The House of Representatives is supposed to vote again today on a plan to rescue ailing financial institutions. Americans have been hearing that if nothing’s done, the recent collapses on Wall Street could destroy many small businesses. They might not be able to get the credit they need to continue operating. Credit has already tightened.
In fact, the local Small Business Administration office announced Wednesday that it’s written 13 percent fewer startup loans this year compared to last. WUWM’s Marti Mikkelson visited a business incubator in Milwaukee to learn how start-up companies there are being affected by the tightening of credit.
The Wisconsin Women’s Business Initiative Corporation, or WWBIC, has been helping women and minorities hang out a shingle for more than 20 years. It’s an expansive building on Martin Luther King Dr., with offices and cubicles inside where entrepreneurs work to get their businesses off the ground. In addition to offering space, WWBIC provides the budding businesses with startup loans. President Wendy Baumann says more requests have come in recently, because banks have been shying away from issuing loans to new businesses.
“Startups are risky ventures no matter how you look at it, so in tougher and harder times, banks are just going to turn off to those startups. So again it’s organizations like ourselves, county, city, economic development programs that are going to take a little bit riskier nature in their cities or their municipalities to help businesses start up are going to be there,” Baumann says.
Baumann says the average loan her agency grants is $25,000. Once her clients start their businesses, WWBIC tracks their success. It’s finding that some are struggling.
“Micro businesses are having a little bit harder time. Some of the retail businesses are suffering a bit more, maybe some of the businesses that are in discretionary funding such as salons are being hit a little harder, feeling that pain of people tightening up with their savings and their own personal credit,” Baumann says.
However, Baumann says one client base that appears stable financially is the restaurant entrepreneur. Stacy Zielinski falls into that category. She works part time at WWBIC and otherwise at the pizzeria she and her husband opened earlier this year on Milwaukee’s near south side. Zielinski believes she was successful at getting a loan because a group of people went in with her on the business venture.
“There’s actually six of us. My husband and I, another couple, and then a brother and our main chef. Between the six of us, we contributed to probably just about 70 percent of our startup costs and the rest we obtained through a WWBIC loan,” Zielinski says.
While Zielinski was able to secure a loan and her restaurant is doing well, WWBIC’s loan officer does not always see happy endings. Marianne Dickson says she’s denied more WWBIC loans this year than in 2007, because she’s seeing more people who are not in good financial shape.
“Even for us, we’re seeing a lot more risk than what we had before, so we also have to be more careful. So, even though we’re getting more requests, we’re having to turn down more as well,” Dickson says.
Dickson says in denying a loan, the agency usually encourages the potential new business to try again. WWBIC’s President Wendy Baumann says she’s been watching the debate in Congress over a financial rescue plan for the financial industry. She says her agency works with several banks, and she believes a federal government action could help those institutions relax their lending practices.
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