude the credit markets are still extremely tight. “Lines of credit are still definitely being cut to many small businesses in the area,” Falatyn said.
Falatyn said he has heard of cases of credit lines of a half-million dollars being cut in half or entirely eliminated. He said while some businesses can thrive without resorting to credit, many manufacturers need lines of credit as a source of cash flow, because they are often not paid for products that are produced and shipped until up to three months after those goods leave the loading dock. And Falatyn said even those three-month pay lags are slipping sometimes. “It”™s taking longer to collect receivables and that is frightening to the banks,” he said. Â
Connections in banking whom he would not name have told Falatyn that while regulators are trying to loosen the purse strings tied around bank vaults, auditors within the banks are being more stringent in terms of approving loans and lines of credit. “They are making it very difficult,” said Falatyn. “They”™re working at odds with what the government is trying to do, which is to get credit eased. They are working at cross purposes now.” The banks, he said, “are really erring on the side of being cautious.”  Â
Clark-Aidan said that, oddly enough, because she does not need credit she is being inundated with offers of credit.
“It is incessant,” said Clark-Aidan. “I get contacts from local banks, from corporate banks, from credit card companies, the sales calls are off the charts. I”™ve had to resort to getting downright nasty on the phone because they are relentless. My business has excellent credit, so therefore I among those people the banks are seeking out.”
