NEW YORK -- After two weeks of harried scrambling to save the country's financial system, small business owners may be wondering how the outcome will affect them down the road.
According to a Sept. 22 Business Week article, the bright spot is the current financial crisis may not hit the small business sector directly. However, a loss of confidence could have long-term effects.
"Entrepreneurs should be mentally and financially prepared to hunker down in this economy for a couple of years," Sam Thacker, finance and credit expert for AllBusiness.com told the publication. "The downturn that started a year ago could last another two Christmas seasons. I'm hoping it's going to be less time than that, but people are worried."
The Business Week article noted that credit unions are making more business loans than ever before. Bill Cheney, president/CEO of the California CU League, said even though a couple of CUs in his home state have had some difficulties, as a whole the industry is capitalized well above government guidelines. Additionally, more calls are coming in from members asking about deposit insurance, he said.
"They're asking about the availability of their credit lines and about deposit insurance. I encourage members to call if they're concerned; they'll likely find that local institutions are doing much better than the larger ones," Cheney said.
The article pointed to several areas small business owners will have to pay extra attention to going forward. Baby boomers, for instance, will most likely be affected the most by stock market and housing price downturns. Some who were scheduled to retire may now be forced to work longer, Paul Rauseo, managing director of George S. May International, told the publication. This could be an advantage for small companies who might have had to spend more to train less experienced employees, he added.
Because of higher fuel costs, small businesses may also have to raise prices. Rauseo said companies also need to focus more keenly on their balance sheets, their business models and on how much credit they're extending to their customers.
Small businesses should also check to see if their insurance company has any ties to financial institutions, the article noted. A company's broker can provide the insurance carrier's most recent financial statements or check its credit rating with an insurance rating organization.
Despite the credit crunch, experts said venture capitalists and angel investors view the current environment as the best time to find good deals, Business Week said. Some private equity firms have their own subordinated debt funds, so they can offer debt financing to entrepreneurs even when banks and other lenders will not, Joe Trustey, managing director of private equity firm Summit Partners, told the publication.