Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 8, 1993 TAG: 9304080409
SECTION: NEIGHBORS PAGE: S-4 EDITION: METRO
SOURCE: By JOHN GIBBONS STAFF WRITER
DATELINE: LENGTH: Medium
RECESSION LEFT VENTURES TEETERING
The recession may be gone, but it's not forgotten.Small businesses that survived "came out of the recession carrying heavy debt loads they built up during the recession," said John Jennings, director of the Blue Ridge Small Business Development Center in Roanoke.
"There's lots of businesses out there that are teetering under the weight of that debt. They have a ways to go, even though the recession is technically over, before they can get their debt load under control," Jennings added.
"Just having survived doesn't mean you're in good shape. It could mean you're in very bad shape."
Banks, too, have been chastened by the downturn and have become more picky about the loans they will underwrite. Their position is understandable when the numbers are on the table.
As many as half of all new businesses will close within four years, and 85 percent close within 10 years, according to an information packet published by the New River Valley Small Business Development Center.
"Many new businesses never really succeed," the packet said. "It often means the loss of a lifetime of savings and many months of agony."
But things don't have to be as grim as all that. In fact, things are looking up.
"In general, there's not a huge boom, but there's a positive movement . . . that has yet to be measured in terms of economic growth," said Jennings.
Small businesses are seeing "sales are up somewhat; they're growing a little bit; they're feeling better . . . Given the length of the last recession, we have a large gap to fill to catch up, and I think that's happening,"Jennings said.
He also said the number of small businesses in the area "has grown. It hasn't grown in leaps and bounds - that rarely happens in Roanoke in any situation - it has experienced at least moderate growth."
As far as the changing credit picture, area bankers say large companies have turned to the credit markets, and banks are looking to small businesses to take up the slack. But, with all the regulatory requirements now in place, they have to take a long, hard look at the small business' situation before making any commitment.
There are ways, however, that small-business owners can skew the odds in their favor. For example, a study released last year says companies with loans backed by the Small Business Administration outperformed their competition, with sales revenue growth of 300 percent over a five-year period compared to 37 percent for other companies.
The report, conducted by the accounting firm of Price Waterhouse and paid for by the agency, also found that SBA policy made long-term credit available to young, growing small businesses that might otherwise have been denied credit.
Jennings also explained that "some industries are more competitive than others, and it's not so much economics as it is competition."
He pointed to restaurants and print shops as being in a particularly vulnerable position and to wholesalers and distributors as "having an easier time."
Jennings said the key thing for most businesses is that "things are changing at a faster pace in terms of competition, regulations, industry Just having survived doesn't mean you're in good shape. It could mean you're in very bad shape. John Jennings Director, Blue Ridge Small Business Development Center shifts, and the way they do business."
That, he said, "presents problems and challenges for those that don't keep up. For those that are tuned into it, it creates opportunities. The pace of change in today's world creates opportunities right and left; it just takes astute business people to see those opportunities."