“I’m stunned,” Mr. Greenblatt said. “God is smiling on this factory. We’re at such an exciting inflection point, and this is what a bank is supposed to do. There’s sand in the gears.”
No loan meant one fewer order for the factory in Chicago that makes the robot Mr. Greenblatt wants to buy, and fewer hours for workers there. It meant less business for the truck driver who would have hauled the robot to Baltimore, and no help-wanted ads for Marlin Steel Wire Products.
Mr. Greenblatt eventually got oral approval for the loan, though after more than a week. He was still waiting for the money at the end of last week.
Wachovia, which lost $8.9 billion in the second quarter, declined to discuss the loan. But the bank confirmed that it has been reducing its lending in troubled areas of the economy.
“We’ve got industries that we consider to be stressed industries, and we’re looking at those a lot harder,” said Carlos Evans, a wholesale banking executive for Wachovia, listing as examples housing construction, building products and distributors for those goods. “Our loan growth slowing is more indicative of the economy than anything else.”
Still, Wachovia’s commercial and industrial loans grew by 13 percent in June compared with the prior year, Mr. Evans said.
“We’re saying yes daily,” he said.
But recent signs suggest that tight lending is spilling from housing into other areas of the business world. Companies with solid credit and profitable businesses can generally still get loans, but rates are higher and wait times are longer.
According to a survey of senior loan officers conducted by the Federal Reserve in April, 55 percent of American banks tightened lending requirements for commercial and industrial loans to large and midsize companies — up from about 30 percent in the previous survey, in January. About 70 percent of the respondents said they have made such loans more expensive.
“Banks will be much more cautious and keep raising the bar, and that will lead to an outright decline in total commercial and industrial loans,” predicted Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh. “Banks clearly have to rebuild their capital base. They’re going to look a bit more nervously before they make those loans.”
Until last summer, banks lent freely, banking experts say, because they sold most of the loans they issued, making them less concerned about whether the customer could handle the payments: If the loan went bad, that was someone else’s problem.
But in the wake of the mortgage crisis, that system has all but shut down. Banks are now stuck with the loans they extend, making them more motivated to scrutinize their customers, particularly younger and smaller businesses.
“It’s the small business guy who creates most of the jobs,” said Mr. Kiefer, the First Capital chief executive. “If they can’t borrow to employ people, then we’ve got a mess on our hands.”
For the last six months, Saul Epstein has been trying in vain to get a $2 million line of credit for his company, Global Harness Systems. The company, based in Bala Cynwyd, Pa., has a factory in Mexico, where it makes parts for engines. The factory gets paid for its wares weeks after they have shipped, necessitating credit to finance the upfront costs of production — raw materials, labor and transportation.
Mr. Epstein figured that getting a loan would be easy. Since he became chief executive last year, Global Harness has gone from break-even to profitable. Sales should reach $20 million this year, up from $17 million last year, he said. But in this new era of caution, banks are focused on the fact that Global Harness lost money in 2005.
“They keep saying, the way the times are, we need a longer track record,” Mr. Epstein said.
Mr. Epstein, forced to limit his production to what he can finance with his existing cash flow supplemented by his own money, has been tightening credit himself: He has been turning down orders from companies with any whiff of financial troubles, lest his company fail to get paid.
“The same way the bank is hesitant to lend to me, you’re concerned about taking on a customer that might go into bankruptcy,” he said.
George Rosero, president and chief executive of Atlanta Pediatric Therapy, has been trying for more than a month to increase his roughly $500,000 credit line to about $1 million.
His company, profitable for the last two years, offers therapy to children with speech and physical impediments, he said. Mr. Rosero aims to expand by adding four sales people. He wants to buy new software to better manage communications with patients and hire a consultant to improve the work environment.
All of that is on hold.
“Three or four years ago, I could just make a phone call and get an increase,” Mr. Rosero said. “Now, they’re asking me for a lot more information.”