With the credit market tightening and banks requiring bailouts, the opportunities for small businesses to receive financial support are becoming increasingly difficult to find.
In October, the Minneapolis division of the Small Business Administration was third in the nation in loan guarantees totaling nearly $26.5 million, which means nearly $50 million was provided to the 136 small businesses who received the loans, SBA Deputy District Director Mel Aanerud said.
Many banks have seen problems with loan returns, and the SBA offers loan guarantees to help protect the banks who support small businesses. They guarantee between 50 percent and 80 percent of the loan that the bank provides to the lender, Aanerud said.
SBA defines small businesses as companies with less than $7 million for most retail and service industries.
Despite larger banks tightening their credit, smaller banks have been receiving fewer loan requests in these harsh times, Aanerud said.
Minnesota, however, has not experienced the drawbacks from the economic problems as much as other states, he said, because it has a lot of small, local banks that try to develop the community.
Carlson School of Management Senior Lecturer Alan Fine said most of the business owners he has spoken with are down between 30 percent and 40 percent and some believe there is already a depression.
The majority of the businesses around campus fall into this category, but not all are seeing the crunch from the struggling economy.
Jason McLean, Loring Pasta Bar owner, said he is slightly in the red but has been pleasantly surprised with how the restaurant has endured the economic struggle.
“We sort of set this place up in the outset to deal with what I figured was the inevitable: a downturn in the economy,” he said.
After operating at two locations during 1991 and 1992, he chose to keep the Dinkytown location open and keep prices low to avoid costly economic problems.
Although Fine said many businesses are struggling, some are set up to strive through bad times.
“When people’s pocket books are hit and they’re concerned about the future, they still have to buy food and they have to buy the necessities,” he said. “If you’re in a business that does those things you’re probably going to be safer.”
But some students are still paying for non-necessities, and McLean, who also owns the Varsity Theater, said the venue has seen revenue increases.
Across campus, Campus Pizza owner Jim Rosvold said he has been in the black recently as well.
“We’re not up a lot. We’re up a couple points, but I’ll take that over a downturn with this economy any day,” he said.