Recently, we discussed how the NFIB’s small business optimism index showed an increase in the confidence of small biz owners in the American economy.
With increased optimism in the future from the small business sector, investments in the growth of business are on the rise, which further fuels economic growth through spending.
But, why are small business owners so optimistic about the future? This is a question that Marlin Steel owner and president Drew Greenblatt tackled in his recent Inc Columnist post on Inc.com titled “Glass 3/4 Full – 10 Reasons Why Small Business Optimism is Improving.” In the article, different reasons for the recent upsurge in confidence among small business owners are revealed and explained, including:
Increases in Lending from Banks
For many businesses, especially smaller ones, the ability to get a loan from the bank in order to cover major expenses that are a consequence of starting up or expanding business can mean the difference between success and closure.
As an example, let’s say that a small manufacturer manages to secure an enormous, lucrative contract with an overseas buyer to make several tons worth of custom metal forms. Before this order can be completed, raw materials need to be purchased, production lines need to be set up, and workers need to be paid. However, payment for the order is contingent upon completion.
Without a loan, the manufacturer cannot complete the shipment, and they lose the money they may have already spent on trying to get set up for said shipment. With a loan from the bank, the company can have access to the funds needed to complete the shipment, and repay the loan from the proceeds. In this arrangement, the client gets what they wanted, the manufacturer makes money (allowing for continued operation and growth), and the bank collects a profit as well.
Because of situations similar to the one above, lending from banks, including the Ex-Im Bank, continue to be a cornerstone of economic growth and success for small business.
Businesses are Adding New Equipment/Facilities
Since banks are lending more, businesses are having an easier time buying new equipment and expanding their facilities. Business have to buy their equipment and facilities from someone, which means more capital is flowing to the suppliers and manufacturers who support other businesses.
Since these suppliers are earning more money, they can afford to make more expenditures, hire new personnel, etc., all of which further helps to bolster the economy. Recently, Marlin Steel added a brand new, top of the line Medium Frequency Direct Current (MFDC) automated welder that can complete welds in a fraction of the time that a standard welding machine would take.
Businesses that acquire new equipment and technology gain a competitive advantage, meaning that their competitors have to find ways to keep up, spurring growth and innovation in their industry as a whole.
Stabilized Energy Costs
For many companies, especially manufacturers, energy costs are a huge part of the operational budget. Thankfully, plentiful reserves of natural gas in our country are helping to keep the cost of energy down, translating into lower electric bills for many small business owners.
This alleviates some of the financial stress on business owners, leading to a modest increase in optimism among small biz owners.
In addition to that, the natural gas industry is adding new, high-paying jobs to the market, adding more people who can pay taxes, buy homes, and put their money into circulation.
The Bottom Line
Overall, increased lending from banks, more investments in improving business infrastructure, and stable energy costs, among other things, are helping to actually breathe life into the economy, which is helping to brighten the outlook of small business owners.
With some hard work and innovation, we can make a difference and make the American economy stronger.
You can read the full article and all 10 of the factors in the Inc.com post.