Bankruptcies Rise 81 Percent in Ca.

[skyrider 0]

Small-business bankruptcies rise 81% in California
With credit tight and consumers still pinching their pennies, many business owners find they can't go on.

The Obama administration's new plan to give a boost to small businesses reflects continued trouble in that sector, which is facing new failures even as much of the nation's economy is stabilizing.

As credit lines have shrunk and consumers have cut back on spending, thousands of small businesses have closed their doors over the last year. The plight of struggling firms has been aggravated by the reluctance of banks to lend money, said Brian Headd, an economist at the Small Business Administration's office of advocacy.

"While bankruptcies are up, overall, small-business closures are up even more," Headd said.

California has been particularly hard hit. The latest data show small-business bankruptcies up 81% in the state for the 12 months ended Sept. 30, compared with the previous year. Filings nationwide were up 44%, according to the credit analysis firm Equifax Inc.

The actual number of small businesses in trouble is probably higher, experts said, because many owners file for personal bankruptcy rather than seek protection for the business.

Dennis McGoldrick, a bankruptcy lawyer in Torrance, said his clients are all stuck in similar situations -- capital is hard to come by, customers are tough to attract and debt is piling up.

"We can't keep up," McGoldrick said. "There's more people that want to come in every day than I can see."

Cecily McAlpine, who filed for bankruptcy protection for her Cold Stone Creamery franchise this spring, said the experience was humiliating but she had no choice.

Receipts at the fledgling Compton ice cream shop plunged dramatically during the recession, and by late 2008 she was paying her employees out of her pocket.

"When the refrigerator died, that was it; I'd just had it," McAlpine said. "That was the day I broke. I just started throwing stuff away."

McAlpine recently withdrew her bankruptcy filing after selling all the store equipment and paying off her creditors. She is slowly paying off some back-rent and utility debt, and will officially dissolve her business in the next couple of weeks, she said.

"I still feel scarred and like a loser," she said. "Even though I'm not in it anymore, it's still there."

Recognizing the problems of business owners like McAlpine, the Obama administration has proposed using federal stimulus money to help funnel more loans to small businesses. The White House has also asked Congress to eliminate capital gains taxes for one year on new investments in small-business stock, and called for a new tax incentive to encourage small businesses to hire more employees.

On Dec. 14, Obama called a meeting of executives of Wells Fargo & Co., Citigroup Inc., Bank of America Corp. and nine other large banks, and told them that they owed it to the nation to make more loans to small businesses and help rebuild the economy.

In California, the need is great.

Over the last year, the Los Angeles, Riverside/San Bernardino and Sacramento metropolitan areas have led the nation in small-business bankruptcy filings, said Tim Klein, a spokesman for Equifax.

About 19,000 small businesses filed for bankruptcy in California during the 12 months ended Sept. 2009, up from 10,500 the previous year.

During September alone, 2,229 small businesses filed for protection, up from 1,503 filings in September 2008, the firm reported.

Kathleen March, a bankruptcy lawyer in Los Angeles, said she often pushes her clients to file for personal bankruptcy instead of a business filing because it's easier.

Many people also close down their businesses thinking that will solve their problems, only to find their companies' debt lives on, March said.

"The norm is if you're running a small business, you will have to either cosign or personally guarantee the significant debts," she said. "The business itself can shut down, but the people cosigned all the debts. So, the individuals are then saddled with these huge debts."

A client who owned a surf shop was paying for business expenses from the client's own funds long before filing for personal bankruptcy, she said.

"In this economy, anything that isn't a necessity is a tough business to be in," March said. "And the majority of my clients have waited too long to file for bankruptcy and in the process made things worse on themselves financially as a result."

nathan.olivarezgiles

@latimes.com

[rushmc 23]

Quote

Small-business bankruptcies rise 81% in California
With credit tight and consumers still pinching their pennies, many business owners find they can't go on.

The Obama administration's new plan to give a boost to small businesses reflects continued trouble in that sector, which is facing new failures even as much of the nation's economy is stabilizing.

As credit lines have shrunk and consumers have cut back on spending, thousands of small businesses have closed their doors over the last year. The plight of struggling firms has been aggravated by the reluctance of banks to lend money, said Brian Headd, an economist at the Small Business Administration's office of advocacy.

"While bankruptcies are up, overall, small-business closures are up even more," Headd said.

California has been particularly hard hit. The latest data show small-business bankruptcies up 81% in the state for the 12 months ended Sept. 30, compared with the previous year. Filings nationwide were up 44%, according to the credit analysis firm Equifax Inc.

The actual number of small businesses in trouble is probably higher, experts said, because many owners file for personal bankruptcy rather than seek protection for the business.

Dennis McGoldrick, a bankruptcy lawyer in Torrance, said his clients are all stuck in similar situations -- capital is hard to come by, customers are tough to attract and debt is piling up.

"We can't keep up," McGoldrick said. "There's more people that want to come in every day than I can see."

Cecily McAlpine, who filed for bankruptcy protection for her Cold Stone Creamery franchise this spring, said the experience was humiliating but she had no choice.

Receipts at the fledgling Compton ice cream shop plunged dramatically during the recession, and by late 2008 she was paying her employees out of her pocket.

"When the refrigerator died, that was it; I'd just had it," McAlpine said. "That was the day I broke. I just started throwing stuff away."

McAlpine recently withdrew her bankruptcy filing after selling all the store equipment and paying off her creditors. She is slowly paying off some back-rent and utility debt, and will officially dissolve her business in the next couple of weeks, she said.

"I still feel scarred and like a loser," she said. "Even though I'm not in it anymore, it's still there."

Recognizing the problems of business owners like McAlpine, the Obama administration has proposed using federal stimulus money to help funnel more loans to small businesses. The White House has also asked Congress to eliminate capital gains taxes for one year on new investments in small-business stock, and called for a new tax incentive to encourage small businesses to hire more employees.

On Dec. 14, Obama called a meeting of executives of Wells Fargo & Co., Citigroup Inc., Bank of America Corp. and nine other large banks, and told them that they owed it to the nation to make more loans to small businesses and help rebuild the economy.

In California, the need is great.

Over the last year, the Los Angeles, Riverside/San Bernardino and Sacramento metropolitan areas have led the nation in small-business bankruptcy filings, said Tim Klein, a spokesman for Equifax.

About 19,000 small businesses filed for bankruptcy in California during the 12 months ended Sept. 2009, up from 10,500 the previous year.

During September alone, 2,229 small businesses filed for protection, up from 1,503 filings in September 2008, the firm reported.

Kathleen March, a bankruptcy lawyer in Los Angeles, said she often pushes her clients to file for personal bankruptcy instead of a business filing because it's easier.

Many people also close down their businesses thinking that will solve their problems, only to find their companies' debt lives on, March said.

"The norm is if you're running a small business, you will have to either cosign or personally guarantee the significant debts," she said. "The business itself can shut down, but the people cosigned all the debts. So, the individuals are then saddled with these huge debts."

A client who owned a surf shop was paying for business expenses from the client's own funds long before filing for personal bankruptcy, she said.

"In this economy, anything that isn't a necessity is a tough business to be in," March said. "And the majority of my clients have waited too long to file for bankruptcy and in the process made things worse on themselves financially as a result."

nathan.olivarezgiles

@latimes.com

And this is where our current gov has us headed

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[Amazon 7]

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Receipts at the fledgling Compton ice cream shop plunged dramatically during the recession, and by late 2008 she was paying her employees out of her pocket.

OOPS yup that is all Obama's fault

[Gawain 0]

Not possible, TARP, Omnibus and Stimulus have fixed all that....better than imagined. VP Biden said so.

So I try and I scream and I beg and I sigh
Just to prove I'm alive, and it's alright
'Cause tonight there's a way I'll make light of my treacherous life
Make light!

[jcd11235 0]

Impossible. The private sector operates far too efficiently for a company to ever need to declare bankruptcy.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[kallend 2,030]

The fallout from the financial sector's mismanagement and folly sure is a bummer. Pity it was deregulated to the point that they could do this to the country.

Poor decisions by GM and Chrysler management also reverberated across the country.

The private sector sure fucked us all. Yet these are the people some idiots want running our healthcare system

...

The only sure way to survive a canopy collision is not to have one.

[mnealtx 0]

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Yet these are the people some idiots want running our healthcare system

As opposed to people whose plan is so fucked up, they had to bribe their OWN folks to vote for it.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[jimmytavino 16]

small businesses can fall into one of a couple of categories...

some are essential...
such as service companies, food suppliers, home and building maintenance providers and some health care companies.

and some are NON essential.....
Hoidy Toidy restaurants,
Ice cream stores,,, specialty clothiers,, ( high end) ,
spas and "relaxation" centers. Hairdressers and the like...
and very narrowly focused Shops and Boutiques... ( Think Fred Willard, and "the Scotch Boutique" from SNL...)( which sold scotch tape )...

When times get tough...specialty places WILL suffer....
non essentials will NOT be able to stay above water...
Not sure about CA. ,, but i would venture a guess that there are many "small businesses" which could easily disappear,, and never be missed..
Of course,, If High End ENOUGH!! the wealthy and the high rollers may still tend to frequent some of them...

A large part of the problem could be,, that many people think it's "A Piece of Cake" to "start ones own business"... ANYbody can do it!!!!!

IF someone does so,, AND begins by "taking out a loan"...They could inadvertantly be perching themselves on a precipice
.... before even getting Started..... They can't get into the black,,, unless the banks FIRST,,, get their taste...and if the numbers don't work. the business owner is often LAST in line...

One or two missteps,,, or a turn in the local economy,,, or as has been the case.. a huge backstep, in home values, and it's suddenly crunch time...

Too bad....

Better to start with a sensible plan... EARN money ,, but don't TAKE the money ( the owner should be the LAST person who takes $$$ when a company is trying to get started...) Resist hiring others, unless it's absolutley justified by the cash flow.... and plan for it to take some time.. before it is In the Black.
Owners who fancy themselves as some sorta big shot, going out and buying say, a company car, ( on credit) or pulling equity out of their home,,, on some fly by night idea.... can easily be faced with Higher mortgage payments,, AND a company that can't be self sufficent...

a bad mix..

flexibility, the willingness to adjust business plans as needed,,, and SELF financing. may help one to avert such a sad ending.

imho

jimmy

[Lucky... 0]

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And this is where our current gov has us headed

Riiiight, the recession that started in mid-late 07 wasn't the culprit and the idiot that watched it hoping it would fix itself isn't to blame either.

This is where our gov has us headed: http://www.bea.gov/newsreleases/national/gdp/gdp_glance.htm

And the stock market over 10k and holding a year early.

And now unemployment now dropping.



So call Obama a turd for advocating the prescription drug BS and for keeping us in the ME, but please, get your facts straight before uttering ridiculousness about the current fiscal turnarround.

[Lucky... 0]

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Not possible, TARP, Omnibus and Stimulus have fixed all that....better than imagined. VP Biden said so.

TARP was Bushes baby and it saved the banks. The GDP has flipped http://www.bea.gov/newsreleases/national/gdp/gdp_glance.htm, the market mostly recovered and un employment dropping. To expect a 2-week turnaround is to be a Republican.

[Lucky... 0]

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Quote

Yet these are the people some idiots want running our healthcare system

As opposed to people whose plan is so fucked up, they had to bribe their OWN folks to vote for it.

Perhaps because some of our so-called OWN folks are just like Lieberman, so that is the issue.

[funjumper101 15]