Congress raised the national debt ceiling on June 3, 2023, which means the US can borrow more money and won’t default on its loans. However, the extension can still affect the economy and your business. Let’s look at how it can affect you and your small business specifically.
Access to Credit and Loans
As a small business owner, you rely on credit and loans to keep your operations running smoothly, hire help, and manage the ebbs and flows of your cash flow. But when the national debt ceiling is extended, it can create uncertainty in the financial market that impacts your borrowing options.
In an uncertain market, lenders are less confident, which means they want more protection for their investments by raising interest rates. This also triggers tighter credit conditions which can make it harder for you to obtain affordable financing for your business.
Therefore, whether you currently need capital or not right now, you may want to consider applying for credit to lock in available credit now when interest rates are still relatively low, as capital could become harder to come by in the future, and more expensive.
Having ready access to capital is critical in the event that the economy turns recessionary, and you need to ride out a dip in sales for a while. Remember the number one rule to business success is to stay in the game! Access to credit can make all the difference during challenging times.
Lower Consumer Confidence and Spending
Any uncertainty surrounding the national debt ceiling can impact how consumers feel about their spending habits. When customers are worried about the government’s ability to manage its debt, they tend to tighten their purse strings. This, coupled with increased interest rates and current nationwide inflation, can result in reduced sales and revenue for your small business, affecting your bottom line.
When revenue is low or unpredictable it can be even harder to plan investments for your business, like hiring help, expanding your space, or signing service contracts.
However, you don’t have to follow suit. If you know you have a valuable service or product that will make it through national or global economic storms, you can use economic slow downs as the time to double down and pick up great team members who otherwise would be off the market, and use slower times to build systems for when business picks back up.
Remember, it’s all cyclical, and what goes down will go up again, and you want to use slower times to prepare.
Government Contracts and Spending
In 2022, the federal government contracted with over 60,000 small businesses. If your small business has contracts or partnerships with the federal government, the extension of the national debt ceiling might affect you even more.
Due to the debt ceiling extension and higher rates of inflation, government agencies may impose budget cuts or delay payments to contractors, impacting your cash flow. This can force you to make difficult decisions like cutting costs, reducing staff, or delaying payments to suppliers.
If you’re affected by cuts in government contracts, give us a call. We can discuss options to pivot your business and keep you moving forward while wisely managing your business’ cash flow.
Tax and Fiscal Policy
Changes in tax and fiscal policy can directly impact you as a small business owner. As the government seeks ways to manage the national debt, it may consider altering tax rates, deductions, or credits. We’ll keep you informed about tax and fiscal policy changes that may affect you, so keep reading our blog and LinkedIn.
Ongoing Guidance for Your Business
Our focus is to provide support and guidance as you navigate the complexities of being a business owner – from changes in the legal landscape to overcoming limiting beliefs that can hold you back.
Our goal is to equip you with the knowledge and awareness you need to make informed decisions that grow your business and bring you closer to your ideal work-life balance.
To receive personalized guidance for your business, give us a call. We’d love to show you the difference it makes when you have us as an ongoing part of your team.
AB Law, PLLC is a full-service business law and estate planning firm that serves clients throughout Texas. All consultations are free and no question is too silly, ridiculous, or complex. https://calendly.com/ablawpllc www.ab-firm.com