From Strain to Resilience: Small Business Strategies for 2024

In 2023, the landscape was tumultuous. American small businesses, lenders, and service providers faced many challenges. These included soaring interest rates, inflation, labor shortages, and supply chain disruptions. Now that things seem to be settling down, the prospect of a softer landing in 2024 has infused many with cautious optimism for the journey ahead.

An Uncertain Economy

As the economy continues to shift, attention inevitably turns to labor concerns. With inflation showing signs of cooling and consumer spending on the rise, small businesses find themselves at the forefront of this resurgence.

From December 2023 to January 2024, 650,000 new jobs were created. This underscores the rebound's momentum. Still, 40% of small businesses are actively seeking to expand their workforce, while the unemployment rate stands at a mere 3.9%. The stark contrast is between job openings and available labor. It presents a big obstacle for businesses. They are striving to meet growing demand.

As the spotlight returns to labor dynamics, small businesses are trying to navigate the delicate balance between supply and demand in the employment market.

High Default Rates

Although core personal consumption expenditures (PCE) inflation has stabilized at a 2% annualized rate in line with the Federal Reserve's objectives over the past six months, small businesses still face ongoing pressure from interest rates. This financial strain is shown in the concerning trend of small business default rates. They have risen continuously for the past 18 months as of February 2024.

Despite these challenges, there is a glimmer of hope on the horizon. The Federal Reserve is expected to cut about 75 basis points (bps) from the federal funds rate. They will do this before the end of the year. Should this monetary adjustment play out, then it may serve to alleviate some of the burdens currently on small business balance sheets and offer much needed relief from the financial strain of the past few years.

Small Business Resiliency

Financial stress is getting worse for consumers and businesses. However, they must adapt in order to thrive. Now is the time to understand your customers' finances well. You must assess their capacity and find the best growth opportunities.

At Equifax, we offer the assurance necessary to navigate these challenges, because we understand your customers' financial circumstances. Use accurate affordability assessments before giving credit. Then, you can be confident that your customer can afford to borrow. Also, by using our insights into financial capacity, you can find customers who match your offerings. Then, you can use the insights to do targeted marketing across many channels.

With a firm grasp of your customers' financial reality, we empower you to grow confidently, and move forward even during these uncertain and ever changing times. We can help your business thrive with resilience and adaptability.

Deeper Insights

Read the full Q2 report in our eBook as well as the first blog in this series which discusses the significant uptick in small business creation.

You can also find more economic and credit insights by registering for our monthly Market Pulse webinar where you'll hear the latest data and trends from industry experts.

Public link

Please use the above public link if you want to share this noodl on another website.