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Sep 26, 2008 7:25 pm US/Central
Business Slow For Remodeler During Credit Crunch
(WCCO)
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"Banks aren't handing out money like they were three years ago," said Schirber.
CBS
Lawmakers continue to hash out details of a bailout plan to help jumpstart our ailing economy.
Friday, President Bush told Congress it needed to "rise to the occasion" and pass a plan that will help get us back on track.
Under that $700 billion bailout plan, the Government would buy bad mortgages from financial institutions that are in trouble. That in turn will boost banks profits, making them more likely to lend money.
Economists say it doesn't matter if the bailout goes through or not, because we're all going to feel its affects.
In fact, one home remodeler in the Twin Cities has seen a significant slowdown in what used to be a building boom.
"That's our hope, is that we get rid of an eyesore," remarked Steve Schirber, while he walked around a building he and his company, S.M.S. Builders, are remodeling.
It's off South Cedar Avenue, and it was once vacant and condemned. Schirber has a vision of turning the property into condominiums. But doing his kind of work is getting tougher these days.
"Banks aren't handing out money like they were three years ago," said Schirber.
Homeowners can't get the financing they need to do remodeling projects, and that hurts Schirber. Some have even backed out of planned projects all together.
Schirber usually does a couple projects every year worth $250,000 each, but with this financial situation that we're facing, some projects are worth less than a $100,000. Some even dip down to $30,000.
Schirber would like to expand, but he says it's a hang-up.
"We got all these ideas and opportunities, but to grow and finance that, nobody's looking at lending money right now to small businesses, especially in the construction industry," he said.
Economists say banks have less money to lend people who are buying or remodeling.
"It's already happened. Credit has already tightened up," said Dr. David Vang, a Finance Professor at the University of St. Thomas.
Economists think banks are going to lend to people and businesses who have the best credit. Borrowers might also have to give the bank more documentation than before of just how much money they make.
"Ironically, you're going to be seeing relatively lower interest rates for the coming year, but you're going to be having a hard time getting credit unless you put up with more stringent terms than you have in the past," said Vang.
As tough as it is now and might continue to be, Schirber is confident that, after 12 years in business, he'll get through this slowdown like others before it.
"I'm confident that we're going to make it through this one as well," he said.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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