'I'm not going to quit or file for bankruptcy'

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Since getting that financing this spring, Vers Audio has added an employee, introduced new Vers models and created the next extension of its line, a combo iPod dock/alarm clock that will soon be on sale. None of that would have been possible without their line of credit.

"We came within 45 days of D-day," Trzepacz said. "We probably would have had to halt business operations, and our revenues would have been half what they'll be this year."

Other small businesses are stuck at a standstill. Take, for example, Jamaal Oldham of The Cheesecake Experience in Nashville. His four-person operation has been hand-delivering their specialty cheesecakes for years, and the business has been growing locally. The problem is that the team is still working out of Oldham's home kitchen. It needs funding to expand into a larger facility.

"Restaurants both in-state and out are interested in carrying our product, but we can't produce on a mass level because we don't have the facility," Oldham said.

He's confident he'll be able to pay back the $10,000 loan he's seeking. But banks are not budging, including the one that holds his company's accounts. "They told us to consider using credit cards, but with rates as high as 20%, I'm not really willing to go that route," Oldham said.

Oldham is now looking for cheesecake-loving investors, which may mean giving up partial ownership of the company: "I'd rather do that than deal with rates."

Weathering storms

Few entrepreneurs say they're looking for financing and loans to fund ordinary operations; business owners know that debt is expensive. What drives businesses to banks are growth plans or unexpected shocks.

For Hull Printing, the tipping point was an expansion gone wrong. About to outgrow a too-small building, the company owners began looking for new real estate. A sales manager pitched a broader expansion: Add new equipment and increase printing capacity, she said, and sales will jump.

That turned out to be inaccurate. Hull Printing added employees and bought advanced new printing presses, but sales stayed flat. Then the company's bank turned the vise tighter: It announced that by expanding without the bank's permission, Hull Printing had violated the terms of its existing loan. Although the company was making all its payments on time, Jon Hull says, the bank placed Hull Printing in default.

"Our banker knew, and chose not to tell us, 'you guys are risking a lot by making this expansion,'" Hull said. "Putting us in default instantly caused the interest rates on our credit lines to double, which only added fuel to the fire. Here we have a struggling company, and they're adding fees."

Hull worked with a business consultant to try to improve the business's cash flow, and he lined up a buyer interested in taking over the business. But as the company's credit dried up, so did its options and its daily operations. Eventually, closing down became inevitable.

Rusty Quave of Fayard's Grocery is trying to stave off that fate. Storms are his problem. Almost 30% of D'Iberville residents who left town after Katrina haven't come back. When Hurricane Gustav blew through last month, D'Iberville evacuated again, and Fayard's Grocery had no customers for several days.

Open every morning at 6 am, the store has temporarily pulled its closing time back from 9 pm to 3 pm. That's still enough time to feed the breakfast and lunch crowds, who gather at Fayard's for buffets of chicken, shrimp, crawfish, and other Gulf Coast specialties. Locked in negotiations this week with the Small Business Administration, which holds the note on the disaster-assistance loan Quave took out after Katrina, Quave is seeking a deferral. A one-year break on repaying his loans will give him the cash flow he needs to keep Fayard's Grocery open and his staff of 10 employed, he believes.

"We're not asking for free money, we're asking for loans and deferrals of payments to allow us to stay in business and keep being productive," Quave said. "My business is struggling but I'm hanging on. I'm not going to quit or file for bankruptcy, which would be the easy way out. You can't give up. We want to live here and keep our businesses going."  To top of page

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