Join our Waitlist for Expert Advice!

What the Dow's Decline Means for Small Businesses The market's plunge could trip up already hobbled small businesses.

By Diana Ransom

Opinions expressed by Entrepreneur contributors are their own.

What the Dows Decline Means for Small BusinessesJust when you thought the worst was over.

Yesterday's 600-point plunge in the Dow Jones Industrial Average has businesses owners across the country scrambling. Some are moving around their retirement funds and drawing down their credit lines. Most of them, however, are holding tight and hoping for a better performance in the markets today.

The stock market's dismal performance may not directly affect small businesses that don't operate within the financial industry, but it does hit their customers. And if shoppers aren't feeling very rich, you can guarantee that spending overall will ease, says Peter S. Cohan, the president of Peter S. Cohan & Associates, a management consulting and venture capital firm in Marlborough, Mass.

"Tack on reduced government spending and this is could be the one-two-punch that sends the economy into negative territory," says Cohan who wrote Capital Rising: How Capital Flows Are Changing Business Systems All Over the World (Palgrave Macmillan, 2010).

Rohit Arora, the co-founder and CEO New York's Biz2Credit, an online credit platform that connects small businesses with credit options, was even less optimistic. When the ratings agency Standard & Poor's downgraded the U.S.'s debt from AAA to AA+ last Friday, the government's lending costs jumped. That move will push up small business lending rates, as the price banks pay to borrow from the federal government will also rise, he says.

What's more, if the nation falls back into recession, the government -- thanks to its promise cut spending and reduce the nation's debt -- won't be able to put forward new stimulus measures. "The payroll tax cut and other incentives that the government had considered renewing will [likely] go away," says Arora.

Such prospects are no doubt rankling still struggling small business owners. For Irene Firmat of Full Sail Brewing Company, the uncertainty is the worst. "Economic uncertainty and rampant unemployment is scary," says Firmat, who founded the brewery in Hood River, Ore., in 1987. "We have a pub that does a lot of volume from people in Oregon. But we also get many people coming from all over the U.S.; they have to pay for gas or airlines tickets," she says. "If you're not scared you shouldn't be a business owner."

Although the extent of the market's decline will largely determine the level of damage the U.S. debt downgrade has wreaked, some potential bright sides may shine through, says Arora. Oil and commodities prices could remain subdued if the market's turmoil spreads, he says. In addition, if the dollar continues to decline, exporting abroad could become increasingly attractive, as U.S. products and services become cheaper to foreign buyers.

Want to attempt some contingency planning?

See: What a U.S. Default Might Mean for Small Businesses.

Want to stage a business comeback and prosper in good times and bad?

See: Shift Your Mindset, Save Your Business.

How about reduce stress?

See: How to Stop Stress in 60 Seconds or Less.

How might your business be affected by the latest stock market rout? Let us know in the comments section.

Diana Ransom is the former deputy editor of Entrepreneur.com.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business News

You Have One Month Left to Buy a House, According to Barbara Corcoran. Here's Why.

"If you are planning on waiting a year and seeing where interest rates go, you are out of your mind," Corcoran said.

Business News

Meta Fires Employee Making $400,000 Per Year Over a $25 Meal Voucher Issue

Other staff members were fired for the same reason, per a new report.

Franchise

The McRib Is Back, But Only at Select McDonald's — Here's Where to Find It

This scarcity is nothing new. In 2022, McDonald's announced a "Farewell Tour" for the McRib, suggesting that it might be the last time customers could get their hands on it.

Business News

These 3 Side Hustles Make the Most Money While Working Fewer Hours, According to a New Survey

The survey also found that having a side hustle doubled as a path to becoming more employable.

Thought Leaders

These 3 Trends Will Change What It Means to Be an Entrepreneur in 2025

Here are three entrepreneurship trends from the new Global Entrepreneurship Monitor report that are changing the landscape for the future.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.