Buyout activity is facing crunch, too: stingy credit terms slow takeovers, sales of L.A. firms.

Homes aren't the only things that are difficult to buy or sell these days as the mortgage market has imploded and the financial position of Calabasas-based mortgage lending giant Countrywide Financial Corp. has rapidly deteriorated. The spreading credit crunch is also making it more difficult--and more expensive--for Angelenos to buy and sell businesses.

"Things have really changed in the last 10 days or so. Deals that are more marginal are tougher to get done," said Steve Brodhead, managing partner with Torrance based Sunbelt Business Sales & Acquisitions.

Brodhead said that because lenders have pulled back on their lending, business buyers now must put more of their own money into the deal. And if they don't have enough to close the deal, then they are also asking the business seller to put some money into the pot.

"If you're looking to buy a business and don't have all the cash on hand, if there is bank money involved. the bank will ask for more of a down payment from the buyer, which makes the deal more expensive," he said.

A year ago, it was common for a bank to require a down payment of 20 percent or 25 percent. Today, Brodhead said, banks have upped that to 33 percent, with some going as high as 40 percent. As a result, potential business buyers are left with two choices: finding a smaller company to buy or cobbling a deal together that often includes asking the seller to put up some money to bridge the gap.

With the credit crunch roiling the private equity markets, a business looking for a private equity buyer is also having a tougher time.

"I'm counseling businesses that are looking for private equity buyers to wait. The prime time to do a deal isn't now. It may be a few months from now," said Lloyd Greif, president and chief executive of downtown L.A.-based middle market investment bank Greif & Co.

Companies looking to sell to other operating companies are faring better, at least for now. But the lending clampdown has put the squeeze on financial buyers, entities like private equity firms that specialize in buying up companies, trying to make them more efficient and sell them for a profit.

"We've got transactions going on right now with financial buyers. It's a moving target as to how much money they can borrow. Basically, in each case, we're seeing how the month shakes out and then we'll resume talking again after Labor Day." he said.

Much will depend on what happens with the broader financial markets in the next few weeks. And those markets have their eyes fixed on Country, wide, the nation's largest mortgage lender. Last month, the company released figures showing a rise in delinquencies across, the board (not just in the subprime sector). Chairman and Chief Executive Angelo Mozilo also warned that a credit crunch could pose liquidity, problems for the company.

Last week, following a report by a Merrill Lynch & Co. analyst that outlined a potential bankruptcy scenario for the lending giant that prompted a further slide in the company's stock. Countrywide reported on Aug. 16 that it had tapped all of an $11.5 billion line of credit because it was finding it increasingly difficult to tap the credit markets for cash.

Countrywide's shares plunged nearly 30 percent on that news, which in turn sent the Dow Jones industrial average plunging more than 300 points. The stock was down more than 50 percent on the year.

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Local dealmakers and bankers say they expect more pain in the mortgage and private equity sectors in coming months. The question is whether that pain will spread to the broader economy, which in turn would hit corporate profits. That would make companies less attractive as buyout targets, further constraining the deal market.

"What's happening now will clearly have some impact on the national economy. The concern is how widespread some of the excesses have been, and about the current constipation in credit availability," said Russell Goldsmith, chairman and chief executive of City National Bank, the banking subsidiary of Beverly Hills-based City National Corp.

"As long as the rest of the economy is doing reasonably well, I think we'll get through this period. There will be some pain inflicted in the short ran, especially in the housing industry. But things will get sorted out," Goldsmith said.