As the financial tsunami continues to rip through the credit markets and Wall Street, local lenders are doing their best to keep financing consumers for things such as cars, furniture and appliances.
And many are keeping a close eye on the contentious $700 billion financial rescue bill making its way through Congress.
“This is probably the most significant economic crisis to occur in our lifetime,” said Ed Gallagly, president and chief executive officer of Florida Central Credit Union. “It’s serious, but credit must be made available to consumers and businesses or we will grind to an economic halt.”
Bruce Page, president of Cadence Bank in Bradenton, said his institution is still actively lending to small businesses and consumers.
But that doesn’t mean the bank isn’t looking at deals more closely.
“We’re certainly being cautious,” Page said. “We have a good pipeline, as many of the community banks do. If a loan makes sense in good times it probably makes sense today for good customers. We do look at leverage and cash flows and the ability to repay the loan as we normally would.”
For at least the time being, however, 100-percent financing is a thing of the past, Page said.
“We do want to see some kind of down payment on a car loan, for example, whereas a couple of years ago a client could probably go into a dealership and not put any money down,” Page said. “You’re not going to do a 100-percent loan and I’m not sure that ever made sense.”
Troy Brown, general sales manager with Autoway Ford in Bradenton, said the dealership hasn’t noticed any significant tightening of credit it offers its customers.
“We’re still using most of the same (financing) companies we have been,” Brown said.
But customers are relying more on credit for their purchases, he added.
“Fewer people are paying in cash, because the cash was coming from their home equity lines of credit,” Brown said.
All eyes have been on the rescue bill, often dubbed the “bailout” bill, that passed the U.S. Senate on Wednesday night and is now in the hands of the House.
The bill, which failed in its first attempt at passage, has been controversial. Critics say the bill will put an unnecessary burden on taxpayers and favors banks and Wall Street firms, the very entities that created the complex finance vehicles tied to subprime mortgage loans that have wreaked havoc on the financial system.
Proponents of the bill say the government will actually be able to eventually turn a profit on as much as $700 billion in troubled securities it would purchase from financial institutions and the move would loosen up credit markets, benefiting both Wall Street and Main Street.
The impact has been felt locally by small businesses, said Althea Harris, spokeswoman for the U.S. Small Business Administration’s South Florida district office. In her region, which encompasses everything south of Orlando, loans are down 30 percent to 40 percent, Harris said. Loans in Manatee County are down 31 percent compared to last year, and in Sarasota, the decline is 48 percent, Harris said.
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