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Business Effect on the Economy

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BUSINESS EFFECT ON THE ECONOMY
Impact of a Strong Economy

In a strong economy, nearly all businesses enjoy greater prosperity. Disposable income is high, unemployment is low and consumer confidence prompts people to pump their money back into the economy through the purchase of essential and nonessential goods and services. The impact of a strong economy on a small business is two-fold: as business increases, so too does the need for a small business to keep pace with demand by hiring additional employees, expanding retail space or adding new product lines. While this may be viewed as a positive, the downside is that if the economy starts to falter, many small businesses find themselves overextended, which can result in mass layoffs and business failures.

Impact of a Slow Economy

During an economic slowdown, many small businesses face a number of challenges. Consumers become concerned about their job stability and, in turn, are more likely to be cautious with expenditures, which leads to decreased revenue for small business owners. A slow profit stream can make it difficult for a small business to repay creditors, which can negatively impact its long-term viability. A business facing financial struggles is far less likely to qualify for loans for capital expenditures and operations, which limits growth opportunities. Many small businesses also are forced to downsize their workforce during a slow economy. This limits their ability to serve customers and contributes to the unemployment rate, which furthers slows the economy.

Economy-Related Business Opportunities

Some types of small businesses thrive in a slow economy. For example, companies that are involved in facilitating home foreclosures and vehicle and property repossessions find their businesses on an upswing during a slow economy. Additionally, small business owners with solid and substantial

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