Who Does the Credit Crunch Bite the Hardest?

It depends on the type of small business

By + More

Via Small Business Trends, I see an interesting survey that illustrates an important point when thinking about how the embattered credit markets affect small businesses--your average small business is not critically affected.

PayCycle, Inc., America’s #1 online payroll service, today released the results of a proprietary survey that found 58% of small business owners do not feel the government is addressing their needs. Sixty-nine percent (69%) say they are not directly impacted by the credit squeeze because they don’t need more credit, but 91% are still worried about the economy.

This is not to say that credit is not the lifeblood of the economy, as is often said.

George Gendron, director of the Innovation and Entrepreneurship Program at Clark University, explained it to me when I interviewed him for an article on the credit crunch a few weeks ago. The majority of the small businesses out there are small conservative operations that don't want to take on debt. They funded their business initially through their own savings or money from friends and family. They're content with being local businesses so don't need to take huge loans for capital investments to expand.

But the highest-growth, highly sophisticated small businesses--such as those that seek venture capital--do need debt to get off the ground or expand. That's where the slowdown in the small business economy is going to primarily come from if it continues to be more difficult to get traditional sources of financing.

The bad news is that these are the most productive of our entrepreneurs and the ones that contribute the most to economic growth.


TAGS:
small business
recession

You Might Also Like