This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

3 Ways the Debt Ceiling Hits Small Business

NEW YORK ( TheStreet) -- The deadline for raising the debt ceiling is swiftly approaching, and while headway was made with Tuesday's so-called Gang of Six plan, created by a bipartisan group of six senators, most doubt the proposal will be passed as is.

The debt ceiling is the amount the U.S. government is allowed to borrow at any given time. It's capped at $14.3 trillion, a figure the U.S. has essentially reached. Congress needs to approve a raise to the debt ceiling by Aug. 2 or risk defaulting on debt, services and benefits for U.S. citizens.

As the deadline ticks nearer for a default on U.S. debt, small-business officials find cause for hope and alarm.

Such votes occur regularly, but this year Republicans have dug in on several underlying issues, alarming economists and rating agencies such as Moody's (MCO - Get Report) and Standard & Poor's as the deadline ticks nearer. Of course there are also reasons for small businesses to be concerned about the default.

"The consequences of that are what concerns our members -- the potential for higher taxes and how does that impact government services over the long haul? They want Washington to have some fiscal responsibility," says Bill Rys, tax counsel at the National Federation of Independent Business.

>>>Likely Debt Debate Result: Spending Cuts

Here are three ways the outcome of the debt ceiling debate could directly affect small businesses:

1. Getting a loan will be even tougher.
As if getting a bank loan isn't hard enough these days for small businesses, if the government places a large cap on spending or, in a worst-case scenario, the debt ceiling does not get raised, new loans will be even tougher.

"The bottom line is the raising the debt ceiling is as inevitable as taxes and death," says Jeff Stibel, CEO of Dun & Bradstreet Credibility.

If the debt ceiling doesn't get lifted, "this would be a cataclysmic even for small businesses," Stibel says. "What's going to happen is U.S. credit is going to get downgraded, which means access to credit is going to get much harder and interest rates are going to skyrocket."

To get a bank loan "will be harder and the terms would be so onerous that it just won't be palatable," he says.

Federal spending last year amounted to approximately 24% GDP -- a level not seen since World War II, the National Small Business Association says.

"If we continue to run high deficits, increased interest rates and constricted credit will negatively impact small businesses' ability to garner financing, the lifeblood of every small firm," it says.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
MCO $96.77 0.00%
AAPL $129.09 0.00%
FB $79.75 0.00%
GOOG $571.34 0.00%
TSLA $197.32 0.00%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs