The 2012 election is over. The fiscal cliff can was kicked down the road (yet again), and the sequester and debt ceiling debates have been volleyed by the partisans. And now the mainstream media and politicians are saying that we’re in a recovery.
Business owners aren’t convinced. They’ve been dealing with uncertainty over tax increases, health care changes and increasing small business regulations for years, and here’s what they’re facing right now:
- They’ve been [sws_highlight hlcolor=”fbfac7″]waiting for this “business recovery” for for five years.[/sws_highlight]
- Too many small businesses have been hit hard by [sws_highlight hlcolor=”fbfac7″]weak demand, slowing cash flow and the inability to service business debt.[/sws_highlight] Since banks and lending institutions have severely curtailed small business lending, [sws_highlight hlcolor=”fbfac7″]business owners are finding themselves with serious financial difficulties that threaten otherwise viable companies.[/sws_highlight]
- [sws_highlight hlcolor=”fbfac7″]Job growth is falling behind[/sws_highlight] the dismal 2012 trend.
- [sws_highlight hlcolor=”fbfac7″]Manufacturing indexes are disappointing.[/sws_highlight]
- The service growth sector has hit a [sws_highlight hlcolor=”fbfac7″]seven-month low.[/sws_highlight]
- Companies are currently issuing [sws_highlight hlcolor=”fbfac7″]strongly negative outlooks.[/sws_highlight]
Business owners: “What recovery?”
Business owners voiced their concerns in the respected NFIB Small Business Optimism Index survey released in March 2013:
[sws_grey_box box_size=”600″]While the Fortune 500 are enjoying record high earnings, Main Street earnings remain depressed. Far more firms report sales down quarter over quarter than up. Washington is manufacturing one crisis after another—the debt ceiling, the fiscal cliff and the sequester. Spreading fear and instability are certainly not a strategy to encourage investment and entrepreneurship. Three-quarters of small business owners think that business conditions will be the same or worse in six months.[/sws_grey_box]
Does that sound like a business recovery to you? Hardly. These indicators are the tip of a very dangerous iceberg — actually, three icebergs, each of which threatens to turn an economy on life support into another major financial crisis.
Dead Ahead: Three Dangerous Icebergs
1) Is there a bond bubble?
By reducing interest rates so low, the Federal Reserve has enticed investors into making risky investments (junk bonds). Most economists did not predict that low rates would last this long. They WILL increase in the near future which will cause large groupings of late investors to get crushed.
2) Is there a housing bubble?
In some areas of the country, prices have dramatically appreciated by up to 10% from a year ago (still well below the 2006-07 averages). Reports have surfaced that the White House is directing banks to once again lend to riskier borrowers. This policy lead to the housing collapse. Meanwhile household debt increased 6.4% during the 4th quarter of 2012 which leads us to believe the paring down of debt has now reversed. Another concern is that institutional investors who were gobbling up foreclosures are now exiting the housing market. When interest rates go up we will see a slowdown and exodus from the housing markets.
3) Is there a stock market bubble?
It is widely accepted that the stock market gains have been predicated solely on the Federal Reserve’s stimulus policies of printing money and buying financial securities from the larger financial institutions (known as Quantitative Easing). This has flooded the banks and financial institutions with massive cash and caused balance sheets to appear healthy, thus increasing their stock prices. However, many economists predict this artificial phantom bull market will crash, it’s just a matter of time.
Now, higher tax rates that took effect in 2013 are adding to the burden of business owners and consumers. Business owners are deeply concerned about the implementation of the burdensome ACA health care legislation. In fact, this is now causing medium and large businesses to reclassify full time employees as part time, taking away benefits and much needed hourly wages.
In addition, the threats of a slowing China and the continuing crisis in the Euro zone, economists now are publicly stating the U.S. slowdown will continue into the 2nd quarter and it is possible we will see some form of major correction in the markets in the coming months.
As small businesses face these challenges, owners are besieged with the worry and stress of a slowing economy. When cash flow slows, business owners freeze and the situation can spiral downward quickly.
Business debt problems can turn into litigation, employee layoffs, and possible bankruptcy
While sometimes litigation is the only recourse available, it usually only benefits the lawyers. In today’s marketplace, it’s important for small business owners to know they do have other options. Specialized consultants (including those with Valcor) can restructure business debt and obtain alternative sources of capital to keep otherwise healthy businesses to remain viable. Valcor’s consultants help relieve the burden, worry and stress by leading business owners through the minefield and resolving business threats quickly and efficiently.
Many business owners don’t realize these options exist. Once they do, getting help quickly can mean the difference between layoffs or bankruptcy OR a continued productive future in the local economy.
[sws_blue_box box_size=”620″]This article by Valcor CEO David Sussman was featured on Six Figure Jobs. If you’re a business owner facing stressful financial difficulties, you can get in touch with Valcor here. The company is also training consultants who want to start their own business providing these services in their communities; learn about this business opportunity here.[/sws_blue_box]