Janet Hildreth is gearing up for Black Friday at her San Francisco flooring company.
Orders have plunged so precipitously that she is laying off half of her 40-person staff at the end of this week -- the first such cuts in the 36-year history of Tree Lovers Floors Inc.
Hildreth had intended to get through the rough patch by using her $250,000 home equity line of credit to help meet payroll. But her bank, Pasadena-based IndyMac, was seized in July by federal regulators. The institution recently froze her credit line, Hildreth says, even though she has excellent credit and more than $400,000 in equity in her home.
Plan B was to tap a $30,000 American Express credit line. But AmEx slashed the maximum she could borrow on the line to $1,000 because she hadn't used it.
"I'm mad at the banks," said Hildreth, 47. "Because of all the deadbeats, they're coming after me. But they're contributing to the problem by denying credit . . . to people who've never been late."
Her former husband, Christopher Hildreth, 57, who founded the business and is still a partner, is cashing in an insurance policy to keep the company afloat.
As lenders tighten their fists and consumers tighten their belts, businesses from small restaurants to industry titans such as AT&T are getting squeezed.
Some are slicing inventory as they struggle to find financing to buy new merchandise. Others, unable to get loans to cover payroll and operating costs, are laying off employees or closing their doors. Even businesses that have healthy revenue and are up to date on their payments are having their loans called in or their interest rates raised.
Some businesses are landing loans against the odds. Tracis Verfaillie applied successfully last month for a $11,000 loan for Chocolatt, the confectionary he owns in West Los Angeles. His good credit history was the clincher, he said.
But the National Small Business Assn. reported that 67% of small businesses said in August that they had been affected by the credit crunch -- and that was before September's market turmoil. The number of small businesses using bank loans was at a 15-year low and 32% said their loan terms were getting worse. The same was happening with credit card rates, 63% said.
The credit manager's index, which the National Assn. of Credit Management uses to measure credit and collections professionals' confidence in the economy, dropped a record 3.3% in September.
