World Economy

Higher Taxes May Cause US Small Businesses to Downsize

Small business owners say a positive economic environment  is critical for their ability to grow.
Small business owners say a positive economic environment  is critical for their ability to grow.

The Bank of America Business Advantage Small Business Owner Report is a semi-annual survey of 1,000 business owners across the country. The fall 2017 report found that 78% of entrepreneurs consider taxes to be impactful when it comes to making decisions about downsizing. On a larger scale, 92% of small business owners said that a positive economic environment is critical for their ability to grow.

So essentially, economic factors can have a major impact on business decisions. Things like tax rates can make the difference between a small business expanding or taking a step back. And in turn, those business decisions can make an impact on the economy, as growing businesses are more likely to contribute to job growth and other positive changes. So increased tax rates can actually have an even larger impact on the economy than some previously thought, BoA’s Small Business Trends reported.

However, while those factors can certainly make an impact, they’re not necessarily leading to any negative effects right now. According to the Bank of America survey, 71% of small business owners are confident that their yearend revenue for 2017 will exceed their yearend revenue for 2016. And 51% of small business owners have plans to grow their businesses in the next five years.

Sharon Miller, head of small business at Bank of America said in an email to Small Business Trends, “Anything that increases capital for small business owners—a positive economic environment, a reduced tax rate, high customer demand—enables them to invest more in their businesses, ultimately leading to growth and expansion.

“Our survey also found the inverse is true with respect to factors that decrease cash flow. A negative economic environment, taxes viewed as overly burdensome and the inability to attract and retain quality employees can all be influential factors in a small business owner’s decision to downsize.”

  Problem of Women Owners

Getting a bank loan is still a struggle for many women who own businesses. Kirsten Curry has had three rejections in the past six months and is waiting to hear from a fourth bank. Curry, owner of Seattle-based Leading Retirement Solutions, has applied to national banks, a regional bank and a credit union.

A survey of businesses conducted this summer and released Wednesday found that just 30% of companies owned by women were able to get bank loans during the previous three months, compared to half of all the owners surveyed.

The survey, conducted by researchers at Pepperdine University’s Graziadio School of Business and Management and Dun & Bradstreet Corp., questioned owners of companies with up to $100 million in annual revenue.

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