Keep Your Eyes Focused on the Big Picture
Are we in a recovery or not? And should you worry about the year ahead if you intend to grow your business? Despite the battling numbers, all indications are that the economy is steadily improving and that you should plan for a good year ahead, experts say, barring something totally unforeseen.
On the positive side, the Commerce Department today released its latest tally of gross domestic product, or GDP, showing the U.S. economy increased at an annualized 3.2 percent in the fourth quarter. That follows an increase of 4.1 percent in the third quarter. That's pretty decent growth, despite the government shutdown in October, which sapped billions from the economy.
But for the last few days, global markets have been in a rout, based on economic weakness in emerging markets. Last week, markets experienced the biggest losses they'd seen in seven months. Yesterday the Federal Reserve Board voted to continue tapering its monthly bond buys to $65 billion per month. The bond buy-backs are a component of the Fed's quantitative easing program, whose goal is to inject liquidity into markets and keep interest rates low. In reaction to the announcement, markets slouched further yesterday overseas and in the U.S. The Dow Jones Industrials Average fell nearly 200 points in late day trading.
Today, however, the Dow is up again, increasing 135 points to 15,874 in mid-day trading, based on the Commerce Department news.
"Market moves within a 10 percent band [don't] impact small businesses at all," John Backus, founder and managing partner of New Atlantic Ventures, a venture capital firm in Cambridge, Massachusetts, says. "A bigger move, say outside of a 20 percent band, might destroy confidence and make it harder for small business to raise money, or even to sell to larger companies who might be more worried about their viability, or ability to deliver on orders placed."
Another place to look for guidance for what's really going on with entrepreneurs is the alternative lenders who specialize in small business lending. They paint a very positive economic picture.
"We like the economy right now," says Noah Breslow, chief executive officer of OnDeck Capital, based in New York.
OnDeck has committed over $825 million in loans to small businesses in 700 industries since 2007. The online financial provider uses alternative information to create a proprietary credit score for loan applicants, such as checking account, payment processing, and other loan information.
Since the beginning of the recession, Breslow says reasons for obtaining financing have changed. During the height of the financial crisis around 2009, about 40 percent of borrowers obtained financing for "offensive" purposes, which means to invest and grow their businesses. Today, that's closer to 85 percent, says Breslow.
"Businesses are healing, and we think we'll see this for a couple of years," Breslow says.