News

Small-business owners feeling economy's pain

October 14, 2008 - Clarion Ledger - Jeff Ayres

For Monte Agho, the tight credit market and its effect on the economy has led to one of his worst years in business

Agho has operated Monte's Steaks and Seafood in Jackson for 17 years. He, like other small-business owners, is feeling the pinch.

"People are scared to (spend) money," Agho said, referring to the volatile stock market.

Agho has taken measures to save: cutting some workers' hours, earlier closing times on slow days and going with different food vendors.

Other area businesspeople said they are unsure if they could open a business in today's climate.

"I wouldn't dare open a piano store right now," said John Allegrezza, who operates the 52-year-old Allegrezza Piano Co. in Ridgeland. "It's a bad situation. Sales are off. Volume is way off."

He said the credit market has made it difficult. Most people use credit cards to purchase the store's instruments, he said.

Another small business, Sweet Peppers Deli, a Columbus-based chain, has been franchising stores throughout the Southeast.

"The (franchising) inquiries have slowed down a little bit," said Bernard Bean, Sweet Peppers' director of operations. "With any economic downturn, people quit making investments and (started) looking into investment opportunities."

But he said four restaurants under construction in Mississippi are on track with financing. Bean said several franchisers have expressed interest in opening second stores and don't seem too concerned about securing financing.

But Richard Ridgway, who is developing the $300-million-plus Flowood Town Center, said finding credit is a concern.

"(If I) were trying to put a project of this magnitude on the books today, I wouldn't be able to get a lender," he said.

Although the Town Center has secured commitments from anchor stores, Ridgway is putting the project's 900-unit housing portion on hold indefinitely.

"Look, this happens every 10 years," he said. "We'll bounce back. The question is: Have we bottomed out yet? I don't know."

Generally, Mississippi's smaller businesses haven't been hit as hard by the credit freeze because the state's banks are largely community and regional operations that are solvent, said Ron Aldridge, state director for the National Federation of Independent Business.

"The hometown bank and the hometown banker (are among) the advantages of living in a state like Mississippi," Aldridge said. "It's not some unknown relationship."

But being on a first-name basis with a bank doesn't mean the borrower won't have to meet stringent guidelines, Allegrezza said.

"They have always been (rigorous in lending)," he said. "If you're wanting a $100,000 loan, you've got to put up $100,000 or $120,000 in collateral."

Aldridge said businesses already strapped by high fuel and insurance costs are looking at other ways of accessing credit.

Many small businesses are using credit cards to help pay for day-to-day operations.

"I can get it for a little less than if I went to a bank," Aldridge said.

Thomas said credit cards are a good idea only if a business needs them for the near future and can get one at a low interest rate. Longer-term use can mean higher rates and more trouble as time goes on, he said.

Thomas said opportunity can grow from the credit market's wreckage.

New businesses should look around their communities to see if vacant buildings and unused equipment can be bought to kickstart their operations, he said, explaining that can be cheaper than repaying a bank loan over time.

Investors can step in and provide money that banks won't, he added, especially when so many are pulling their money out of the stock market.

"There are going to be people with cash who are looking for a place to put it," Thomas said.

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