Small Business Confidence in U.S. Economy

Although, the National Small Business Association's (NSBA) data is compiled from late-August and early-September surveys prior to the most recent banking failures, it can safely be stated that small-businesses owners are concerned with the security of their money.

Due to the fact that the Federal Deposit Insurance Corporation (FDIC) only guarantees up to $100,000 per account holder per bank, small businesses could be particularly at-risk. When asked if the current FDIC insurance limit of $100,000 is adequate enough to insure their business accounts, 68 percent responded that it was not adequate. Nearly two-thirds, 60 percent, have already or are considering taking action such as spreading deposits across multiple institutions to reduce their financial risk.

Small-business owners were asked about this particular issue in a Sept. 10 quick poll—prior to the most recent onslaught of government bail-outs and bankruptcies. That number is likely much higher now. A significant, and frequently not recognized problem small businesses have faced in the past 6 months is the collapse of the housing market. According to the February survey, nearly one-fifth (18 percent) of small business owners leverage their business loans with a second home mortgage.

As home values have plummeted, small-business owners are left with loans that far outweigh the value of their home. This imbalance is forcing bankers to account for the increased risk of a loan not fully backed by assets. A clear result of housing market woes is the higher rate (32 percent) of small-business owners with worsening bank-loan terms. In the February survey, only 27 percent cited worsening bank terms, and that was among smaller, less-established companies which traditionally face worse terms than those more well-established firms included in the August data.

Another issue grabbing headlines in the past six months is the ever increasing cost of energy. Small business, along with the rest of the country, is being pummeled by the cost of energy. Eighty-seven percent of small-business owners in August stated that rising energy costs have had a negative impact on their business. In February, 77 percent cited negative impacts of rising energy costs. Nearly half (47 percent) of small-business owners have reduced business travel and 42 percent have increased prices. One silver lining is the fact that nearly 20 percent have invested in energy-efficiency upgrades to their business.

For more information on how Access Companies can help reduce business overhead costs, call Bob Hutt at 866-722-4715.