How the Recession has Impacted Small Businesses

recessionThe worldwide recession has shaved trillions off of the global economy. Corporations have posted losses in the billions. Countries have fallen into deep recessions and in some cases, civil unrest. Although not always in the spotlight, small businesses have taken the brunt of what has become known as the worst recession since the great depression of the 1930’s.

From a business standpoint, many small enterprises do not have the wherewithal or the diversification to supersede the turbulence which market conditions have caused. Simply stated, there is less money to spend. When a business‘s target sales market becomes more spendthrift, less revenue is generated. If we combine this with increased taxation and inflationary aspects, budgets are severely restricted. A company may have to downsize or cease operations altogether.

Another problem for small enterprises is that many of their operations require bank loans to operate. Banks worldwide are bordering on the brink of insolvency and the implication here is that less small businesses will be approved for the money they need. Should a business have less-than-perfect credit, the chances for the approval of a loan are even less.

Notwithstanding these factors, there also exist opportunities for the small to medium-sized enterprise. Newer niche markets have opened up as the large corporations have lost much ground due to their overexposure to the markets. Succinctly, there are less big fish❠in the pond. Additionally, should a business develop an innovative product or service, the chances for long-term success are higher than they would be in an economic climate defined by the status-quo.

There are many other options which have opened up for smaller businesses than in the past. One must not forget the power of the internet and the low overhead associated with operating a website which can target millions of people every day. Another facet which has grown considerably is that of selling discounted merchandise, as nearly everyone is looking for a better deal. Should they find a company which specialises in such goods, they will most likely remain loyal when economic conditions improve.

A further effect the recession has had is that low-cost capital is now more available. Let us not forget that the banks themselves cannot make money without granting mortgages and small business loans. Especially in regards to smaller banks, they are now offering loans at significantly lower rates because, simply stated, they have little choice.  Similarly, turning to specialist invoice finance services is a realistic option to improve cashflow.

The case is similar in the insurance industry; agencies are now giving highly discounted policies which were just as valuable as they had been before the economic decline. Many providers have actually increased their coverage to generate further interest from businesses. Indeed, while this downturn has brought about some pronounced difficulties, there also are some factors which can provide a silver lining for those who understand the opportunities created.

photo by clementinegallot