The most popular topic of conversation is, of course, the Fiscal Cliff and how close the US is teetering on the edge of it. The general populace is expressing concerns about taxes – will the middle class have to pay more or will the main burden be relegated to those earning in excess of $250,000.00 for individuals and $500,000.00 for couples. Obviously the stock market and its investors are worried about how any change in tax laws will affect them and their investments. There is a whole segment of the population that is apprehensive about how this situation will influence the entitlement programs upon which so many are dependent. One sector’s concerns that do not seem to have been addressed as readily by policy makers are those of the Small Business division of owners.
As we know, small businesses do the majority of the hiring, and the one thing that this economy needs to recover is a major decrease in the jobless rate. For a small business to consider hiring/expanding it has to feel that the economy is on the up-swing, that consumers are out there who want to buy their products and services. This, then, would make it feasible for these merchants to consider hiring to increase production. All indications, based on news surveys, suggest that consumer confidence is at an all-time high.
The Fiscal Cliff is posing many problems for the merchants that do the most to support out economy. The possibility of an increase in taxes is of great concern to small business owners. Many report their business income on their personal income tax forms. These are the very taxes that are in imminent danger of increasing, and more so if the company makes more than $250,000.00 per year. This increase will have a dramatic effect on capital that an owner might want to reinvest into expanding the company. To make ends meet, these merchants will have to increase their costs to their public for goods and services. This could revert to another round of layoffs and stalled hiring, bringing us back to square one. Lowering expense deduction limits, especially to those small companies that are barely making a living, could have a devastating effect on these firms’ ability to stay in business much less expand.
Many small businesses are trying to borrow now to avoid any changes in the lending structure which would undoubtedly be detrimental to them. For these small businesses to maintain and expand their firms, they need to have access to capital, which unfortunately is not readily available. Small business lending has decreased dramatically since 2008. Banks are currently approving only 10% of applications submitted and that only to companies with impeccable credit. After the 2008 debacle and as part of the Obama stimulus measure, SBA lenders increased their guarantees on loans from 75% to 90% of the total loan. Unfortunately this provision expired in 2011. If the SBA were to reinstate this larger guarantee, there would be more funds available for small businesses to take advantage of. Again, the SBA has strict parameters it needs to abide by; so many small businesses with less than stellar credit might still fall by the wayside.
Until there is a resolution to this Fiscal Cliff, many of the companies that do the most to aid job growth, will find themselves in financial limbo. If your establishment feels it could benefit from an influx of cash, but doesn’t want to wait until we have fallen off the Cliff, contact the Underwriting Specialists at Liberty Capital Group, Inc. @ (888) 511-6223 or visit www.libertycapitalgroup.com.