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Index Depicts Weak Small Business Economy

Limited access to credit, flat job growth, and tepid retail spending blamed for soft outlook.

August 23, 2011
KEYWORDS business , index , small
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An index of U.S. small business health indicates a sluggish small business economy.

The SB Authority Index rose 0.96% from June to July to 107.26 points due to increased Small Business Administration loan volume and retail sales, and indications from the Russell Microcap Index.

But other factors are dampening business growth.

“The small business economy has been extremely sluggish and struggles to grow,” says Barry Sloane, president/CEO of The Small Business Authority, which publishes the monthly index. “Our slight monthly increase for July is a further condition of the problems that small businesses ultimately have and will have going forward. We see slight availability of credit, flat job growth, and tepid retail spending.

SB Authority Index“In addition,” he continues, “the Federal Reserve keeping interest rates at 0% is not good for small businesses since this is creating inflation and weakening the dollar.”

The SB Authority Index uses eight authoritative economic indicators to determine small business health. Computed relative to the base year of 2007, each indicator is factored into a mathematical formula based on correlation coefficients that monitor the strength of the small-business economy.

The eight indicators the index leverages are:

  1. ADP National Employment Report;
  2. Russell Microcap Segment of the U.S. equity market;
  3. Prime rate;
  4. Retail sales;
  5. Newtek Merchant Processing;
  6. Approved Small Business Administration loan volume;
  7. GLS Estimated Small Business Loan Default Rate; and
  8. State of Delaware new business formations.

A number greater than 100, the established baseline, describes the economy climbing to a healthier state and a chance for small business success.

Watch Barry Sloane explain the SB Authority Index:

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