By the Bootstraps

As I mentioned in a previous post, independent businesses are seen as potential driving forces out of hard economic times. The flow of events looks a little something like this:

Potential Business Owner gets Loan > Business Owner opens Small Business > Hires People > People Buy Goods From Small Business > $$$$ to Owner, Employees and the WORLD!

Sadly it isn’t that simple, especially in light of an alarming new trend highligted in a recent USA Today article: there is a decline, instead of an increase, in small business creation during the recession and a rise in bankruptcy. This switch is even greater than could have been expected from pre-recession numbers, according to the New York Times’ blog “You’re the Boss.”According to their analysis, if business bankruptcies had followed the rate of bankruptcy from the first quarter of 2006, around 10,000 businesses would have filed for bankruptcy by the first quarter of 2009. Yet with the recession, more than 14,000 businesses have gone bankrupt.

Considering that small businesses make up half of the nation’s gross domestic product and “account for most job growth” according to USA Today, it’s incredibly important for business owners to receive loans to help them out of debt and continue their businesses. However even with $730 million being diverted to small business issues, 16 percent of small business owners say business loans are harder to get.

According to PolitiFact’s Obameter (a fun way to keep track of our president’s campaign promises), President Obama has kept his promise to expand loan programs for small businesses. But it remains to be seen if and when this move will actually restore bank and small business owners’ confidence.

Photo credit: “Recession in Chicago” By the Red Line Berwyn Stop. http://www.flickr.com/photos/theeerin/ / CC BY-NC-ND 2.0

Linens ‘n’ Things.

Eddie Bauer.

Starbucks.

Steve and Barry.

These stores and numerous others are either closing low-performing locations in the city or cutting their losses and filing for bankruptcy. Stores that once revelled in the big boom of America’s economic heyday are now feeling the push of a financial crisis many have likened to the Great Depression of the 1930s.

A day after the new year, Chicago Tribune reporter Sandra M. Jones rang in the New Year with disheartening news: 2009 would be “the year of reckoning for retailers.”

A mere 5 percent of companies in the Standard & Poor’s 500 went bankrupt between 1978 and 2005, compared with 27 percent of retail companies, according to Bernstein Research.

[Colin] McGranahan (an analyst at Bernstein Research in New York) predicts that this recession will wipe out 5 percent to 10 percent, and maybe more, of the stores now operating, and he foresees the reckoning to continue through 2009 and estimates the challenges could spill over into 2010.

So why focus on Chicago’s smaller businesses, when presumeably more people stand to lose from hardships felt at bigger companies?

Chicago’s a city made up of neighborhoods whose boundaries are felt by natives and visitors alike. Within those neighborhoods are micrcosms of Chicago-at-large; each has its own feel, its own culture, its own voice. The small businesses within those communities make up just as much a part of the community as the people who live there. By exploring how these independent stores are being affected by the recession, we’re really seeing how each community in Chicago is being affected, by neighborhood to race to class.

Also small businesses and entrepreneurial spirit are considered guideposts to help us get out of this recession. But what happens when commercial bankruptcy skyrockets as a recent report in USAToday reports? If banks are less willing to give out start-up loans and people are even less willing to strike out in unknown territory during a time when security is key, what happens to that part of the American dream?

We’ll find out together and hopefully make some sense of these unsecure times through the stories of independent businesses on the “Main Street” of different Chicago neighborhoods.