The Importance of Small Businesses to the Economy! #isupportsmallbiz

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The upcoming election is of significance to small business owners. This is because these policies will influence hiring and capital spending decisions. To understand which candidate has the best approach requires carefully examining the how each one can help entrepreneurs over the long term.

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In the last four years, the total number of small businesses going bankrupt has become volatile. This is because the recession and lingering effects from the financial crisis forced a number of firms to choose this option. As liquidity and additional financing, came to a sudden halt (which impacted their short term working capital). This affected their ability to pay the most basic expenses and continue building for the future. At the same time, the sudden slowdown in consumer spending hurt their profit margins and cash flow. The combination of these factors forced a number of small businesses to file for bankruptcy.

However, since 2010 these amounts have been steadily declining. Evidence of this can be seen in the below table from the American Bankruptcy Institute.

Total Amount of Small Businesses that Filed for Bankruptcy between 2007 and 2011

Year    Total Number of Bankruptcies
2007    28,322
2008    43,546
2009    60,837
2010    56,282
2011    47,806

These figures are showing how the economy has been steadily improving. However, the rates of change have continued to remain stagnant. This is troubling as small businesses will do the majority of the hiring for new employees. According to Business Week, these firms have added 2.6 million jobs since the end of the recession. This is 29% of the 8.8 million jobs that was lost from 2007 to 2010. As a result, the upcoming election is important to all small businesses.

The Significance of the Election and its effect on Small Businesses

Both candidates have been actively catering the needs of these firms. This is because they realize their importance to the economy and campaigns. However, like with any election year, a lot of promises are made. Yet, once the votes have been counted, is when many elected officials will ignore the needs of smaller companies. This is troubling as these policies can make the underlying economic situation worse or better (depending upon the strategy).

Therefore, it is imperative that everyone studies the small business plans for both candidates and support small businesses in your community. This means asking themselves, if this approach will help small businesses or hurt their ability to expand / innovate. At the same time, there needs to be a focus on specific factors that could serve as a catalyst for these kinds of firms. This requires looking for specific provisions in the strategy that will highlight its ability to address the needs of small business owners. When this happens, everyone will have a greater understanding as to the impact of this approach on smaller firms. This will have a direct effect on the unemployment rate and economic growth.

Clearly, the upcoming election will have a dramatic impact on small businesses. This is because the strategies from the different economic plans will influence hiring decisions and capital expenditures. In the next four years, the approach that is utilized will have an effect on these variables. This is why it is so critical for everyone to carefully examine the economic plans of both candidates. Once this takes place, is when they will have a clearer understanding as to each ones approach in addressing the needs of small businesses.

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Ramon Alvarado
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