20% of our orders were cancelled today. - because the credit market is closing.

[SmileyRose]

I work for a family business that deals with smaller shops of home accessories and with interior designers. In the last 3 days the fax machine has gone non-stop with cancellations. Since Monday, about 30% of our orders have been cancelled. About 20% of our orders today alone. Almost everyone who cancels is saying their credit lines are being reduced or cut off (in the case of marginal operations). In fact, our owner has a meeting with his bankers on Oct 6 to appeal the decision to reduce our lines of credit by about 40%. Ours is a healthy, up until now vibrant, growing business. Our profit margin is very good. But without that credit line, like our own customers we are out of business and 70 people will lose their jobs.

Like myself, the owner of this business is NOT behind that awful Bush plan to deal with this. He's angry that DC sat around on their hands for a decade watching this happen. Yesterday alone, more than 1 Trillion in wealth was lost on Wall Street. For most people, that is only on paper and eventually they'll get all their money plus. But the ramifications for privately owned businesses is huge. Upper middle class people, senior citizens living off their 401K's and a bunch of other people are pulling back. Credit is being cut off for even credit worthy businesses - forcing them to close their doors.

Something has to be done and fast. This is urgent. I very glad that horrid pile of horse lick they tried to pass failed miserably, and I don't know what the answer is. But if too many small to medium sized businesses fail because the investor with their hands on the money supply got nervous, the ripple effect will not be pretty.

[meegbear]

1. OMG! Hang in there!

:hug:

[dkofos]

2. Contact your local Credit Union. They still have money to lend.

The big banks are freezing credit to get what they want.
It's part of the plan.

[Marrah_G]

5. It's her customers that no longer have access to the credit they are used to.

Credit union one time loans are not the issue here.

[dkofos]

9. Tell her customers.

[Lochloosa]

12. I agree with this advise. I met with a good friend at our CU the other day.

They are in good shape. It might just be a short term solution, but enough to get through this.

[Marrah_G]

3. Hang in there. They will pass something to deal with this.

The results of doing nothing would be to devastating as your post shows.

[alcibiades_mystery]

4. You CORPORATE FAT CAT!!!!! Stop with the FEAR TACTICS, RICH SCUM!!!!!

:sarcasm:

[conspirator]

46. So the rich are blackmailing us and you stand up for them?

SmileyRose has a job and is whining.
What about those who don't have homes to buy accessories to, or those whose jobs were
outsourced by wallstreet greedy stock holders.

[Oregone]

6. Strange. We have had 0 issues with credit...

98% of our orders are credit.

Monday/Tuesday were record days. We have seen no sales decrease or cancellation of orders due to credit problems. It all seems suspicious to me.

[Fresh_Start]

7. who are your customers?

the OP are small businesses which is where the credit collapse will affect first

[Oregone]

36. Gotcha...normal consumers are customers.

[Fresh_Start]

39. consumers have open end loans

which the bank can't close without reason for adverse action which they have to disclose (unless the bank is getting out of the business entirely).

small businesses typically take short term loans which they have to renew. everytime they come up for renewal, the bank can decline. And the bank doesn't have the same burden to take adverse action because small business doesn't get the consumer protection statutes.

Or at least thats what I understand.

[sandnsea]

8. Business or credit cards? n/t

[anigbrowl]

30. It would help if you told us what line of business you're in.

[Oregone]

37. Just niche widgets a tiny percentage of the population buys and are intrested in...

We are small time. Around a million in sales monthly.

[bananas]

33. Do you work for Home Depot?

People said it was the most crowded it's been in three months,
see this thread: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4134642

[TexasObserver]

10. No, the problem is not the credit markets. Your business field is in a recession.

Why would anyone in their right mind want to loan money for anything to do with home building or home improvement right now? People who have businesses that are in decline get turned down for loans because they are not a good loan risk. You don't throw money into a business on its way down if you're a lender.

The credit markets work fine for those in sound fields of business. If you are tied to a segment of the economy in decline THAT is the reason your loans are turned down.

We cannot create DEMAND simply by passing a $700 billion bailout, and I assure you that this bill will do nothing to save the company you work for. The problem is simple. We are in a recession, and those connected to real estate are hurt most. It's bad, but we cannot create business for all those people who have no homes they can sell, no loans to arrange for homes.

[SmileyRose]

18. We are in a nitch of the market that is doing exceedingly well

units shipped in Sept 08 were 14% higher than Sept 07 and our dollar value was up 17%. This business has been around for over 50 years and they tend to do better business in harder times. We specialize in basically taking trash and turning it into very high quality custom home accessories. We have 30 artisans and people all over the country - we even sell internationally. We are basically a huge version of your local thrift store. The problem is credit, not demand for our product.

We can weather the storm of fewer orders, no problem. It's just a matter of how far to retract. But having that business line of credit cut will put us on the street so to speak.

[LanternWaste]

28. keep our fingers crossed that the credit market begins to open up

Always odd when someone, without full knowledge of the relevant protocols begeins psycho-analyzing why my (or yours, in this case) business should or should not be doing well in a particular market.

That aside... lets keep our fingers crossed that the credit market begins to open up its steely sphincter again soon. One of my best friends is a new cars salesman, and he tells me his dealership is getting it from both sides-- much less foot traffic on the showroom floor (people afraid to spend? Not getting loans from their banks for the new car?), and credit refusals to get updated models onto the lot (and on the second item, he told me that it's never, ever happened before at his dealership...).

It seems to be a sad deal all the way around, and to make it worse, everyone seems to be an expert these days, always with analysis and advice-- or, as my pal said on Monday-- they're like secular preachers, telling me what IS or IS NOT with the absolutism of a southern baptist preacher.

:) Let's keep our fingers crossed.

[TexasObserver]

32. If the business cannot find other lines of credit, it's likely in trouble.

With all due respect to your perceptions, employees don't always know whether their business is really in trouble. I told a WAMU banker a month ago he'd better get a new job then, and encouraged him weekly to do so. He thought they were going to make it. He argued with me about it the day before WAMU was seized.

That is common. Employees do not see it coming, because they do know how well the business is paying its bills, and how much of its lines of credit it has used.

Any business that has very limited cash reserves and relies too heavily on debt is going to have trouble in a declining market.

[tama]

23. Depression

gone threw one, now it.

[TexasObserver]

31. Try Abilify. They claim to help that.

[tama]

38. I can't spell

at all.

[girl gone mad]

11. I'm sorry to hear that this is happening.

Your industry is being it especially hard by this recession.

HELOC's are being cut off.

Unfortunately, I don't think that giving the banks more money will do a lot of good, because they are not likely to turn around and loan the money to declining industries. The American consumer is tapped out right now.

I hope that you can hang in there until Obama is elected and we can start the long recovery.

[Madam Mossfern]

13. My husband has a small business

selling not necessary items-fine china, crystal, sterling. This will be devastating to his bottom line. He will not be able to secure small loans to increase inventory coming into the holiday season. The phones are dead.

Thank goodness for my civil service job. Although, we were told that there is a hiring freeze for the department where I work, meaning huger case loads as more people come back on the welfare rolls, or will be forced onto welfare when their unemployment benefits expire and there are even fewer jobs out there.

This is not good.

[smoogatz]

14. I think it's temporary, and panic-driven.

Here's the deal: inter-bank lending is currently moving very slowly because banks are afraid to lend to one another. The reason they're afraid is that a LOT of banks are now grossly undercapitalized as a result of the devaluing of their mortgage portfolios (and other related assets, like mortgage-backed securities); if you don't know whether the guy who wants to borrow from you is going to declare bankruptcy tomorrow or the next day, you'd obviously be reluctant to lend him money. The result is that even solvent banks are facing serious liquidity issues: if they can't borrow from other banks, then they don't have nearly as much to lend. Plus, they're reluctant to further degrade their own debt portfolios by lending anything to anybody whose credit rating is less than perfect--and I mean perfect. So small borrowers are caught in a bind, and there's no telling how long it will last or what the fallout will be. Last week's bailout plan would've been a disaster, though, IMO, because it failed to address the root of the problem: a grossly undercapitalized banking system. I like the Soros plan a lot better: get the government to buy equity in shaky banks, infusing them with cash and shoring up their balance sheets. Then, when the banks are back on their feet, they can buy back the taxpayer's share of their stock at (then) market prices. But just backing the armored trucks up to the treasury and handing a bunch of derivatives traders the key? I don't think so. Bottom line: it's a relatively simple problem with an elegant and relatively simple solution, from which the taxpayer stands to emerge with a handsome profit. Whether we'll actually do the right thing is anybody's guess.

[Virginia Dare]

27. It does appear to be panic driven but probably will be a long term thing..

if we're lucky, we'll get out of this with "just" a fairly lengthy recession. What I most fear is any republican gains, as they will try to "fix" this problem by cutting taxes to the wealthy. More "trickle down" bullshit. With Dems in charge we have a fighting chance at rebuilding our economy in such a way to help the working and lower classes.

[specimenfred1984]

15. Most people "believe" they don't know "what the answer is"

It doesn't matter how many times over the years I've told them "what the answer is", people just don't want to hear it here in propagandized America. You want to know the answer: throw corrupt repukes in jail and put regulators in place that have the power to actually regulate things.

It's that easy but it takes brains and guts.

[SmileyRose]

26. Of course you are right, long term

unfortunately, by the time they get around to putting things right 10's of 1000's of small businesses will be out of business and the "black market economy" will be the only way people can keep the food on the table -- if they can find it.

[EFerrari]

16. I expect something to shake out by the end of the week.

We're in about the same shape. Hang in there!

[chicagoexpat]

17. You MUST be wrong, all the brilliant DU'ers linking arms w/ RW maggots say u r imagining things

[tjwash]

40. YEAH!! So hand over that $700 Billion to bush and his cronies no questions asked...

...he's had such a fine fucking track record the past seven years when it comes to the little guys and the small businesses. He would never just distribute it to his pals, and let eveyone go down the toilet in flames now, would he?

Who are you? Rocky from New Orleans?

[leftofthedial]

19. an extortion racket doesn't work

unless the bad guys burn down a building once in awhile

[tama]

24. And you know also

that wage slavery is just another extortion racket.

[Mudoria]

29. Wage slavery?

:rofl:

[slipslidingaway]

20. Maybe people should be cutting back on spending...

sorry that this is effecting you personally.

Household debt as % of GDP...

See link for chart, April 2007
http://contraryinvestor.com/2007archives/moapril07.htm

"The following chart really says it all and ties directly back into the breakout periods of the prior two charts shown. In very large measure, all of these charts reflect baby boomer demographics. So, as we look ahead, we can ask a few very simple questions. We already know that the baby boom generation has been more than willing to lever up their personal balance sheets over the last quarter century without so much as batting an eye. As is clear, since 1980, household leverage as a percentage of GDP has doubled, after remaining relatively constant in the prior quarter century. Questions being, as this baby boom generation pushes ever closer to retirement years where income and liquidity will most certainly be two primary concerns, just how much more leverage requiring long term cash flow servicing will they be willing to accept? How many more assets do they have left at the household level that are both appreciating in price and can be further levered?

[lib2DaBone]

21. Call your CONgress person today...

tell them to inject working capital at the public open-market window of the Fed.

[tama]

22. That's how depression happens n/t

[depakid]

25. This is the kind of thing we can expect to see

not only on the personal level- but on a level with larger businesses too.

Obama's said as much, as have many economists.

[dhpgetsit]

34. I know people are hurting.

But dammit, this is a fight!

When King George sent troops to control the colonies, people got hurt! But they didn't give it.
When corporations sent thugs to bust up unions, people got hurt! But they didn't give it.
When civil rights activists were met by police and thugs in Selma in 1965, people got hurt! But they didn't give it.

I don't want to get hurt, but I want all our children to to have opportunities for education, health care, and decent jobs. This pandering to the corporate elite has got to stop!

[girl gone mad]

47. We're a country full of people who refuse to..

make personal sacrifices.

People just don't want the party to ever come to an end.

[Neshanic]

35. What part of anything related to houses will be affected is so hard to understand?

Granite countertops, appliances, realtors, home improvements, landscaping, painting, Home Depot, Lowes, Ace Hardware, geraniums, lawn mowers, furniture, stainless steel dishwashers, house flipping, architectects, developers, land brokers, commercial real estate, ant farms, restaurants, Pottery Barn, Ethan Allen...

Our economy was based on never ending consumption since 2002. Never. Ending. Consumption.

[ThePowerofWill]

41. I have noticed something strange happening where i work.

Orders are down slightly, but not bad. However we are starting to receive materials waaaaay before their vendor due date. I have one vendor who has sent 3 months preordered stock. It was supposed to be trickled in 40,000 at a time with one (two trucks each) shipment a month. I have gotten all three already, and the 2nd is not supposed to have been due till 10-14.

We pay for each order within a day or two after receiving it. The truck driver today said their broker told them we had to have it today I pointed too 80,000 lbs of stock and said does it look like i need it? So us needing it, or anyone calling the vendor and requesting it was out of the question. I think my 2nd reply to the truck driver may have rung true, i told him "we don't need it today, but i bet they need their money". Meaning they shipped it all to get some cash flow going. I don't really know, it's just very odd. Not the only one either. I received a large shipment of chemicals waaaaay early, and some finishing materials.

Since the owners of my plant are such skin flints we are ok. The reason i mention this is because them being sooooo bottom line oriented we almost always operate at positive cash flow, so our money is there. I guess the vendors know this as well.

[SmileyRose]

43. I think it has to do with

everyone trying to ship orders before their customer has a chance to change their mind and cancel the order. The vendor who supplies our wood finishing products did what you describe but their invoicing clerk saw the comment on the order ticket to call us before shipping. No one had signed off so she did it and we were able to stop it. It's not that we can't pay for the product now, it's that we don't want to warehouse it.

You also have everyone starting to get their inventories down before tax deadlines.

[goforit]

42. So lets agree to the bailout now that states we have to bail out the foriegn investments as well

[MadHound]

44. Something has to be done, yes,

But not necessarily fast. Let us not rush into approving a deal that winds up being worse than the problem. That's what this current Paulson plan is, a cure that is worse than the disease. I'd much rather see something coming out of the House, that put people before Wall St. rather than simply throwing money at the problem.

We want a better deal.

[pnutbutr]

45. Wait what?

You are saying that credit has dried up and orders are being cut right and left and you yourself may lose your job because of it and are happy that the bill that would restart the credit lines and could save your job failed to be passed? :rofl:

[SmileyRose]

48. Interesting

that viewpoint you have of Bush's 2.5 page pile of dog lick or else everyone in America starves. Congress has proven they can put legislation together within days. What I'm saying is, we all thought there was more time to stop and do this right, but the landscape has changed quickly within a few days. We have to stop and do this right a bit faster.

Krugman said as much yesterday.