Credit crunch hits small businesses

Until delinquencies and defaults began to spike, mortgage lenders were only too happy to write loans against home equity without demanding proof of income. That helped thousands of marginal entrepreneurs, who might not have been able to raise money by other means, launch and expand businesses. In an August survey for Discover Small Business Watch (rasmussenreports.com), 30% of respondents said they had used home loans for funding.

A 2005 study of small businesses in Tennessee conducted by researchers at Middle Tennessee State University (mtsu.edu ) found that the entrepreneurs who used home equity relied on it for 43.1% of funding, on average. Today that money is harder to tap.

Full text