The National Federation of Independent Business (NFIB) is an advocacy group for small businesses that consistently surveys its members to get a reading on the current business climate from small businesses. Currently, around 325,000 small business owners are members of the organization. While the group is clearly political in nature, its surveys can help provide some insight into the state of small businesses.
The Uncertainty Index
One of the surveys the group does is called the Uncertainty Index. The goal of the Uncertainty Index is to determine how business owners feel about the future. According to the group’s 2016 Small Business Problems and Priorities survey, two of the biggest concerns for small business owners are uncertainty about the economy and government actions.
NFIB defines uncertainty as “the inability to anticipate the outcomes of important future events which are critical to planning and forecasting for the firm.”
Shortly before the election, the uncertainty index rose to a 42 year high as business owners were clearly unsure of the path the nation was about to embark on and what it could mean for the economy. In March, the Uncertainty Index remained high at 93, its 2nd highest level since it was first measured.
To measure uncertainty, the NFIB calculates how many business owners answer “I don’t know” or that they are uncertain to six questions from the monthly Small Business Economic Trends Survey. These six questions focus on business expansion, thoughts about business conditions in the future, sales expectations, employment planning, the ability to procure financing in the future, and whether they may make capital expenditures in the following three months.
Beat Uncertaining with Planning
While some aspects of uncertainty cannot be tackled—business owners will always be faced with some form of ambiguity—planning can help small business owners better prepare for any issues that may arise.
One way to help business owners tackle uncertainty they have about the future is through investigating funding options. Question five specifically states, “Do you expect to find it easier or harder to obtain your required financing during the next three months?” Too many business owners may interpret this question as dealing with bank financing or credit cards. While it is clear that banks do not make many loans to small businesses and that small business lending has been down, there are other options available.
For companies that invoice for their services after a job is complete, factoring may be a useful financing method. Construction companies and contractors frequently use factoring to help ensure they have the capital to cover supplier costs and payroll. There are multiple different types of factoring. To learn more, visit our website or contact one of our skilled representatives.
Manufacturers and subcontractors may be eligible for purchase order financing, which is used to finance the purchase or manufacture of goods that have been presold. By focusing on the creditworthiness of the buyer, a financing company can help newer businesses establish themselves as they take on more clients and provide the necessary capital to ensure the product is delivered as specified.
The future of small businesses doesn’t need to rely on the banking climate. While there will always be a measure of uncertainty (it’s just a part of doing business, after all), being aware of one’s financing options can help alleviate the stress that comes with not being able to know the future.
If you’re interested in learning more about factoring or purchase order financing, reach out to one of our skilled representatives today.