According to The economists, one of the reasons why many businesses decide to shut down is due to the impact of the global economic slowdown. In fact, it has been confirmed that almost all businesses have lost their business prospect after the year’s end. According to reports, majority of the big multinational companies and other leading companies in the United States have faced a setback due to the impact of the economy.
Many of them have faced a decline in their market value, as they were not able to secure financial assistance from the banks. They also found difficulty in getting the credit line increasing from the banks. However, the worst situation has befallen not only American businesses but all over the world. It has been confirmed that the economies of Europe, Japan, Canada, Australia and South Asia have also been affected by this global economic recession. Every country has its own circumstances and problems that need to be addressed. Despite this, however, it is undeniable that the economies of most countries are contracting.
In a nutshell, the problem lies with the dearth of investment funds. A recession is a tough time for any businessman. He has to cut costs, reduce staff numbers and reduce inventory if he wants to survive in the market. For this, he would require adequate funds. Hence, it becomes a challenging task to manage business operations in a way that helps him survive and eventually emerge successful.
The present economy has been highly affected by recession. Businesses are losing customers who opt for cheaper goods. As a result, they are forced to sell their products at reduced prices. Moreover, there are fewer consumers who are ready to spend. Hence, businesses find it difficult to survive.
At present, there are fewer businesses that have the potential to bring in more profits. The ones that survive suffer heavy losses. There is a dire need for capital in the economy. Business enterprises require around $80 million to tide them over during the tough times. However, the scenario looks bleak if money is not available. As a result, the economy takes a beating.
A majority of small-scale businesses are on the verge of folding, as they are unable to survive. They have accumulated debt over the years. Hence, their survival relies on access to credit. However, there are no takers for their credits as banks do not feel comfortable with their accounts. Hence, they are forced to shut shop.