Home » Government Articles » The Impact the U.S. Credit Downgrade Is Having On Small Businesses
The Impact the U.S. Credit Downgrade Is Having On Small Businesses
The credit downgrade provoked fears regarding its aftereffects on small businesses.
September 30, 2011 /Government PR News/ -- Financial headlines have been troubling recently. The economic recovery continues to be anemic; no jobs were added to the economy in August and politicians in the U.S. and Europe continue to debate the national debt and the best way to fight off recession.
Perhaps the most startling financial news in August, however, was the S & P downgrade of the U.S. credit rating. Now at AA+ from its previous highest-possible AAA rating, economists and the general public were concerned interest rates would rise in the wake of the decision, leading to increased costs for individuals and small businesses.
So far, fortunately, fears about U.S. interest rates have not materialized. Interest on a U.S. 10-year bond has actually lowered to less than 2 percent at the time of this writing, from 2.56 at the time of the S & P downgrade. The average interest overall on U.S. debt has held steady at 2.9 percent.
However, fears of credit card interest rate increases have proved well-founded, as those rates are at an all-time high. While still relatively stable, average rates for credit cards have gone up twice in the past month. This may contribute to lower consumer spending in the future.
Small Business Implications
For those who own or wish to start their own small business, the downgrade was certainly disconcerting. While investors seem to remain confident in U.S. Treasury bonds, the downgrade may still affect small businesses. It may be more difficult for a small business entrepreneur to take advantage of federal programs, for instance, as the U.S. cuts spending in order to reign in its debt.
In addition, fears of a continued slow recovery and the danger of another recession can make obtaining the capital needed to start a business challenging. Worried consumers and businesses may also be more hesitant to spend.
With the troubled economy lenders are taking a harder look at the structure of business entities and the corporate compliance as part of the lending process. Thus the need for assistance from an attorney versed in small businesses is critical. Despite the difficulties, however, small businesses still have the opportunity to obtain the capital and resources needed to be successful. Those considering starting their own business should contact an experienced business entity selection attorney to discuss the proper business form for their enterprise.
Article provided by The Mead Law Firm PC
Visit us at www.meadsmith.com
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