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An example, drawn from life, about how the credit crisis hits Main Street
I am, as you probably have figured out, involved in the construction industry. I design buildings. Other people build them. This generally is a good plan.
Most building contractors operate on what is called a "bank line of credit" for day-to-day cash flow. They borrow money to build a $20,000,000 school or courthouse. They don't front the cash for your public (or private) project out of their own deep pockets. Instead, they buy steel and concrete and man-hours using bank money, bill for the work *in place* on a monthly basis, and somewhere from two months to a frigging *year* down the road from when they did that work, they get paid from the school board's or county's construction account.
No line of credit, no work.
And banks have been cutting those lines of credit.
Most building contractors operate on what is called a "bank line of credit" for day-to-day cash flow. They borrow money to build a $20,000,000 school or courthouse. They don't front the cash for your public (or private) project out of their own deep pockets. Instead, they buy steel and concrete and man-hours using bank money, bill for the work *in place* on a monthly basis, and somewhere from two months to a frigging *year* down the road from when they did that work, they get paid from the school board's or county's construction account.
No line of credit, no work.
And banks have been cutting those lines of credit.