Fueling up a trucking fleet. Trying to franchise a new mail store. Asking for a loan to fix up and flip a house. Those are the moments in recent days when the distant, vague notions of a nationwide credit crunch became all too near and concrete for Colorado business.
Pak Mail, based in Englewood, was ready to sell a franchise to a businessman who had his house paid off and brought “plenty of other assets” to the deal, said Pak Mail president Evan Lasky. But the spooked lender wouldn’t back financing unless the franchisee put up his house as collateral. The deal died.
A credit-card company sent Gavito Trucking of Milliken a notice that its limit was cut by $11,000 a month. The small firm won’t ask its drivers to carry hundreds of dollars in cash to buy diesel, so it will have to make credit-card payments more than once a month to stay well under the new limit. In the meantime, new clients who want items shipped may have to pay cash upfront so Gavito can pay its own bills.
And modest real-estate investors such as Steve Ward cool their heels in meetings with suddenly chilly bankers. Ward, who buys small properties and sells them after a fix-up or development deal, was waiting in a banker’s conference room and reading a Wall Street Journal headline on “America’s Credit Crunch.”
At that moment, the lending officer walked into the room and said “good luck” and goodbye, Ward said.
Some business owners report few credit problems: “The major banks and credit unions we do business with are all fighting for business,” said David Rothrock, president of Rocky’s Auto.
At the Rocky Mountain Chocolate Factory in downtown Denver’s Writer Square, manager Megan Vanoni said the credit crunch hasn’t had a direct impact but that prices are rising and purchases are shrinking.
“The cost of chocolate is rising — it’s a commodity,” said Vanoni, who added that cautious customers are making smaller purchases.
But others say the crisis reaches more niches of the economy every day.
“I don’t think Congress in general has done a good job articulating to the American public how inextricably linked our credit markets are to our entire economic system,” said Walker Stapleton. His Denver firm is delaying a deal to take a real-estate company private because of uncertain financing. “You have a number of banks that are changing terms by the day, by the hour.”
Multiply these anecdotes by hundreds of thousands of companies in America, small-business owners say, and the threats from a slowdown become clear. Executives stop planning, stop hiring, stop spending until they know where the next dollar will come from.
“This one is unusual because it’s affecting small business as well as big business,” Ward said. “I talk to my contractors and subcontractors, too — things are bad out there.”
Pak Mail sells mail-store franchises around the world and is now losing deals because of new lending terms, Lasky said. A typical Pak Mail store may cost $120,000 to open, including franchise fees and building out the store.
Lenders using Small Business Administration backing used to ask the franchisee to contribute about $40,000 of that total, Lasky said. They now want $60,000 to $70,000 before they will loan the rest.
“That’s how much it’s tightened up,” he said.
Employers who feel the credit clampdown then have to get tougher with people down the line, said Laura Gavito, operations manager for the trucking company. In part because of the tighter monthly fuel-card limits, Gavito has turned away big hauling customers who want to pay bills every 90 days.
Gavito’s credit company, Wright Express of Portland, did not return a phone call for comment.
“It’s weird how this has snowballed,” Gavito said.
Wright Express worries that it will “be left holding the bag” if failing companies don’t pay their fuel bills.
“But we’ve never been a day late or a dollar short, and we’re being punished because of the economy,” Gavito said.
The crunch does create small opportunities for other businesses. Byron Weiss, owner of a used heavy-equipment company called Portapower Inc., said customers who normally buy new are now looking for a bargain.
“With the economy the way it is, we’ve had a lot of buying opportunities,” he said.
However, he said, collections have been slow, and he has more inventory than normal, reflecting the national report from credit managers.
Staff writer Kimberly S. Johnson contributed to this report.
Michael Booth: 303-954-1686 or mbooth@denverpost.com
Margaret Jackson: 303-954-1473 or mjackson@denverpost.com
Megan Vanoni
What she does: Manager of Rocky Mountain Chocolate Factory in Writer Square, Denver
What she faces: The chocolate-shop manager reports little change for the business, although she has noticed that the cost of chocolate has been rising and customers are making smaller purchases.
Sam Gavito
What he does: Owner and operator, Gavito Trucking, Milliken
What he faces: The company’s credit-card company cut its limit by $11,000 a month, creating a problem for drivers’ fuel purchases. The company is asking some customers to pay cash upfront so it can pay its own bills and keep its trucks fueled.
