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Durango businesses feel crunch
Tightening loan policies may affect small operators
Herald Staff Writer
Bowser
"People are scared. There's just no getting around that," said Eric Eicher, senior vice president of Alpine Bank, in a phone interview Thursday. "They're anxious and they're scared. Not everyone, but the vast majority of people are."
Eicher said the bank's customers started voicing their concerns after IndyMac Bank failed July 12.
Fears, especially among retirees, have since escalated with media reports of more major bank failures - including the nation's largest savings bank, Washington Mutual - and the Bush administration's proposed $700 billion bailout.
"We have people filling their mattresses full of cash," said Eicher.
Main Avenue business owners gave more tempered reactions Sunday, but agreed the uncertainty in the economic environment left them unsettled.
"I've never seen anything like this," said Geoff Miller, who co-owns The Shirt Off My Back T-shirt shop at 638 Main Avenue with his wife, Bonnie, and two other owners. "We're treading on thin ice as far as the economy goes."
America's credit crunch
Financial experts agree one thing is certain - credit is tight.
Anyone looking to take out a loan will need to make a larger down payment than they would have in the past, said Dan Bowser, president of Value Insights, Inc. of Durango and Chandler, Ariz., and a columnist for The Durango Herald, in a phone interview on Sunday.
"That applies to whether it's money to buy a house or a commercial building or a piece of equipment for your business, or whether you want to increase your working capital," he said. "Your skin in the game - is what we call it - will have to be greater before the bank will loan you money."
Banks and other investors also will demand that borrowers have higher credit ratings and accept stricter loan terms, he said.
Community and regional banks across America are not failing but simply being more cautious, he stressed.
"They never did a lot of the crazy stuff to start with. Most are in very good shape, but they're still becoming more conservative in their lending policies, and that's where the crunch happens on (America's) Main Street," he said.
The pendulum in lending will initially "swing too far," Bowser continued, with some people and businesses that are otherwise good credit risks being denied loans.
"That's not all bad," he said. "It'll put some more sanity and reality in what's required."
Businesses expected to be hit the hardest are those in housing, automobile and other finance-driven industries, and service-oriented businesses, which generally don't have enough hard assets to count as loan collateral.
Durango's business outlook
Some business owners on Durango's Main Avenue report feeling the credit crunch not so much through their banks' lending policies but through their customers' spending habits.
"Definitely, the market has slowed down," said Sylvia Bedwell, owner and manager of Kid's Rock, a maternity and children's store at 1032 Main Avenue. "Between the gas prices and the credit crunch, the summer's been horrible."
Other owners, however, said that business is holding steady.
At Oohs & Aahs, 1001 Main Avenue, owner Phyllis Burwell said she's lucky because her store caters to "recession-proof" second-home owners.
"They're not blinking at prices, as of yesterday, so that's what's keeping us alive," she said.
Customers are being careful with their purchases, but still buying high-end furniture, she said.
The Millers said that business at their T-shirt shop has been good, but it's too soon to tell what the winter holds for anyone.
With 30 years' experience under their belts and a strictly cash operation, they said they know how to cut back on expenses and that their banker wouldn't hesitate to give them a loan, if they needed it.
Younger business owners who depend on lines of credit to purchase inventory or make payroll might have a tougher time, they said.
Still, they said, they aren't taking the future for granted.
"This year can be a whole different thing," said Geoff Miller.
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