Some small businesses are getting squeezed from both sides with more stringent requirements for financing and fewer customers paying later.

    Delaware District Director Jayne Armstrong of the U.S. Small Business Administration said it’s harder to get any kind of financing as banks have tighter credit standards and she’s hearing more from businesses whose loan applications have been repeatedly denied.

    “We’re getting phone calls from businesses that have been turned down five or six times and they’re desperate,” Armstrong said.

    It’s hard to understand the situation because statistics won’t be available until later, she said. Loans can take years to default, as it’s a long process that needs to exhaust all options, and there is no data on small business closures yet. However, in her 20 years, this is the toughest time she’s seen for small businesses to get start-up financing.

    Van Hampton, executive director of the First State Community Loan Fund in Wilmington, said as a non-traditional lender that typically works with businesses that have difficulty going to the bank, they are seeing more demand.

    Businesses might need a second loan for expansion or growth, but the first lender holds all the collateral, which puts First State Community Loan Fund in a peculiar situation, he said.

    “We’re definitely seeing it in our portfolio,” he said.

    Hampton said delinquencies have risen and loan default rates also have gone up slightly. They’re hearing from businesses that have been around a long time as the First State Community Loan Fund has started dealing more with small businesses.

    Stricter banking requirements for lending eventually will affect their lending requirements, he added, because banks are where the fund ultimately gets the money they lend out. However, they might move more into government funding.

    Small businesses also have to deal with corporations paying them later, Armstrong said, where normally it would take 30 days and now it’s 60 or 90 days.

    “That can knock a small business out,” she said.

    Slower payments effects cash flow, which can lead to lower credit scores and then small businesses can’t qualify for loans, Armstrong explained.

    “It can be a spiral effect,” she said.

    Hampton said retail and service businesses often don’t have contracts with corporations but are just losing business.

    On one hand, Armstrong said she will talk to a business owner that has seen an uptick and she starts to feel like maybe the worst is over, but then hears from three straight businesses that are getting ready to close.

    Overall, Armstrong feels the smart or innovate businesses will be the ones that survive, although in some cases a whole industry has been affected. For example, she said a high-end restaurant needs to become price consensus and perhaps go to family-style dining.

    In place of banks, some small businesses can benefit from federal stimulus money.

    The Small Business Administration has programs under the recovery act that try to help existing businesses by giving them a shot in the arm and positioning them for growth later, Armstrong said. It also eliminated its program fees and increased the government guarantee on loans to decrease exposure.

    However, one program where SBA acts as a guarantor of loans for car dealerships has hit a snag because banks still won’t take on their financing, she added.

     Email Jayne Gest at jayne.gest@doverpost.com