source for article: Wall Street Journal,  by Simona Covel

The banking-industry crisis is having an immediate impact on at least one group of small and midsize businesses: those that were built to provide products and services to a booming financial sector.
The effect on these companies “has been nothing short of devastating,” says Charles Doyle, managing director at Business Capital, a San Francisco company that provides financing and restructuring services for distressed companies. “It is complete carnage.”
Many of Mr. Doyle’s clients — mostly small-business executives — have already cut staff and borrowed against their assets, he says. Some are using credit cards to survive and have stopped taking paychecks themselves. He adds that many of their accounts receivable are so far past due that they are considered uncollectible by lenders, which can limit a company’s borrowing options.
Ken Goldstein, an economist at the Conference Board, a New York think tank, estimates that each finance job probably supported two to three other jobs. The cash-rich finance industry was known for consuming more lavish services — including limousines, corporate gifts and fancy technology — than many other sectors.
Over the 25-year life of computer-supply company E-Mediaplus, more and more of the company’s business came from the finance sector each year, says President and Chief Operating Officer Jim Jarman — in part because of the company’s Hackensack, N.J., location, which is near New York. Mr. Jarman declines to name individual clients, citing nondisclosure agreements, but says the company has lost hundreds of thousands of dollars of business over the past few months as big banks and finance companies have merged or disappeared. Business has fallen off so sharply that a few months ago, sales were growing at about 20% over last year’s rate, and now Mr. Jarman expects to post a 15% decline for the year.
The company is working to build other parts of its business, including computer-tape recycling and data destruction. But when a single Wall Street bank provided $800,000 in revenue annually, “it’s going to be tough to find another account that’s going to give you a couple million [dollars] over two years,” he says. E-Media is down to 19 staff members, compared with 35 a year and a half ago.
Tim Bartek thought the banking sector would help his business, Integra Software Systems LLC in Franklin, Tenn. The company, which provides software for lending, watched a fifth of its mortgage-banking customers disappear this year and last. So the company expanded its clientele to include consumer-and commercial-lending institutions. Now, banks and credit unions that talked about expanding consumer and commercial lending “have put it on the back burner,” says Mr. Bartek, Integra’s senior vice president for sales and marketing. In some cases, the company was midway through a deal cycle when the customer returned to say, “We’re pushing it back to ‘X’ date,” Mr. Bartek says, adding, “I have no idea when ‘X’ is.”
In the meantime, Integra has cut its staff more than 20%, to 30 people, through attrition and layoffs.
The problems are growing even for companies that are more diversified. About 15% of Per Annum Inc.’s business came from big Wall Street companies, which ordered the custom-publishing concern’s calendars and city guides as corporate gifts.
Over the past few months, Alicia Settle, Per Annum’s founder and president, has watched that business slip away. When Merrill Lynch & Co. was acquired, a $50,000 order disappeared. Bear Stearns Cos., which was also gobbled up, had been a big client, too.
Other accounts remain up in the air as Ms. Settle waits to see if the remaining big banks place their annual holiday orders.
She is not optimistic, though. “Most people right now are shying away from corporate gifts,” she says.
When business took a dive in the months after the Sept. 11, 2001, attacks, Ms. Settle says, she was able to put her own money into the New York-based company to keep it afloat.
This time, she says, her personal investment portfolio is down 25% and she is not sure she can do that again.
Instead, she is working with her vendors, which have agreed to longer payment terms and, in some cases, to send items directly to the end customer so Per Annum doesn’t have to preorder and hold lots of expensive inventory.
With a continuing stream of bad news from global markets, Ms. Settle doesn’t see corporate gift-giving picking up anytime soon. And though the company has made a concerted effort to increase its retail business in recent years — it’s about half of the total now — consumers are pulling back, too.
“Quite frankly,” Ms. Settle says, “I don’t know what we’re going to do.”

Write to Simona Covel at simona.covel@wsj.com