Housing News

Small Businesses Are In Trouble Too

CaliforniaThe housing crisis has affected small business catering to property needs.

Small businesses with ties to real estate are experiencing a slowdown in sales, according to a report in The Los Angeles Times.

Real estate professionals and home builders are having lackluster performances due to the stricter credit approvals by banks. Sales among these small businesses have dipped 8 percent in agent services while cement and concrete manufacturing have also plunged by 5 percent, according to a study by Raleigh, N.C.-based Sageworks. Other affected industries include lumber, furniture and residential construction.

Small and medium enterprises provide support and backbone to the American economy. However, there have been factors that continue to stymie small investors in expanding their business. University of California at San Diego professor Michael J. White published a seminal paper last October 6 about small businesses in the country. He concludes that the Bankruptcy Abuse Prevention and Consumer Act of 2001 will discourage more start-up entrepreneurs from putting up their business. The bill aimed to reduce the number of bankruptcy filings by defaulting borrowers. White finds that although loans will be more available since borrowers are less protected, more businessmen will be put off with the idea of entering the market.

Raised taxes
It’s not only bankruptcy procedures that will affect small businesses’ future. Tad Dehaven’s article on The Cato Institute reveals that the government has regulated the activities of small business and raised their taxes. Congress has even taken advantage of the Small Business Administration for expanding its connections in the industry rather coming up with programs that will provide more start-up capital. We are also aware that these firms are also facing problems in unstable revenue, technology limitations, and human resource absorption.

Now that small businesses are feeling the crunch, more jobs will be at stake when the crisis progresses at the end of the fourth quarter. Since their size cannot match the economies of scale that large corporations have, they must be supported against the volatility of their industries.

Presidential Policies
The upcoming election is expected to bring answers to this predicament with different fiscal policies for these businesses proposed by Senators John McCain and Barack Obama. McCain would sustain Bush’s tax cuts and even trim down top corporate taxes to 25 percent from 35 percent. Obama on the other hand will implement uniform tax rates but will increase those on couples earning a combined annual income of $250,000. Most of those businesses with that profit range own micro and small businesses, including the areas of house construction and materials.

The government must create measures that will help our businesses recover from the string of losses in the economy. That means building a healthy business climate through stronger capital spending, larger human capital investment and increased demand for their products and services.

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