2010 Small Business Outlook

No matter which way you look at it, 2009 was a dismal year in most business sectors. While the administration has made promises of “green shoots” and painted a fairly rosy picture of the economy in 2010, many economists are questioning their predictions. The last few months have brought an increase in the unemployment rate despite the good news earlier in the fall. So here is a look at what local small businesses should expect for 2010.

Many economists believe that with all of the pending legislation, most significantly healthcare reform and carbon cap and trade, business owners are trying to keep the budgets trim until they find out what is coming in the next year. Many business owners are afraid to begin hiring again because the economy is standing on shaky legs and coming legislation has the potential to knock it off its feet. It’s also critical to understand that any increased demand from slight economic growth can be handled by increasing the work week or switching part time employees to full time. It may not be necessary for small businesses to begin hiring again for quite some time. It is certainly possible that the unemployment rate could remain in the double digits all the way through 2010. While high unemployment is a telling indicator on the national economy, it may not be the biggest concern for local business owners.

The main concern for most small businesses in our area revolves around the tight credit situation many businesses and their customers find themselves in. Despite massive taxpayer funded packages aimed at increasing the amount of credit available from for homeowners and businesses most have found it nearly impossible to wrangle a loan in the last year. Hopefully that will change in the next few months but with the foreclosure rate increasing and a disproportionate amount of commercial loans coming due in the next few years you can bet that banks will be reluctant to dole out much cash. Safe prospect is a relative term for loan officers these days. What used to be a quick and easy transaction for a business owner in good standing with a good credit rating has turned into a laborious task for all involved. Unfortunately conditions in this sector are unlikely to improve until creditors are feeling confident in the direction of the economy. You can bet that many of them will still be waiting it out next year.

With credit tight and unemployment remaining high it may seem a dismal picture, but there are a few indicators that may give some hope. Both consumer and corporate confidence is on the rise and holiday spending saw a small bump this year. That may mean that Americans are beginning to loosen their purse strings, which is good news regardless of the other indicators. A good chunk of the American economy depends on the amount of faith American consumers and businesses have in the future.

Source

http://www.kiplinger.com/printstory.php?pid=18940