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CREDIT CRUNCH SWEEPING NATION FORCES SOME FIRMS TO SHELVE PLANS

KENNETH C. HELINSKI is getting tired of having doors slammed in his face. For more than a year, he has tried unsuccessfully to get his fledgling business off the ground.

Money has been the main stumbling block. Helinski simply doesn't have the funds to launch his Computer Assisted Record Retrieval System, a complex method of transferring information stored on large computer tapes to small compact disks.

Like many small-business owners, the 29-year-old Buffalo man has fallen victim to the infamous credit crunch that is sweeping the nation. Commercial banks are scrutinizing loan applications more carefully because of bad loans made by savings and loans.

The red ink on the ledgers of thrifts like Empire Federal Savings of America and Goldome has caused commercial banks to restrict credit, small-business lobbyists say.

Helinski has presented his 34-page business plan to bankers, venture capitalists, economic developers and friends. All to no avail.

"How are you supposed to get help, if they (bankers) won't give you a chance?" he asked.

The entrepreneur explained that his company could save large corporations both money and space by coverting their mainframe computer tapes to small CD-ROM disks. The Computer Assisted Record Retrieval System allows businesses to replace their huge centralized computers, which often occupy several rooms, with personal computers that can fit on a desk, Helinski said.

The small-business owner estimated he needs about $250,000 to buy equipment and rent office space. That "seed capital" generally isn't considered to be a lot of money in Corporate America. But because Helinski doesn't have a house or any valuable assets that he can put up as collateral, bankers aren't interested in loaning him money.

"It seems that the harder you prove to a bank you don't need money, the faster you will get it," he said.

Helinski said he understands why lenders view him as a poor credit risk. At the same time, he urged them to take a chance on his dream.

"This isn't a fly-by-night idea," he said, noting that about 10 companies throughout the country already use the same technology.

Helinski isn't the only entrepreneur having money problems. A heated debate is occurring within the small-business community and on Capitol Hill about whether there is a credit crunch and, if so, how severe it is.

In a recent study, the Federal Reserve Bank found that more than half of the banks it surveyed had tightened lending requirements to small- and mid-sized firms this year.

Small companies depend on bank loans to buy equipment, pay for supplies, stock inventory, build plants and expand. The loans to these small businesses, with less than 500 employees, help produce about 40 percent of the goods and services in the nation's $5.4 trillion economy.

When credit is plentiful, businesses borrow, helping them, and the economy, to expand. Six of every 10 new jobs in the economy, for instance, are created by small business.

But when credit is scarce and interest rates high, businesses can be forced to scale back and even cut jobs.

Economists now are concerned that a growing credit pinch could threaten the nation's 7 1/2 -year-old economic expansion. They say a full-blown credit crunch could bring on a recession.

In Western New York, it's difficult to say whether there is a credit crunch. For example, the Buffalo office of the U.S. Small Business Administration has arranged a record number of federally-guaranteed loans so far this year, according to Franklin J. Sciortino, the district manager.

"I can't say there's a crunch here," he said. The SBA's Buffalo office has processed $35 million worth of loans during the first five months of this year, compared to $22 million for the same period in 1989.

"We have some of the most progressive banks in the country in terms of small business," he said.

Sciortino noted, however, that lenders are carefully reviewing credit applications because of the savings and loan crisis. "They (commercial bankers) are saying to themselves: 'That could be us and we want to keep our quality up.' "

Rep. John J. LaFalce, D-Town of Tonawanda, said the "threat of a credit crisis" doesn't warrant loosening the regulations that govern banking. "I do not advocate easing regulatory standards," he said.

Surveys from the National Federation of Independent Business, the nation's largest small-business group, support the congressman's contention that small-business financing hasn't yet reached a critical stage.

The Independent Business group's studies show that nationwide the degree of difficulty for small businesses in obtaining loans has declined and stabilized since peaking in early 1989, according to William J. Dennis Jr., a senior research fellow at the Independent Business organization. "We do not have a national problem," he said.

Southwest businesses, however, have had more difficulty getting loans than companies in other parts of the country ever since the oil-price depression of 1986, Dennis said.

In New England, loans have been increasingly harder to get since the "Massachusetts Miracle" economic boom started dwindling a couple of years ago, he said.

Furthermore, the Independent Business survey and a report from the Conference Board suggest that the reason lending appears tight now is because current loan activity is low in comparison to a few years ago.

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