Economist sees small business opportunities ahead

Here's a rare nugget of better news: Economist Diane Swonk sees opportunities for small business in 2010.

Swonk, chief economist at Mesirow Financial, a Chicago-headquartered diversified financial services firm, is no Pollyanna, however.

"There's not a lot of growth in this economy," she warns. "If you're waiting for the economy to lift all boats, you're going to be sunk. (Small businesses) will have to keep things firm and tight."

The economy is "two steps forward, one step back" with still a "significant" but not absolute risk of a second dip, Swonk says. "Hopefully we won't go there."

Here, in capsule form, is where Swonk sees possibilities:

• B2b businesses, she says, will come back faster than those in the consumer marketplace.

"The credit situation is very harsh," Swonk says - and exacerbated in the consumer sector by federal legislation, the Credit Card Act, passed last May to shelter consumers from excessive credit card interest rates and fees.

Swonk points out, however, that many card issuers "have raised fees and lowered credit lines" in advance of the February 2010 effective date of the legislation. Along with continued high unemployment, the resulting credit tightening is likely to keep consumer spending down, she says.

• There's less such pressure in the B2b sector. In particular, small businesses that sell to larger ones may be well positioned.

"Large businesses have cash on their non-financial balance sheets, and they must make that cash do something," Swonk says. She expects spending will center on "hi-tech solutions that will boost productivity."

• People. For smaller businesses, the upside to high unemployment is that "many highly qualified people are unemployed now. With some creativity on the compensation side, small businesses can have the pick of the litter."

By creating "strategic partnerships with individuals," Swonk suggests small businesses "can afford to hire some highly talented people who have come out of the large business environment and who can get a small business's foot in doors it hasn't gotten in before."

• Banking, where credit finally may flow early next year. Treasury Secretary Tim Geithner may implore big banks to lend more to small businesses, but "large banks aren't where small businesses get loans," Swonk says.

Community banks, a more traditional source of small business financing, have tightened their business lending as much as the giants, but "they're "not suddenly being mean," Swonk says. "They didn't get TARP funds, and they're paying for the FDIC. They're into self-preservation," she says.

The plus is that "government is trying to fund small business," putting out money largely through Small Business Administration loan guarantee programs.

Swonk's advice: Get your balance sheet in shape; find the niche banks that do SBA lending; and get in line, so you're there when funds start to flow.

Questions, comments to Jim Kendall, JKendall@121MarketingResources.com. © 2009 121 Marketing Resources, Inc.