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Renita Jablonski: Today, we launch our occasional series on the impacts of the credit crunch. The scarcity of new bank loans has hit many small business owners hard. The National Small Business Association says more than half its members have had trouble getting credit recently. Marketplace's Amy Scott looks at one company struggling to stay on track.
Amy Scott: Rick Snow sends a racer on his way down an indoor go-kart track. Snow owns Maine Indoor Karting, just outside Portland. Back in the fall, he started noticing a drop in what he calls arrive-and-drive customers. People were still booking bachelor parties and corporate events, but the drop-in customers with a little extra cash in their pockets weren't showing up.
Rick Snow: Our summer months are very strong usually, and then we see a drop-off in September and October anyway, so we were kind of planning for that. But when our business didn't really pick up a lot in November or December, we realized that maybe we were in more of a crunch than we had thought.
Meanwhile, Snow saw his costs rising -- everything from the food for the cafe to the gas for the go-karts. His employee health insurance plan jumped 22 percent this year.
To get by, he and is wife were forced to hire fewer staff and work longer hours. One big way to cut costs was to buy the building that houses the track. But they needed money for the down payment. So, like a lot of small business owners, the Snows turned to their home.
We knew we'd have to apply for a mortgage on our home and tap into the equity into our house.
And that's when Snow came face to face with the credit crunch. He and his wife had good credit and enough savings to make their monthly payments. But because their business was still getting off the ground, they couldn't prove a steady monthly income.
With a so-called no-document loan, you don't have to. But because of abuses during the housing boom, these mortgages got the nickname "liar loans." And when Snow applied for his mortgage in February, he hit a roadblock.
Snow: The Monday before our closing, the bank called and said the state has just passed a law that won't allow us to do no-document mortgages. So we had to scramble and figure out what are we gonna do now?
What they did was eventually find a bank in Tennessee that would make the loan.
But the delay cost them almost $18,000 in rent and other expenses, plus an extra 1 percent interest on their home loan.
Snow: It's an awful lot for a small business.
Snow did find one bright spot in this whole mess. Thanks to the Federal Reserve slashing interest rates, Snow managed to lock in a low rate on his commercial mortgage.
But traffic is still down at Maine Indoor Karting. And Snow says he's praying for a strong summer to get things back in gear.
I'm Amy Scott for Marketplace.