An owner of a small knitting shop on trendy Montana Avenue in Santa Monica has seen many fellow small business owners go belly-up. Sales for her 20 year-old business are down 55 percent in the last two years. She has been forced to lay off half her employees and has lost nearly a half million dollars in revenue.
It seems no one is immune. The big fishes are taking their licks as well.
Rachel Ashwell, known for her Shabby Chic home furnishings empire, has had a storefront on Montana Avenue since 1989. In 2009, she along with 19,000 other small businesses in the state of California filed bankruptcy (in her case, chapter 11 protection.).
Ashwell's Santa Monica flagship store closed its doors last year along with her other retail and manufacturing locations. (She has since reopened a pared-down "couture" version of Shabby Chic in Santa Monica and New York City--guess it helps to have access to investors.)
Last year was the trifecta for small businesses in the state of California: loss of consumer confidence, mounting debt and non-existent loans.
The 22 banks that received the lion's share of federal bailout money are of little or no help to the state's small businesses. The banks have cut small business lending by $11.6 billion since April 2009.
With consumer purchasing levels at historic lows, most banks feel lending to any small business is just too big of a risk these days.
Many California small business owners are frantically trying to secure loans to limp them through until business picks up again.
Others have adopted extreme cost-cutting measures like reducing or eliminating staff. The most desperate have gone back to 9-to-5 jobs just to pay rent and keep the creditors at bay.
Even if consumer spending miraculously rebounds this year, it will be far too late for most small businesses. It could take California businesses years to recover from the devastating effects of the economic crisis, if at all.
That doesn't bode well for the state's entrepreneurial spirit.
