While Big Businesses Flash Recession, Small Businesses Look To Expand

The final few days of 2018 turned out to be absolute chaos in the business world. Equity markets were plunging, the Federal Reserve seemed intent on continuing its hawkish interest rate policy, and everyone was certain that the 10-year economic expansion that the U.S. has experienced since the 2008 recession was about to suddenly come crashing down around them.

By most accounts at the time, 2019 was going to mark the end of this expansion’s endless summer, and businesses of all sizes were going to feel the impact.

The More Money We Come Across...

At least, that was the impression according to the results of several business sentiment surveys conducted among the world’s highest paid executives late that year.

The annual Duke CFO Global Business Outlook survey reported that more than 80 percent of financial executives believe a recession is likely to hit global economies in 2020, while a New York Times survey of 134 Yale CEO Summit attendees stated that the slowdown would start sometime in 2019.

Whether late-2018’s market anxiety caused this drop in executive confidence or the other way around, the negative sentiment within private business wasn’t actually as unanimous as those surveys suggest. After all, while global businesses entered the year contending with global uncertainties, the vast majority of business owners were riding the wake of a still expanding business cycle.

...The More Problems We See

The latest edition of Pepperdine’s Private Capital Markets Report reveals that, while 43 percent of small to medium-sized business (SMB) owners are preparing for a recession in 2019 by cutting back on business loans from traditional lenders like national or regional banks, the vast majority (86 percent) are still optimistic about growth in 2019.

What’s more, the report elaborates that a similar contingent of SMB respondents plan on seeking less cumbersome ways to keep capital flowing through 2019 by way of smaller, nontraditional forms of funding like credit cards or family loans.

Similar options like capital financing from fintech lenders like Credibly are also seeing a major influx of financing requests in 2019. Technology-focused lenders, which specialize in the kind of short-term operational financing outlined in the Pepperdine survey, are quickly becoming many SMBs first choice in capital funding tailored to their specific needs. In fact, a survey conducted among its previous clients showed that 62.5 percent of respondents applied for financing through Credibly before seeking a traditional business loan.

The No-Show Slowdown

Beyond sentiment signals, the actual numbers reported by SMBs in the initial two months of the year do not uncover much anxiety mounting among owners.

For example, the results from the first two ADP National Employment Reports of 2019 show businesses with fewer than 500 employees adding more than 250,000 new hires to their payroll to start the year. As a point of comparison, that’s more than double the new hires in the same period of 2018

Backing up that huge increase, the National Federation of Independent Business’ February Jobs report registered its largest month-over-month increase in 45 years, with an average net addition of 0.52 workers per firm of the 10,000 businesses surveyed for the report.

Whatever fate holds for the remainder of fiscal year 2019, the economic and business activity that has taken place in the first few months of the year place it among one of the strongest periods in recent history. While multinational firms and big banks might feel the pinch of global trade spats and smaller loan portfolios, small businesses and other drivers of the domestic economy are ready to expand in whatever economic environment 2019 manifests.

Credibly is a content partner of Benzinga