REDWOOD CITY, Calif. — As the effects of the economic collapse began pouring down Main Street, the government last year was left holding a record $2.1 billion in write- offs of small-business loans it had guaranteed. And officials expect the numbers of defaults to rise.
Records obtained under the federal Freedom of Information Act show the public is paying to offset bank losses on small-business loans across the country.
“I just couldn’t make any payments. I was barely making rent or payroll,” Chris Sakelarios, owner of an espresso shop and small gym in Redwood City, Calif., said on a recent afternoon when her cafe had just two patrons. “We’re in a hovering pattern.”
It’s a sign that even as record profits re-emerge on Wall Street, thanks to massive government loans and guarantees for banks deemed too big to fail, the pain on Main Street is as profound as it has been in half a century. Companies not too big to fail are failing.
Their plight is a shift from previous recessions, when small business bounced back ahead of big employers, said Todd McCracken, president of the lobby group National Small Business Association.
“This could be the first economic recovery we’ve seen in a long time that hits small business the hardest the longest,” he said.
The Small Business Administration purchased $2.1 billion in bad loans from lenders last year. Agency officials say it’s likely that this year will see another high as the recession nears the two-year mark.
“It’s frustrating when (banks) are getting bailed out for bad decisions they made that there isn’t more assistance for the small business,” said Eric Geedey, who manages Sakelarios’ cafe.
Small businesses account for half of all private-sector workers and have created roughly half of the nation’s jobs over the past decade.
The White House has floated a proposal to take money from a $700 billion bailout of the financial system to help small companies. But help would not arrive until fall.
Sakelarios, a breast-cancer survivor without health insurance, tries to stay optimistic.
“Any time anyone asks me how it’s going, I say the same thing,” she said. “It’s going real ly good.”
