by Joseph Kenny | 05/10/09
There are a number of indicators that the entire small business sector may in danger of contraction as the economic woes of the U.S. continue to shake the confidence of many consumers. According to recent statistics, there is an estimated 27.2 million small businesses in the United States.
This becomes a crucial matter when you consider that more than half of those Americans employed are working for small businesses with 100 or few employees. If the small business sector does not turn around, it could exacerbate an already troubling situation in the overall employment levels nationally.
When examining these new developments, a factor that may substantial contribute to this new trend was revealed. It was discovered that the new rounds of new credit restrictions imposed by an already skittish credit card industry was have a negative impact on the operations of small businesses.
With the segment of small businesses that rely heavily on different lines of credit including credit cards to bankroll their operations and efforts at expansion, this change in credit card policies is creating new limitations that can cripple these small businesses.
Due to industry wide problems, big credit issuers like MasterCard, Capital One, BankAmerica, Discover, and American Express have had to reduce their available credit lines and ratchet up interest rates on existing lines in order to maintain their stability.
When small businesses no longer have access to credit cards because of tighter restrictions, the amount of small businesses that can remain viable will decrease. Decisions by investors to open new business opportunities will fade away with increased risks.
This is a prime example of the overlap of economic decline that continues to resonate from one end of the economy to the other. There is no telling how extensive this effect will permeate the financial and business sectors or how long it will persist.
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