Does stock market fluctuations affect small and medium businesses at all?

It is only ten years since the most recent depression passed over our heads and while a lot of businesses were affected because of the poor economic conditions to the extent that 60 percent of them closed shop, a lot of other business owners still thought that it was no major event for them.

I am dead sure that the small businesses that were caught unaware during the most recent recession would not have thought in their wildest dreams that they would be affected. The idea generally is that I am only a small enterprise and how can a market fluctuation affect me when I don’t even have a stake there or when I myself am so small to become listed there.

This is the mistake that most small entrepreneurs do. There is no doubt whatsoever that the fluctuations in the stock market however small have an impact on the small enterprises. It has an impact on everyone. So, while these small businesses may think that they are immune from any such changes and marker fluctuations is only kidding himself into believing something that is well nigh impossible.

No one is actually immune from fluctuations, not even individuals. With regard to the small businesses the following are the reasons why staying in business and not getting affected by market fluctuations is utopian.

  1. The entire economy works on credit:

The economy is almost entirely working on the credit system. Businesses across the industry do not want to put their own money in their enterprise. They rather borrow and raise the capital as a loan and then pay the principal along with an interest.

Say A owns a departmental store and he wants to operate it. He rushes to the bank and finds them ready to give him a loan at a stipulated rate of interest. He takes the loan and furnishes stock in the store. Similarly, we all buy gadgets even grocery with a credit card and then pay it at a later date failing which interest on the late payment also becomes due.

  1. Consumer behavior

Market fluctuations definitely affect the psyche of the common public. When the stock prices touch the sky people are seen buying things not only that they like but also the ones they like but don’t really need. When the market plummets the people start behaving cautiously and start saving money instead of buying goods.

  1. Competitions:

Small businesses sometimes do not feel so threatened by bigger enterprises in fact what they must be afraid of is competitions from other companies their own size.