During a recent interview on Fox Business, Kevin O’Leary, the entrepreneur and “Shark Tank” television star, voiced his concerns about an emerging crisis in the United States. Despite reports of optimism in the data, O’Leary, who closely works with small and mid-sized businesses, finds that entrepreneurs are far from content with the current economic conditions.
Small businesses, in particular, are struggling despite a slight uptick in optimism. The National Federation of Independent Businesses’ Small Business Optimism Index reached a seven-month high of 91 in June, but it remains below the 49-year average of 98. O’Leary refutes the reported surge in small business optimism, stating that his interactions with businesses in various states paint a different reality.
He believes that the Federal Reserve’s 10 consecutive interest-rate hikes since March 2022 are a significant issue. The rapid and unprecedented speed of these hikes has put small businesses in a difficult position, leading to a surge in the cost of capital. This liquidity crunch is particularly concerning because small businesses represent 60% of the U.S. economy.
To mitigate risks during these uncertain economic times, O’Leary suggests that investing in startups can offer diversification to investment portfolios. Startups often operate in sectors that are less directly tied to the broader market’s fluctuations, providing a hedge against potential downturns in other investments.
O’Leary is taking a proactive approach and urging entrepreneurs to listen carefully while offering survival strategies. He predicts that the situation for small businesses will only worsen as cash flow becomes scarcer.
In an effort to assist struggling small-business owners, O’Leary advocates for the use of the Employee Retention Credit (ERC), a valuable resource that many small businesses are overlooking. He emphasises that businesses may still have an opportunity to claim the credit retroactively for previous eligible quarters, even if they did not claim it earlier. Changes introduced by the Consolidated Appropriations Act (CAA) and the American Rescue Plan Act (ARPA) in 2021 allowed businesses that received Paycheck Protection Program (PPP) loans to also claim the ERC, providing they meet the eligibility criteria.
