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Small Businesses: Difference between revisions
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=== 2008 === | === 2008 === | ||
==== '''NEW YORK FED''' ==== | |||
The 2007-09 downturn has had a deeper employment impact on small businesses than on large ones. Small firms attribute the relatively steep decline in jobs mostly to poor sales and economic uncertainty—problems that also affected large firms, but to a lesser degree. Tightened access to credit and adverse financial conditions also constrained small firms but a more important factor was the decline in new investment and associated financing in the face of weak consumer demand for the firms’ products and services<ref>https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci17-4.pdf</ref> | The 2007-09 downturn has had a deeper employment impact on small businesses than on large ones. Small firms attribute the relatively steep decline in jobs mostly to poor sales and economic uncertainty—problems that also affected large firms, but to a lesser degree. Tightened access to credit and adverse financial conditions also constrained small firms but a more important factor was the decline in new investment and associated financing in the face of weak consumer demand for the firms’ products and services<ref>https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci17-4.pdf</ref> | ||
[[File:Screenshot 2023-06-22 145741.png|center|thumb|457x457px|https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci17-4.pdf]] | |||
* '''Regardless of sector, small firms experienced greater employment declines than large firms did.''' | |||
* Senior Loan Officer Opinion Survey indicates that firms of different sizes have experienced similar changes in the loan standards and interest rate spreads imposed by banks, and that the '''prevalence of a decrease in credit supply is similar across all firms. Credit supply is not the main reason why the small firms were affected more adversely than large ones during the recession.''' | |||
* Literature suggests that small firms tend to rely more on credit obtained through intermediaries, such as banks, while larger firms have more varied sources of fi nancing, such as direct credit, including the issuance of equity, corporate bonds, and commercial paper. According to '''balance-sheet data presented in the Quarterly Financial Report, bank loans represent two-thirds of the total debt of small firms, compared with one quarter for larger firms.''' | |||
* Bank loans have declined significantly since the start of the recession. In particular, '''commercial and industrial loans fell approximately 20 percent from March 2008 to June 2010. Moreover, credit card use by small business owners has contracted 7%''' | |||
* The plunge in real estate prices has thus put further downward pressure on the borrowing capacity of these individuals., 16 percent of small business owners have taken out home equity loans to fi nance operations. | |||
* NFIB survey reveals that the '''share of small businesses reporting poor sales as the most important problem has increased dramatically, while the relative significance of other factors, such as insurance costs and the availability and quality of labor, has diminished.''' Few establishments cite financial conditions and interest rates as the main obstacle, a trend that has remained stable throughout the recession. | |||
* '''This reduced consumer interest in the products of small fi rms likely lowered the firms’ demand for credit. In these scenarios, firms do not have the ability to invest and thus have little need to borrow.''' | |||
* Total debt of small firms started to decline in fourth-quarter 2008 and has not begun to recover as of second-quarter 2010. Meanwhile, total debt of large firms (with more than $50 million in total assets) continued to increase throughout the recession. | |||
* The behavior of sales has been similar for small and large fi rms until recently. Sales started to recover among large manufacturing fi rms in second-quarter 2009, while sales of small firms have lagged and their recovery has been sluggish. | |||
* Growth in inventories for small and large firms has fallen since fourth-quarter 2008, but it has declined more sharply for small firms. Fixed investment dropped significantly among small firms, and there has been no sign of recovery. In contrast, fixed investment by large fims has shown a sharp increase. | |||
==== Average Business Size and Sectoral Employment Declines ==== | ===== Average Business Size and Sectoral Employment Declines ===== | ||
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