Throughout 2019, we experienced a tremendous uptick in the economy resulting in low unemployment, low inflation, and increased household spending. Overall, one would believe this would lead to significant growth across a number of sectors of the economy. However, there were other forces which when combined, presented some challenges for some small and mid-sized business owners.
Trade Wars with China Threatening Economic Growth
Perhaps one of the more challenging issues which besieged business in the United States was the threat of reduced trade with China. As many import and export businesses are fully aware, this trade helps us keep costs lower for consumers. Higher tariffs imposed on Chinese goods meant higher costs to consumers and also presented some new supply challenges. Fortunately, the back and forth eased up towards the end of 2019, helped farmers and also created new demand for import and export business owners resulting in higher demand, and therefore, the need for additional funding.
Tech Business Growth Continues Upwards Trend but…
While tech businesses continued their upward trajectory, there was plenty of controversies. There were record fines imposed on some businesses, while others were subject to hacking, and other problems. Privacy issues, trust issues, and other problems continue to plague this industry while the demand for more technology solutions continues.
The Retail Apocalypse Continues
While retail sales have shown an increase, this is not well-reflected in brick-and-mortar establishments. Retail giants are continuing to cut their locations while giants like Amazon have continued to show improved signs of strength since 2008. Currently, this is good news for those who are in the import/export business but maybe more problematic for distributors who depend on retail giants for their revenue.
Small Business Lending in 2019
The Small Business Administration (SBA) reported a great year with small business loan volume increasing slightly over 2018 totals. As of October of 2019, the SBA reported there had been more than 60,000 loans offered to small businesses across the United States. While this number showed signs of increased lending, there are a total of 30 million small businesses across the United States meaning there are potentially several business owners who could not secure SBA loans or did not have access to other forms of lending.
Economic Uncertainty Seems to Have Increased
Perhaps one of the most unusual business stories released during 2019 was interest rate changes. The Federal Reserve cut interest rates three times during 2019 when they had originally been on the increase. While many believed that lower interest rates would help spur more business lending, in some cases, banks were tightening their belts and making it harder for some businesses to obtain loans.
The Usual Businesses Seem to be Left Behind
Unfortunately, as with the trends found in 2018, some business owners were left behind even during a booming economy. A careful review of business loans showed the following businesses and sectors seem to be still trying to secure additional capital and have been having more problems than usual. In fact, 32 percent of all small business owners (the same as 2018) showed access to capital was their primary concern. Some of these businesses and sectors including:
- Minority-owned businesses — for a number of reasons, many minority-owned businesses continue to face challenges growing their business due to a lack of capital. In many cases, this is because these businesses are often smaller operations and they do not have well-established banking relationships.
- Import-export businesses — because of continued changes in trade deals, and new trade restrictions, some import-export business owners are finding it more challenging to secure funding. This trend is likely to continue until such time as new trade deals are put into place.
- Construction businesses — there has always been a difference between how a construction project is funded and 2019 found this remains to be true. Subcontractors often face challenges purchasing the needed materials in order to fulfill their end of a contract. Without appropriate funding, this has been challenging. As unemployment rates continue to be at historic lows, these businesses also must raise wages to remain competitive.
At Capstone Corporate Funding, we understand the challenges business owners faced during 2019, as well as the challenges they are facing during 2020. This is why we remain committed to working with businesses to help them get the funding they need to help grow their businesses and have the capital on hand to take advantage of larger contracts. Please call us at (212) 755-3636. One of our highly-trained representatives will work with you to find a funding solution that helps you reach your goals.
