Few Small Businesses Plan to Hire as Economy Struggles: ReportBy Channel Insider Staff | Posted 2011-09-26 Email Print
There is more gloomy news from the small business front as companies report margins are squeezed and hiring prospects are slim.
Newtek Business Services announced the release of the Small Business Authority Index for August 2011, which reached 108.06 points. The SB Authority Index is up 0.76 percent from July 2011, with approved SBA loan volumes, the Russell microcap index and retail sales causing the increase in the index. However, the index growth was limited by the flat and slight reduction within the other five components.
Newtek President and CEO Barry Sloane said the small business economy continues to struggle as consumer spending and employment trends are clearly reducing economic activity. Plus, the recent announcement of monetary policy by the Federal Reserve may increase interest rates to small businesses as most small businesses borrow on a prime rate basis and off the short end of the yield curve.
"If Federal Chairman Bernanke's 'twist strategy' works, long-term rates will decline but at the expense of short-term interest rates increasing. Again, if the strategy works, it will be most beneficial to the long end of the market, which drives residential mortgage rates lower and cost to refinance lower," Sloane said. "This should put increased cash and disposable income in hands of consumers and may take several months before we see the effects. Short-term rate hikes to small businesses will be effective immediately."
The company also released the findings of its SB Authority Market Sentiment Survey, a monthly window into the concerns of independent business owners. Based on a poll of approximately 1,100 respondents, one of the key findings from the survey was that 69 percent of small business owners do not plan on hiring. In addition, two other questions in their survey appeared to support the findings of business pessimism.
Most business owners, looking out on the horizon, are either pessimistic or neutral at best, regarding the overall business environment. Several business owners during the last 12 months have raised their prices or maintained them to fight off the effects of inflationary pressures eroding their margins. Business owners in an economy described as stagnant said they need to improve their cash flows and bottom lines while continuing to look toward the only segment of their business where the market enables them to improve their cash flows.
"Technology utilization needs to be embraced by small to medium-sized business owners over the next several years. It is the only area where internal costs to run one's business can be reduced as well as produce efficiencies in performance and production of one's labor pool," Sloane said. "There is no denying the trend of utilizing the cloud environment for computing and operating one's business is far superior in costs, security and efficiency than what business owners are typically using today."
To read the original eWeek article, click here: Small Business Economy Struggling, Few Plan to Hire: Report