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Small business owners alarmed by higher interest rates

A variety of food display at a small restaurant in Carson
A variety of food display at a small restaurant in Carson
Photo: RGA

Small business owners are reluctant to borrow money from the banks. Why? They have mixed answers to this question. According to some of them, they can't afford the high interest rates imposed by banks, particularly those that availed huge bailout money from the federal government.

The Obama administration had recently approved an estimated $30 billion from the unused bailout money that small business owners can tap to either expand or further buoy up their operations in the midst of the economic turmoil.

Well, it's hard to blame some of the business owners who don't want to enter into a mess, knowing how some banks change their interest rates so quickly. "I would rather not borrow any money from the bank at this time because their interest rate is so high that all your profits will just go to the repayment of the loans you took from the bank," a restaurant owner in Carson said.

"We are contended with the liquidity that we have right now," she said, as she entertained some customers at lunch time. "Our business is still surviving despite the mushrooming of eateries around the community where we operate."

Although, she admitted that it wasn't the competition that she's afraid of, considering how established her business was compared to other restaurants that just popped up recently. "We have been in this business for a long time already. And I'm not worried at all because our customers just keep coming back to patronize what we have in the restaurant."

True to her words, it seems the distribution of the bailout money had not been felt so much in this urban enclave, knowing that businesses go about their usual operations even without the much-needed infusion of additional capital from the banks.

But banks officials could not explain why some small business owners just don't want to take advantage of the bailout money for them.

Earlier, the treasury department said in its report that business lending was down from 10 to 15 percent. Among the banks that cut their commercial lending between April to October this year include Bankg of America, JPMorgan Chase, Citigroup and Wells Fargo. This means that loans to small businesses were down by $7 billion during the period.

Reports said the lending was down this year because there are fewer qualified borrowers. But businesses said the banks have tightened their lending standards so that only few businesses may be able to secure loans from them. But there are suspicions that some banks are just hoarding cash to prepare for future write-offs, a news report said.