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Small Business Owners Not Getting Credit Score Help

By Sally Maison
Published: Friday, October 16th, 2009

Small business owners are experiencing a diminished morale after seeing most of their counterparts go bankrupt. Equifax, one of the three major credit bureaus, reports that bankruptcy rates for the sector soared by 81 percent in June 2009 compared with June 2008. This translates to 10,000 more small-scale entrepreneurs losing their business. Analysts say the current downfall is caused by lack of sufficient help from federal government, which they say could have helped those entrepreneurs keep their business running and credit scores intact. Economists say this has a very serious impact on US employment and economy, since small business owners represent more than 99.7% of all employers.

Small Business Owners Not Getting Credit Score HelpMany small-scale entrepreneurs were forced into bankruptcy because of tough economic times. But analysts say the reason is not poor financial management on their part. Rather, it was their inability to secure loans when the economy was it worse. Experts note that these businesspeople suffered major cuts on credit score when card companies cut debt limits without sufficient warning. Their diminished rating made it difficult for them to get loans which could have saved their business, and this only led them to greater financial troubles, experts add.

Earlier this year, President Barack Obama said he aims at thawing credit freeze for minor businesses and promised $15 billion in aid for banks so they can easily liquidate assets. This will equip banks with greater funds which they could later on provide as loans to those businesses. He also expressed his plan of reducing fees for Small Business Administration (SBA) clients. However, many small business owners claim they did not get sufficient help from federal government that is why their finances and credit scores fell at bottom level. Some claim that only very few minor entrepreneurs availed SBA’s America’s Recovery Capital, which could have given qualifying businesses up to $35,000 or six months of debt retirement (paying off of a debt).

Small-time businesspeople say they are forced to deal with local lenders who charge excessively high rates, which makes it even more difficult for them to make their firms survive. They add that meeting on material and payroll expenses forced them to trim their spending. Unfortunately, cutting on firm spending means laying off employees, which analysts say only lead to another cycle of fewer income source and poorer credit scores for consumers.

Small-scale entrepreneurs are calling out to federal government for aid so they can get back on better financial track. They say it is especially difficult for them to lay off employees since they “are like a family to them”, with minor businesses usually operating with only about ten people.

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