Though there have been a number of economic improvements in the last few years, since the end of the recent national recession, many see the growth of the economy at large as not being as fast as it could be. This is particularly true of small business owners, who have a number of concerns on the matter related to federal issues.
Today, six in every 10 small business owners say that there has been a negative impact on the national economy because of the amount of uncertainty currently seen in Washington, D.C., according to the latest Small Business Authority Market Sentiment Survey released monthly by Newtek Business Services. Another 22 percent say that the biggest issue is related to rising income taxes, while the remaining 18 percent felt this way about payroll tax increases.
"With all of the data obtained in today's society, our independent business owners are still most concerned over the confusion and uncertainty in Washington," said Barry Sloane, chairman, president and chief executive officer of Newtek. "Despite payroll tax increases, Obamacare, and a weak economy, the uncertainty over what the federal government is doing to the business climate is our small business clienteles' biggest worry. The uncertainty and lack of confidence in Washington continues to put a damper on future decision making, risk taking and economic forward thinking."
Are small businesses preparing for troubled times ahead?
All this economic uncertainty can be a problem for businesses of any size, but may be particularly impactful on smaller, independent enterprises, and many of these companies' owners may consequently be scaling back plans to expand, according to the Thomson Reuters/PayNet Small Business Lending Index for February. In all, this index slipped to a rating of 101.3, from January's 111.7. That also constituted a year-over-year growth of just 2 percent, the smallest such increase observed since September.
PayNet founder Bill Phelan told Reuters that despite the existence of the Federal Reserve Board's new bond-buying efforts and the resultant low interest rates, many small businesses have still been unable to take on more debt in their efforts to expand, the report said. That may show they simply do not have the belief that the economy is improving enough to justify such a major financial move, and that, in turn, may also hinder hiring by these companies in the near future.
Moreover, there may be other concerning signs for small businesses that show the financial stress they're now feeling is on the rise, the report said. Instances of late payments – between 31 and 180 days behind – on small business loans have risen by nearly 20 percent in the last several months, climbing to a rate of 1.85 percent in February. That's up from the all-time low of 1.55 percent in August.
These changes came even as delinquencies on other loan types have tumbled during that time, to 1.58 percent from 1.62 percent, the report said. Moreover, borrowing for nearly all other types of loans continues to expand as well, potentially indicating that while consumers are generally feeling good about the direction of the economy and their ability to borrow comfortably within it, their view is not shared by the majority of small business owners overall.
Of course, each small business owner's situation is different, and with costs for liability insurance for businesses generally rising, owners will have to necessarily assess their own standings before proceeding with any plans to expand their businesses or begin a new round of hiring. Getting a complete picture of a company's financial situation will help owners to make more informed decisions about growth.