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Small businesses don’t see much cause for optimism

Justin Ho Jan 12, 2021
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A "Closed" sign at a nail salon in Virginia. Small business optimism is at a seven-month low as the pandemic continues to rage across the U.S. Olivier Douliery/AFP via Getty Images
COVID-19

Small businesses don’t see much cause for optimism

Justin Ho Jan 12, 2021
Heard on:
A "Closed" sign at a nail salon in Virginia. Small business optimism is at a seven-month low as the pandemic continues to rage across the U.S. Olivier Douliery/AFP via Getty Images
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Small business optimism is at a seven-month low, according to a survey from the National Federation of Independent Business released Tuesday.

Fewer companies are looking to expand, sales expectations are down and, despite the fact that borrowing money is really cheap right now with interest rates near historic lows, only 3% of businesses say they’re interested in taking on additional debt.

Back in 2018, Sophie Blake took out a business loan for her Virginia-based jewelry store because, she said, she was feeling good about the economy.

“And I was very aggressive. I was very excited,” Blake said. “We did a big renovation of our store. I felt confident at the time that we would be able to pay it back.”

Right now, she’s not so confident. Blake’s store now has a government disaster loan on its books, and it’s borrowed from the Paycheck Protection Program.

Blake said the idea of taking out a loan to expand her business like she did in 2018 is out of the question.

“I’m not sure if we’re going to be around at the end of the year if things go the way they’re going,” she said.

And that’s why most businesses don’t want to borrow any money right now, said Bill Dunkelberg, chief economist at the NFIB.

However, some companies are taking advantage of the lowest interest rates we’ve seen in a long time.

“So, the banks I’m familiar with are doing a lot of lending to small construction firms, to build one or two or three new houses, some bigger construction projects like a Dunkin’ Donuts, or small hotels,” Dunkelberg said.

At the Bank of Southern California, CEO Nathan Rogge has been looking to make loans to businesses in other industries.

“Industries that are associated with the internet [or] anything that’s medical,” he said. “We’re looking at distribution, wholesalers — all doing relatively well.”

Rogge said those are all businesses that have valuable collateral and pretty solid cash flow, considering. That’s two things a lot of other businesses don’t have right now.

COVID-19 Economy FAQs

What are the details of President Joe Biden’s coronavirus relief plan?

The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.

What kind of help can small businesses get right now?

A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.

What does the hiring situation in the U.S. look like as we enter the new year?

New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.

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