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U.S. Credit Downgrade Raises Anxiety for Small Biz

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    NEWSLETTERS

    Most have probably heard about the S&P downgrading the U.S. credit rating from AAA to AA. It’s a stunning turn of events in the history of the U.S. economy and may not affect the daily lifestyles of everyone, but it does have a long-term impact on small businesses. How, exactly?

    According to Business Insider:

    • The U.S. government’s leverage to pump up the economy has gone down even further.
    • Interest rates will go up in near future as the cost of borrowing money in the U.S. will rise.

    But everything is not gloom and doom, as a weaker dollar and lower costs can make small businesses more competitive, BI points out. The important concern is whether small businesses will get enough incentives and support.

    Is it a real concern, though, or just a hyped-up event made worse by the media?

    "This is an unprecedented event. No one expected it," said Mike Waller, Chicago Coach of consulting firm The Entrepreneur Source and a mentor to prospective franchise owners. "But it is more of an emotional reaction, and it’s raising anxiety."

    Not all small business owners feel the same way. Certainly not Elaine Krieger, president of Naperville–based Krieger Kiddie Corporation. Her corporation includes Clothes Mentor ®, Plato’s Closet ® and Once Upon A Child ® retail apparel resale stores.

    "I went to five banks and was turned down. The banks had too much debt," Krieger said. If anything, she said, small business owners need to save their own money and not rely on bank loans – fortunately, with hard work, she made it through.

    "The downgrade has huge repercussions down the line," she added. "We knew it was coming, we just didn’t know when."

    In the meantime, it’s business as usual for Waller.

    "I can buy things I need at the 7-11, my garbage man is still working, and I am going to spend money at Sam’s Club right after this," he said.

    The lesson here: don’t panic, but be wary of your budget and spend wisely – and don’t expect any sympathy from the banks.