Report: Small Businesses at Risk

Slow sales and falling real estate values threaten companies.

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More small businesses are at risk this year, thanks to slow sales and plummeting real estate values, according to a study released by the Washington, D.C.-based National Federation of Independent Businesses.

The report, which examines access to credit, found most of the 750 small firms polled think the economic crisis has substantially affected their businesses. A quarter of those impacted say their survival is threatened.

The study points out that approximately one in ten small businesses fail every year, but the economic climate could mean more firm deaths and fewer created in 2009.

Surprisingly, the study reveals that access to shrinking credit is not a primary concern among small business owners. Forty-five percent say their biggest problem is a sharp drop in sales. Twenty-three percent cited unpredictable business conditions, while poor credit access tied with slipping real estate values at nine percent.

William Dennis, a senior research fellow at NFIB and the poll's author, sees the need for some kind of economic stimulus to address poor sales.

"We shouldn't just go out and start throwing money at the problem, but there clearly needs to be some kind of stimulus to get people to walk in the door," he said.

He also stressed the importance of the drop in real estate values. Respondents are heavily invested in real estate, and many have used their holdings to finance business activities. But the collapse in property values has destroyed that means of leverage, explains Dennis. Nine percent are now underwater on at least one property.

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