Housing Decline Hurts the Small Business Sector
- Mar 17, 2008
Washington, D.C.–Small businesses are the latest victims of the housing and credit crunch, according to The Washington Post.Business casualties are increasing quickly in Washington-region bankruptcy courts. The number of corporations filing for Chapter 11 has more than doubled in Maryland, Eastern Virginia and the District of Colombia from the same period last year. Twelve times as many smaller firms tried to liquidate under Chapter 7 during the same period.According to a 2007 report by the Board of Governors of the Federal Reserve System, small businesses are greatly affected by economic downturns. A third of all such businesses don’t make it through their first two years; 56 percent only last four years.Many of the companies filing for bankruptcy this year are smaller; some business owners are overly leveraged, such as one Washington, D.C. couple who poured their investment, retirement and home equity capital into their first development: a townhouse community that only made it halfway to completion because of the housing slump.The couple filed for bankruptcy when the bank tried to garnish their personal accounts, rendering them unable to complete the development, the Post said.