In March, the National Federation of Independent Business’s Small Business Optimism Index experienced a decline of 0.9 points, cratering to 88.5, marking the lowest point since December 2012 and the 27th consecutive month below the 50-year average of 98. Additionally, the net percentage of owners who reported raising average selling prices increased by seven points from February to a seasonally adjusted net of 28%.
The NFIB’s index is just one many gloom and doom economic headlines right now. While the magnificent seven stocks soar to the moon with their fortress-like positions, small businesses are feeling the impact of every bump in the road.
Here are three practical finance implications to have top of mind when serving small business needs right now:
- Cash flow is tighter. When cash flow is tighter, access to capital becomes harder, and when combined with bank tightening, there is a shortage of obvious funding options for many small businesses. However, with a well-performed prospecting effort, brokers can seize opportunities as they run in to fill the void.
- Equipment runs longer. Equipment and technology replacement cycles will lengthen as more companies delay investment because of economic uncertainties. This will create opportunities for equipment failure and urgent needs for emergency capital when capital may be harder to come by. This represents another important value-creation opportunity for brokers.
- Cost reduction is essential when everything costs more. As with the previous example of equipment failure, business owners often must invest more capital to lower overall operating expenses. Whether it’s buying inventories in bulk, investing in higher quality labor to avoid turnover, or moving to a new location with lower long-term rent expenses, achieving these savings may require spending now that small businesses cannot afford easily. Creative broker financing can be a powerful bridge to a lower-cost destination for these businesses that doesn’t require breaking the bank.
The broker’s value through cycles cannot be underemphasized in situations like these. Your ability to bring more credit solutions to the table and create genuinely customized capital alternatives can be the necessary fuel to help small business return to more confident ground.
