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By MICHAEL SASSO

msasso@tampatrib.com

Published: November 5, 2008

TAMPA - You don't make a fortune teaching art to children, but Tony Capobianco counts himself lucky nonetheless that he was able to break into the business.

Two years ago, he withdrew about $55,000 from his 401(k) and IRA accounts - without accruing an early withdrawal penalty - and used the money to help buy a children's art franchise called Abrakadoodle. Tapping one's retirement account for business purposes is allowed in some circumstances.

Today, Capobianco considers himself fortunate because that option likely has dried up for many other small business people, who have seen the value of their retirement accounts dwindle recently. "I looked at my retirement accounts and said, 'What would that be worth today?' It probably would be worth 38 percent to 40 percent less," Capobianco said.

While the lack of access to bank credit has gotten the headlines lately, locally small businesses may be having just as much trouble tapping into other types of business financing, including home equity, government-backed loans and retirement accounts.

One silver lining to the credit crunch: Business has slowed for many companies, so they may not need a lot of credit right now.

The federal government has started putting its $700 billion financial rescue plan into place, but it's not clear banks have increased their lending. This week, news broke that credit markets were beginning to loosen, suggesting that getting a loan will become easier.

It's not clear whether that's happening at large banks yet. Bank of America's Florida spokeswoman wouldn't comment on its current lending practices, beyond saying that Bank of America is "evaluating opportunities as they come up." Smaller community banks insist that they have money to lend, and that the real problem is that the recession has caused demand for loans to plummet.

"We see a lot of waiting and seeing going on," said Doug Winton, market president of Republic Bank.

Outside of traditional bank loans, evidence suggests that credit is still much tighter for businesses than in the past.

Reporter Michael Sasso can be reached at

SIGNS OF A TIGHT CREDIT MARKET

•Reduced home equity. Many small business owners tap into their personal home equity through home equity loans or credit lines to fund their businesses. However, this source of capital has dried up as people's housing values have plummeted.

In December 2006, home equity extractions made up 13.5 percent of borrowers' disposable income. By June of this year, borrowers were pulling less than 2 percent of their disposable income from their homes, according to Moody's Economy.com, which tracks home equity extractions.

•Fewer SBA loans. To encourage banks to loan money to small businesses, the Small Business Administration guarantees bank loans through its 7(a) loan program. However, banks have been cutting back on making such SBA-backed loans.

MONEY 911:

How do small businesses

find money to help bridge

the gap while waiting for an economic turnaround? Watch a Bay area couple get advice from renowned money expert Jean Chatzky at 11 p.m. Wednesday on News Channel 8.

Keyword: Money 911, to check out our special report.

(813) 259-7865.

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