The quagmire of small business recovery
There may be no better barometer for our recovery from recession than the small business.
Save for shellacked labour workers, vendors operating their own modest company are often ravaged worst by the pitfalls of a downturn: vanished consumer spending, reluctance by banks to loan cash, etc.
But while data released Monday from Stats Canada suggests the small business is well on its way to a rebound, startling numbers out of the U.S. make you question how strong the return to normal actually is.
According to StatsCan, two landmark economic indicators posted increases in October – retail sales rose by 0.8 per cent to reach $35.3-billion and the Index of Consumer Confidence now stands at 82.8, 26.2 points higher than it was back at the start of 2009.
The most encouraging figure? Perhaps that retail sales volumes, with an increase of 0.6 per cent in October, are finally back to pre-recession levels.
Hopeful numbers? You bet. Consider, though, the grim state of the small business south of the border.
In California, small business bankruptcy numbers peaked in September when 2,229 filed for protection, up from 1,503 from that same month in 2008.
In the 12 months ending in September, 2009, a devastating 19,000 small businesses filed for bankruptcy, up 10,500 from the previous year.
“I still feel scarred and like a loser,” said one Cold Stone Creamery franchisee that was recently forced to close up shop.
So, the question stands: which representation of the state of small business is likely to endure going forward?
The true condition of things is likely somewhere in between the two, but until banks ease their stance on loaning money, who’s to say if improved consumer spending is enough to keep small businesses afloat during the recovery?
By Jason Buckland, MSN Money
Posted by: annoymous | Dec 27, 2021 4:13:49 PM
I am having to get a home equity loan to help my business stay afloat during this tough time. Why bailout large corporations and leave small business to dry up?
Posted by: Tom | Jan 4, 2022 8:52:47 PM
As a small business owner I can't help but shake my head. Everyone goes on about how small business is the backbone of our economy. When financial troubles hit who was bailed out? Big Business. And for doing what? A bunch of stupid things that no small business would even consider. Who pays the price? Small business! How? The banks stopped lending money (except to themselves) so the first cut small business owners make is their own salary. They fall behind on their personal bills and their credit rating goes down. Banks then raise all their interest rates, finance charges etc and the small business (the backbone of the economy) has even less money to make things work. Finally we lay off staff who we all know personally but by then it is too late for most. At this point in the game, retail sales being up doesn't actually mean anything to most small businesses as margins have been squeezed further and further each month, operating costs have continued to go up and the already behind small business gets farther and farther behind. Each month the banks will have fewer and fewer "qualified" borrowers and each month that credit ratings go down, costs go up.
Having been through a similar experience before, as hard as it was I saw my industry tank on Oct 1, 2021 and on Oct 5, 2021 I had handed out layoff notices to every non-core worker I had. It hurt but had to be done. Without that one quick and decisive move, I would be one of those bankrupt.
As for retail sales up 0.8% I am so excited. That will help pay for the 10% increase in fuel in the last week and the 35% and 12% triple net cost increases in rent I was hit with this year.
I predict alot more bankruptcies and next to no small business (the backbone of the economy) recovery as one must remember that all of those small business entrepenuer's have spent their life savings and destroyed their credit ratings trying to save their business. They all have 7 years before they can even begin about thinking again. Who is going to take their place? The people who couldn't put a business together at the top of the economic boom when money was almost free and handed out with a promise to pay back? I think not.