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Singing the 'Can't Pay the Bills' blues?

Cheryl Rae owns a beauty salon and supply shop called Scarcella's in French Valley, Calif., and over the past few months she's found it harder and harder to pay the bills.

Consumers are bypassing her salon-grade shampoos that can run upwards of $25 for cheaper drug store versions, she said, and many regulars aren't getting their hair cut as often.

Right now, she's a few months behind on her rent, and the bills just keep piling up.

"The economy has hit us hard," said Rae, and she wonders how much longer she'll be able to keep her doors open.

It turns out Rae is not alone. An increasing number of small business owners are having trouble paying bills, according to a new survey.

The poll, conducted by Discover Small Business Watch, found:

--Forty-four percent of small business owners have experienced cash flow issues over the last 90 days, up sharply from 38 percent in October. This is the category's highest rating since April 2008, when the same number of owners reported cash flow issues.

--Cash flow difficulties were most pronounced for small business owners whose primary customers are consumers: Forty-nine percent said they had cash flow issues in the past 90 days that caused them to hold off on paying some bills, while only 33 percent of owners who sell business-to-business expressed the same issue.

"Small businesses are continuing to feel pressure in this weakening economy," said Ryan Scully, director of Discover's business credit card, in a statement. "The number of owners having trouble paying their bills is the highest we've seen since April and more than half of owners are cutting back on their business development plans, which is an all-time high."

I asked Discover if they had any numbers on how many business owners are having trouble paying their credit card bills in particular, or whether late payments have risen. I also wanted to know if the company was doing anything to help out small firms during this tough economic time.

Discover spokesman Jon Drummond says the company does not release numbers on late payments.

As for help for small firms, the company "proactively identifies and calls customers who show the potential for financial distress in addition to assisting those who approach us directly for help," he said. If a customer is deemed "high risk," Discover stops sending them promotional offers; and they offer card holders different payment options.
 
And, he added, "for customers who do become delinquent, our customer assistance team works with them to try to bring their accounts current again."
 
Sometimes trouble paying bills is a function of small business owners not getting paid themselves.

A recent Intuit Billing Manager "Get Paid" survey found that the average small business owner loses close to $1,500 each month becasue of overdue payments or unpaid bills.

The survey also asked:

--With the current economic uncertainty, what key issues about your business keep you up at night?

Forty-two percent of respondents answered: Getting paid quickly (cash flow).

--Are you seeing an increase in overdue/no payments now compared to a year ago?

Thirty-three percent of respondents answered: Yes.

Unfortunately, the late payment of bills is only the beginning of a downward spiral for entrepreneurs like Rae.

"I have this dream that we're going to pull out of this economy, but we're not even making the rent," she lamented." There is no way for us to weather it."

And she gets angry when she sees the federal government bailing out huge corporations and doing little to help people like her.

"It just infuriates me because small business owners are getting kicked left, right and simple," she said.

Are you all infuriated? Are you able to pay the bills? Do you think small businesses also need a bailout?

The Wall Street Journal reported recently that the federal government is providing "up to $200 billion in financing to investors buying securities tied to student loans, car loans, credit-card debt and small-business loans."

Will that be enough?