Those crazy gyrations in the stock market over worries about a credit meltdown are enough to give almost anyone a case of motion sickness. But most small business owners seem to have a pretty strong stomach for market uncertainty.
Few report feeling any side effects from the upheaval in the subprime mortgage market, according to the National Federation of Independent Business’s latest survey. Of course, all that may change, if credit problems drag the slowing economy into a recession. But the Federal Reserve seems ready to step in to prevent that.
So what do small business owners have to fear? Probably just fear itself at this point. Financial advisers I spoke with are a little surprised by the market’s continuing volatility. They believe that emotion is responsible for a big part of the Dow’s ups and downs. The NFIB’s survey would seem to confirm that.
According to its survey, business on Main Street is pretty much as usual. Only 3 percent of those responding cited the cost and availability of credit as the No. 1 business problem. That contrasts with the survey’s all time high of 37 percent in 1982. “The net percent of owners reporting higher rates on their short-term loans was 14 percent (seasonally adjusted), two points above July, but one of the lowest readings since 2004,” the group noted.
The percentage of small business owners who reported that loans were harder to get stood at 7 percent in August, two points higher than July, but still well below the early 1990s, when the economy emerged from the punishing 1990-91 recession. Back then, the same question drew responses in the 12 percent range.
Micro-businesses that rely on home equity loans for financing, however, could be feeling a pinch. An unscientific survey of lenders by Forbes magazine found that some banks were tightening their home equity lending standards for small business owners. As many as 30 percent of all small businesses use home equity loans for start-up capital, according to one survey.
In the end, if the credit crunch has any effect on small businesses it may be indirectly, through a general slowdown in the economy. SMB spending on capital goods and inventory were soft in August while sales trends were “not encouraging,” the NFIB reported.