Small-business owners are slowly making progress, but job stagnation and consumer caution continue holding back a robust recovery, a manager of a small-business index says.
Barry Sloane, CEO of New York-based Newtek Business Services, said his firm’s index shows a modest 0.8 percent uptick in August from the month before.
His tracking tool, called the Small Business Authority Index, rose to 108.6, with the index pegged to mid-2008 with a starting point of 100.
The index looks at a number of indicators, including credit card transactions that Newtek handles for about 15,000 small-business customers. It looks at business formations, Small Business Authority loan originations and loan defaults, and the Russell Microcap Index. That fund managed by Russell Investments Inc., based in Seattle, is considered one of the best measures of small-business equity investment.
Sloane said his index correlates closely to the U.S. gross domestic product. “I can’t be too far away from the GDP or else I would lose some credibility,” Sloane said.
His index avoids the GDP’s exclusive reliance on total revenue and sales, Sloane said. “Our index measures several things, including sales, but other key small-business factors.”
Added Sloane, “This is a volatile time for all businesses. The small-business economy is growing at a very tepid pace, but it is growing.”
Anemic consumer spending hurts small businesses, and minimal job growth is the second key barrier, he said.
Sloane also said the recent announcement by the Federal Reserve of a possible monetary “twist” strategy may increase interest rates to small businesses, rather than inject money into that part of the economy.
If the Fed takes that approach, there will be a trade-off, said Sloane. The strategy probably would lower mortgage interest rates over time and also lower the cost to refinance, he said.
But it also is likely to raise short-term interest rates, which will have a negative effect on small businesses that rely on short-term loans for their capital needs, he added.
His firm, Newtek Business Services, provides a range of office and tech services to small businesses nationwide. Before launching the firm, Sloane was a managing director at Smith Barney Inc., where he directed the commercial and residential real estate securitization unit.