Although the American economy is showing signs of recovery, the government’s continued efforts to aid small-business owners reveal this is one sector that may not rebound well.
The mix of reduced consumer spending and decreased financing has dealt a death blow to many small companies. The result is not only bankruptcies, but an increase in businesses just being forced to close their doors for good.
In particular, California’s showing an increase of more than 80 percent in its small-business bankruptcies in a one-year period (approximately 19,000 were filed from September 2008 to 2009). The national average is up nearly 50 percent; however that number is likely softened, as many business owners declare personal bankruptcy rather than subjecting their businesses to the process. Many owners get trapped in a dangerous cycle of trying to support the business through their personal finances, which can lead to double financial trouble. Since many business owners must tie their business financing to their personal assets or collateral, when the decision is made to shut down, total financial collapse is often the result.
One bankruptcy attorney urges small-business owners not to let things go too long before dealing with financial challenges, as the recovery can become increasingly difficult as time passes.
Some of the measures currently being considered to aid small businesses include: tax breaks designed to boost employment and encourage investments, and increased availability of financing.
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Source:
Los Angeles Times: Small-business bankruptcies rise 81% in California
