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Foundering Small Businesses Running Out of Options

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The Harford County Small Business Development Center

U.S. Small Business Administration

Special Report Main Page

By David M. Johnson
Capital News Service
Tuesday, Sept. 24, 2009

BEL AIR, Md. - For some struggling small businesses, all the Harford County Small Business Development Center has to offer these days, literally, is a box of tissues.

At the center, counselors offer advice to clients who ask for help before their business hits rock bottom. For those who wait until it is too late, there is not much more than a shoulder to cry on.

Monthly statistical increases in auto, gasoline and retail sales around the country have led Federal Reserve Chairman Ben Bernanke to say the recession is technically over. However, many small businesses have used all their available resources to ride out the storm and are now flooding Small Business Development Centers around Maryland with calls for help.

"We do have tissues in the office if we have to tell them, 'There is no way you're going to be able to survive,' " said the Harford Center's director Russell Teter. "Unfortunately, we are the last place they come in a lot of cases. Usually at that point it is too late."

According to Teter, the SBDC would prefer clients come to them with a 411-grade problem rather than wait until the situation turns into a 911-level emergency.

The American Recovery and Reinvestment Act passed by Congress in February created a $35,000 loan for small businesses facing immediate financial hardship, but only 14 businesses have been able to take advantage of it, according to the Maryland Small Business Association.

"In my region, clients have received them but it's a very small niche, because the banks get to determine whom they use the ARC loan for," Teter said. "If there is the right person, right situation and right bank it will work."

"The phones are busy, people are very interested in getting the help," said Rachel Howard, business development specialist at the Baltimore District office. "It is a brand new program, so it takes awhile to get it off the ground."

Brad Watts, vice president of loans at Easton Bank and Trust, said only one loan application has gone through his bank so far. According to him, many banks are not participating in the program because of the administrative work involved.

"We've had a number of inquiries from people outside our market because their banks are not offering the program," Watts said. "The application process is difficult -- it's a small loan, and the amount of paperwork is the same as if the loan were for $1.5 million."

Harford County is not the only Small Business Development Center to notice a blizzard of clients in need. Reports from around the country are similar, said Craig Panos, a counselor in the Towson office who just returned from the Association of Small Business Development Centers annual conference in Orlando, Fla.

"Consensus is small businesses are in more trouble now because they have been holding on, exhausting resources, and run out of options," Panos said. "The recession has lasted a bit too long for some of them."

Kraig Leatherman of Towson started his organic landscaping business, Earthkare, while Wall Street was suffering massive losses in October 2008. After 25 years as the owner of an insurance business that "didn't work," Leatherman decided to start doing something he loves, working with the earth.

In March 2009, Leatherman responded to an ad for a small business seminar and met Panos for the first time. The SBDC helped get him get through these tough economic times, said Leatherman.

"I met with Craig and we set up an action plan, something my old business didn't have," said Leatherman. "Since then we've had several long conversations, there is a lot of support there."

Other small businesses waited too long to seek help. According to Teter, many of them failed because of their lack of planning.

"We go through an economic downturn about every seven years, sometimes recession, sometimes not. It's cyclical," Teter said. "Businesses that plan for it do not let economy be an excuse, they go after customers aggressively."

Copyright 2009 University of Maryland Philip Merrill College of Journalism

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