In Focus: Nightmare on Wall Street 'could hit small business'


The collapse of investment bank Lehman Brothers could hit small businesses across the US, as the shockwaves from its demise could squeeze credit further and tighten access to lending, analysts have warned.

The fallout of the past weekend has shaken markets worldwide and with only two of Wall Street's Big Five investment houses still standing, there are concerns that a shortage of money will now prompt lenders to cut off the loans that entrepreneurs often rely on to expand their businesses.

Jonathan Rosenthal, a partner with investment firm Saybrook Capital, told the Los Angeles Times: "There's lots of companies that want money but not a lot of providers who want to lend money."

Many small and medium-sized firms were already facing tough borrowing conditions, with the credit crunch constricting the flow of funds for everything from internal growth to going public, it added.

Figures from Renaissance Capital show that 36 companies completed first-time initial public offerings in the first six months of 2008, compared to 133 during the same period of last year.

Nevertheless, some experts believe the current turbulence could actually be good news for small businesses - and the economy - in the long-term, as it will eradicate "rampant speculation" and usher in more disciplined lending