Entrepreneurial

Many small business owners in the United States are reluctant to hire more employees in the near term as economic uncertainty and sagging sales continue to put pressure on company balance sheets, the latest index on small business optimism from the National Federation of Independent Business (NFIB) shows.

Of the 2,077 small businesses in NFIB’s membership surveyed, the number of companies planning to increase staff is down two percentage points to just nine percent, while 12 percent plan to reduce their workforce over the next three months. The report also shows employment has been reduced for the fifth month in a row with an average reduction of 0.1 workers per company.

“Small businesses seem to have the right number of employees,” said Holly Wade, senior policy analyst at the NFIB. “They’re breaking even. But until they see a pick-up in consumer spending there’s no reason to hire.”

Economic uncertainty is affecting consumer confidence and in turn small businesses. Twenty-six percent of business owners surveyed said poor sales are their main concern.

Wade doesn’t see anything inspiring more consumer confidence in the near future. “We don’t see anything on the horizon that would get small businesses to hire more and consumers to spend more,” she said.

Just when it looked like President Obama was making some headway with small business, along comes the CIT bankruptcy train to derail everything.

Last Thursday, on Obama’s urging, the House of Representatives overwhelmingly passed new legislation that authorized more than $40 billion for loans backed by the Small Business Administration. It was the relief U.S. small businesses had been hoping for. But just 72 hours later the good news was tempered when CIT Group Inc. – the SBA’s top lender – filed for bankruptcy protection. Now all that new federal money may be loaded onto a train missing its locomotive.

CIT’s failing could leave as many as a million small and medium-sized businesses looking elsewhere for credit in a marketplace where few banks are lending. According to the National Small Business Association, CIT lent $65 million in SBA-backed loans for the first six months of 2009; just 1 percent of all SBA loans issued. That figure was down dramatically over 2008, when CIT comprised 6 percent of the SBA total.