Small may not be beautiful

A look at how tightening conditions will affect small businesses and companies we should look out for

Over the last couple of weeks, all we’ve been talking about is tightening lending standards. One area where these lending standards will have a disproportionately negative impact is small and medium businesses (SMBs).

The Small Business Administration (SBA) defines a small business by firm revenue (ranging from $1 million to over $40 million) and by employment (from 100 to over 1,500 employees).

These companies are the backbone of the US and in fact, any country. Sadly though, they will be most affected by these tightening standards.

We just got the latest report from the NFIB on Small Business Economic Trends. While the Optimism Index declined slightly during March, the survey suggests credit conditions are indeed tightening. “A net 9% reported their last loan was harder to get than in previous attempts (up 4 points)”.

Source: NFIB

I examine some of the reasons that smaller businesses will be affected more and the consequences on these SMBs. I also share a list of companies on the NYSE and Nasdaq that have over 50% of their revenues coming from SMBs.