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US Small Business After Crisis

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Posted by Jose Barreto on November 25, 2010 at 8:44 am

Small businesses in United States suffered a lot during 2007-2009 recession. As per a recent Deutsche Bank research survey, small businesses are showing an improvement in employment.

The key strengthening for the nascent US small business recovery is by improved sales outlook and access to financing. Small businesses have been slow in recovering because of deep losses in the most recent recession. First reason for this is that the construction sector which comprises of 86 percent of small firms was hard hit with recession and it has struggled a lot through out the downturn. The second reason is that the financial crisis. Due to recent recession, there were tighter terms of credit for loans to small businesses who relied more on traditional bank loans and other form of credit.

Uncertainty about the economy and lackluster sales are the main backlogs which are obstructing fast recovery of small businesses. According to a National Federation of Independent Business (NFIB) report published in February 2010, about 51 percent of small employers are finding slow or declining sales as their principal immediate economic problem. About 22 percent of them cited uncertainty and about 8 percent cited access to credit. Just 40 percent of the small businesses are trying to borrow in 2009.

There was also a negative impact of falling real estate values on small business owners’ ability and capacity to borrow as about 95 percent of small businesses were owning real estate.

There was also a fall in lending to small businesses as a result of the financial crisis. As per Federal Reserve, the loans to small businesses decreased from nearly USD 700 billion in second quarter of 2008 to circa USD 660 billion in first quarter of 2010.

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