Thanks for Nothing

"I made something out of nothing, thanks for nothing." - Lil Wayne

I have to say that one of my favorite holidays in the United States is Thanksgiving.  Not only is the food delicious but it essentially marks the end of the year as the mood generally changes in preparations for the coming holidays.  In the small business community in which I operate it seems that there is a general sense of relief that we made it through another year.  The giving of thanks is more about another year of survival than a celebration of massive profits.  Obviously this is painted with a very broad brush as some businesses had a breakout year but overall small business has still not felt the full impact of the "recovery".

While big business has had a banner fiver year stretch small businesses have continued to struggle.  In another article highlighting the woes of small business it was revealed that banks have reduced their lending to small businesses this year from 58% of originated loans in 2009 to 43% this year.  The majority of small businesses therefore have to look beyond the normal avenues for sources of capital and while the capital is available it comes at a price.  Typically there is a spread of at least 5% over a bank loan and a private loan and often it is far higher than this.  For companies that are not showing profits or assets to use to secure the loans rates can rival those of credit card debt.

This drag is having a massive impact not only on their earnings but on growth prospects.  Consider a company requiring $1M that has to borrow at 12% instead of 3%.  The increase in the cost of interest equals two full time employee's salaries.  Assuming that the business requires the money for growth prospects there is a high probability that the goals will not be achieved as they will either have to be met in a far shorter time frame than originally intended or they will have to try to make the target with fewer employees.  Neither of these prospects are encouraging and reduces significantly the chances of success.  In contrast the large business with access to limitless capital in the form of loans and stock issues can not only take advantage of opportunities but also has the luxury of time to let the idea develop and flourish.

As I have mentioned repeatedly in previous blogs, until this landscape changes from completely skewed in favor of large business, GDP growth will not only stagnate but be highly prone to economic shocks from outside the United States.  So while large business deals with the prospects of slowing revenue and lower profits they can at least be thankful of those whereas the small business owner sees more heavy sledding ahead with no end in sight.  Little incentive to start a small business and often times too little incentive to carry on plodding.  For those of you in small businesses or just starting a small business I applaud you and give thanks for your perseverance and wish you much success for 2016!