Small Business Economy Struggling, Few Plan to Hire: Report
There is more gloomy news from the small business front as companies report margins are squeezed and hiring prospects are slim.Newtek Business Services announced the release of the Small Business Authority Index for August 2011, which reached 108.06 points. The SB Authority Index is up 0.76 percent from July 2011, with approved SBA loan volumes, the Russell microcap index and retail sales causing the increase in the index. However, the index growth was limited by the flat and slight reduction within the other five components. Newtek President and CEO Barry Sloane said the small business economy continues to struggle as consumer spending and employment trends are clearly reducing economic activity. Plus, the recent announcement of monetary policy by the Federal Reserve may increase interest rates to small businesses as most small businesses borrow on a prime rate basis and off the short end of the yield curve.
"If Federal Chairman Bernanke's 'twist strategy' works, long-term rates will decline but at the expense of short-term interest rates increasing. Again, if the strategy works, it will be most beneficial to the long end of the market, which drives residential mortgage rates lower and cost to refinance lower," Sloane said. "This should put increased cash and disposable income in hands of consumers and may take several months before we see the effects. Short-term rate hikes to small businesses will be effective immediately."