While the economic landscape in the United States has fundamentally changed in the past 30 years, it's still a fact that small businesses form the backbone of the U.S. financial? system. This characteristic makes it imperative to consider the effects on this subset of the economy when trying to figure out exactly how far-reaching the impact of the government shutdown will be. To put it more simply, how much is the government's shuttering going to hurt small businesses?
Unfortunately, it's difficult to make such predications because the nature of the shutdown is not fully known. Reports suggest that Congressional leaders and Obama administration officials are nowhere near an agreement. Republicans are seeking to tie together the debt-ceiling increase and the budget drafting into one major deal, which is something that Democrats have said they are vehemently against. It's possible to assume that a shutdown could extend for at least another week.
How do small businesses fit into this equation? The most direct impact for them is the closure of the Small Business Administration (SBA). This agency provides logistical support and financing for companies with fewer than 50 employees, and forms an important backbone of many small business funding plans. While the SBA will be able to eventually work through any accrued backlog, the reality is that any businesses hoping to expand with a government-subsidized loan will have to put off their plans.
Investors should care because pressures in the small business community illustrate problems in the wider economy. Therefore, it's important to utilize portfolio risk management tools that help identify potential loss factors in the market. Learn more about SmartStops by contacting us today!
Categories: Risk Management, Trading & Portfolio Strategies