Small Businesses: Difference between revisions

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 === Magaly ===
+Currently small businesses despite the evident drop in sales and earnings for most, still seem optimistic about their financial health, and they seem to be focused still on finding the correct talent, as job openings continue to be very high compared to history. However, positive expectations of future revenue and growth seem to be more sentiment base, and the current stable conditions could be having a biased impact on their sentiment, so I don't think we can take it as a reliable indicator of future conditions.
+Analysis of the 2008 recession indicates that small businesses were hurt mostly by falling demand more than by credit tightened, however concern with sales started until late in 2008, after conditions deteriorated significantly. So is difficult in my opinion to forecast that while sales have been stable currently, they will remain this way later on, as it seems more of a lagging data.
-There are still a lof of questions about the debt structure of small businesses, their credit worthiness, their depanced on it, and data about it seems to be limited or non existance. Which in my opinion in key to undertand the hit the small business could take in a credit contraction.
+Small businesses were also the ones that has the largest declines in employment in 2008 among all firms, and their recovery was also significantly slower than largest firms, with reported recovery in some factors being sluggish even after 2010.
+Bankruptcies are starting to increase at a faster pace this year (from a very low level, and I dont expect to see 2008 levels), and current funding conditions don't signal yet the best environment for unprofitable businesses to thrive, which unfortunately is more than 50% of small businesses.
+But there are still a lot of questions about the debt structure of small businesses, their creditworthiness, and their dependence on it, and data about it seems to be limited or nonexistent. This in my opinion is key to having a better understanding about the hit the small business could take in a sudden credit contraction and even the impact of higher rates for longer. Due to other cycles, I have the intuition the hit from credit contraction could be more indirect, as demand falls throughout the economy.
+Taking all into account, I find it difficult to find the growth factors that could support a small businesses recovery in the near future, other than a broad economic recovery or liquidity coming to the economy, these are the potential headwinds I currently see:
+* Falling demand due to a recession, or a credit contraction
+* Falling inflation, but sticky wage growth (labor market continues to be tight) could squeeze even more their profits
+* Majority of their financing comes from regional banks
+* Fiscal support has now rolled off completely
+* Higher rates could make it impossible to refinance their debt or take new one
+* Past cycle indicating small businesses have a slower recovery and bigger hit on employment in a recession
 '''Key Insights'''
-* Even though small businesses have struggled the most, the majority still see their businesses in a good finantial position, but the optimism about the economy is very low still.
+* Even though small businesses have struggled the most, the majority still see their businesses in a good financial position, but the optimism about the economy is very low still.
-* Employment mesuare by ADP, has only declined in the very small businessess (1-19 emplloyees), but still less than 1% y/y drop.Job growth is declining for most business sizes.
+* Employment measures by ADP, have only declined in the very small businesses (1-19 employees), but still less than 1% y/y drop. Job growth is declining for most business sizes.
-* CFO survey reports than from Q1 to Q2 expected 2023 revenue fell from 7.2% to 2.3%, but expected employment growth increased from 2.2% to 6.1%
+* CFO survey reports that from Q1 to Q2 expected 2023 revenue fell from 7.2% to 2.3%, but expected employment growth increased from 2.2% to 6.1%
-* Inflation is still considered the biggest concern among small businesses. If inflation does not ease, small businesses could continue to struggle specially as pricing power is diminishing.
+* Inflation is still considered the biggest concern among small businesses. If inflation does not ease, small businesses could continue to struggle especially as pricing power is diminishing.
-* Due to the uncertantiy, higher rates and financing conditions small businesses are pausing plans about expansion or spending.
+* Job openings is still high, and firms seems to still have the disare to hire more workers.
-* Much like 2008, small businesses seems to be in a more difficult position than larger firms.
+* Due to the uncertainty, higher rates, and financing conditions small businesses are pausing plans for expansion or larger spending.
+* Much like in 2008, small businesses seem to be in a more difficult position than larger firms.
+* Tightened standards have increased considerably for small firms, but falling demand for loans is what seems to be more prominent. This is also a similar pattern that in the 2008 crisis, and in line with companies not planning to expand.
 === Others ===