Wall Street's crisis hitting small business

But a survey done in 2007 for the National Small Business Association (NSBA) found that just 67 percent of respondents said they could obtain adequate financing, compared with 76 percent in 2000. The largest source of financing for the small-business members: their credit cards.

That's the case for Marilyn Landis, chairman of NSBA and owner of Basic Business Concepts Inc. in Pittsburgh. Ms. Landis is expanding her business, which provides temporary chief financial officers for companies not large enough for a full-time CFO. She applied twice for a line of credit and instead was sent a credit card.

Recently, Landis has been traveling weekly to New England as part of the expansion of her business, so she has run up her credit-card balances. "Much larger monthly balances – even though I pay off the card every month – triggered a change in my credit score," says Landis, a former banker. "One card company cut my credit line in half. Another card company raised my finance charge from 3.99 percent to 23.99 percent."

Impact on universities

Educational institutions have also been encountering challenges. Last week at a dinner in New York, many of the presidents or chancellors of eight universities said that the turmoil in the credit markets was affecting their institutions. G.P. "Bud" Peterson, chancellor of the University of Colorado, Boulder, said he was expecting a significant contribution from an alumnus. But out of the blue, his potential donor said he wanted to wait until the financial markets settled down.

Rebecca Chopp, president of Colgate University in Hamilton, N.Y., said her graduates sometimes have landed jobs at Bear Stearns, an investment bank that will disappear after an emergency merger with JPMorgan Chase.

Lois DeFleur, president of the State University of New York at Binghamton, recounted how more students are coming in for financial aid because their parents' financial situations have changed.

The credit-market turmoil also means some states and other municipal borrowers are paying more interest on some debt. For example, the state of Wisconsin is in the process of restructuring $945 million in short-term borrowings. In the past, the debt carried interest rates in the 5 to 6 percent range. But last month, it spiked up to 10 to 11 percent. To remedy that, on April 1, the state will issue longer-term debt for most of the prior short-term borrowings.

It's still too early to know if it will cost the taxpayers of Wisconsin more money to borrow. But in any event, other costs exist. "At the moment, there are some additional transaction costs and enhancement costs we had not planned on doing," says Frank Hoadley, state director of finance.

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