Survey: Businesses Already Cutting Back
Late last week, the Association for Financial Professionals released a survey from its members over the past two weeks that shows businesses already are reducing spending, freezing hiring and considering layoffs in the face of the current crisis. The study was little-noticed when it came out but now is gaining traction.
Who are these people and why should you care?
The association is made up of the top financial and treasury officers of medium-sized and big companies. In other words, the people who hold the purse strings for big employers.
Board members of the association include top officers from companies such as Target, Tiffany, Wackenhut and Hallmark.
It's important to note that this is only one survey.
Nevertheless, you should care because these people are telling you that they are already so concerned that their businesses can't get credit -- loans -- that even a few weeks into this current manifestation of the crisis, they're considering draconian contractions, including layoffs. Certainly, they're already cutting spending.
Nearly 40 percent of businesses surveyed said they are having trouble getting access to short-term credit, the survey says.
So far in the current financial crisis, the emphasis has largely been focused on the political maneuverings, this being Washington, and the impact on the stock market, which affects real people.
Both are understandable. Capitol Hill either will or won't come up with some version of the $700 billion Wall Street rescue plan. As for the stock market, that makes sense too. Most people have money invested directly in Wall Street, either through their 401(k)s or stocks they've purchased, or indirectly, through pension plans they depend on that have invested their contributions in Wall Street.
But a larger concern -- one that could have serious, long-term, job-losing, business-closing consequences, many fear -- is the credit crisis. Lawmakers have been warning that if some form of rescue bill isn't passed soon, you -- Joe Consumer -- won't be able to get a car loan, for instance, at least not a rates you can afford.
It may be understandable to say, "Too bad. Too much credit got us into this mess." And, to an extent, that's true. And consumers may think, "Okay, if I have to drive my old car for another year instead of getting a loan to buy a new one, so be it."
But every day, every business in America depends on credit for a thousand different reasons: buying merchandise, meeting payroll, paying for shipping and distribution, buying advertising. Everything a business does to stay in business and keep paying its employees. Businesses do not operate on a cash-only basis.
And if businesses cannot get credit to keep growing, they have to make cuts to stay in business, or they will go out of business. And take their employees with them.
-- Frank Ahrens
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