Falling home values are rippling into the entrepreneurial corners of the northern Nevada economy as folks who want to launch a business no longer can tap their home equity lines for start-up capital.
And banks are tightening their lending criteria, cutting off another potential source of funding for business start-ups.
But entrepreneurs remain enthusiastic.
"They usually aren't thinking about the economy. They are only thinking about their idea," says Deborah Prout, executive director of the Nevada Microenterprise Initiative. Her organization loans to the smallest of business start-ups, those that need to borrow less than $35,000.
No one keeps track of small-business startups. One indication is the number of business license applications filed with local governments, although those licenses are required for everyone from the mom who does child care in her home to giant retailers such as Wal-Mart.
In Washoe County, the 866 business licenses issued in 2007 represented a 7.1 percent decline from year-earlier figures.
Reno officials, meanwhile, say the number of business licenses they're issuing these days hasn't changed much either up or down in recent months. A little more than 25,000 business licenses were in effect in the city on July 1, the start of the municipal fiscal year. That was an increase of about 2.5 percent over the year-earlier figure.
The Nevada Small Business Development Center at the University of Nevada, Reno, remains busy but much of its work these days is devoted to keeping existing small businesses afloat rather than helping entrepreneurs launch new ventures.
"Access to capital has shrunken substantially," says Rod Jorgensen, director of counseling and a management consultant at the small business development center.
The use of home equity lines of credit to finance a new business, he says, has almost disappeared as flat or falling home prices leave less equity to be tapped.
Banks, meanwhile, are demanding more collateral from business borrowers as lenders look to strengthen the quality of their loan portfolios.
None of that has discouraged the entrepreneurs who turn to the Nevada Microenterprise Initiative. The organization made $600,000 in loans last year, and Prout says 25 of them were for $5,000 or less.
"We had a great year. People are optimistic," she says. "They continue to want to start small businesses."
Some of them, Prout says, are folks who have been laid off from other jobs or have decided to accelerate a sideline business into fulltime employment as they worry about the future of their day jobs.
The slowing economy also means that owners of existing small businesses are battening down the hatches, and that's shifting the workload of advisors.
"We're as busy as busy can be," says Jorgensen.
Commonly, he says, small business owners these days are looking to fine-tune their marketing efforts at the same time that they reduce their costs. It's not uncommon, he says, for business owners to ask their landlords for lower rent as a way of ensuring their survival.
The Nevada Microenterprise Initiative, meanwhile, is paying closer attention to the ability of its borrowers to weather a financial downturn especially if the borrower wants to launch a business that delivers a service or product that buyers might view as less than essential in tough times.
"Our analysis is shifting," Prout says. "They'll have to be prepared to be persuasive."
An economic downturn, she says, is particularly threatening to young entrepreneurial businesses because they often are thinly capitalized and don't have the extensive experience that helps them to survive.
"A lot of things can knock them off stride," Prout says.
But economic storm clouds don't necessarily mean that well-considered business plans will languish for lack of financing.
"There are always good businesses to loan to," Prout says.
