Despite Bubble-Spotting, Business Owners Aren’t Buoyant

Despite Bubble-Spotting, Business Owners Aren't Buoyant

Photograph by Corey Holms/Getty Images

Small business owners are losing confidence in the economy, according to recent surveys by Vistage International and SurePayroll. Confidence among executives at midsize companies with $10 million to $1 billion in annual revenue has “leveled off,” according to a quarterly survey published this week by the National Center for the Middle Market.

Contrast those results with the bout of bubble-spotting that’s going around:

After social media companies Pinterest, Nextdoor, and Snapchat made venture capital-raising news over the past two weeks, Dan Primack wondered if “we’re nearing a market top for consumer-facing Internet companies.” (OK, so he didn’t say the word “bubble.”)

Jonathan Weill was more explicit, noting “pockets of bubble-like behavior in plain sight.” Those include frothy valuations for high-profile companies such as Facebook (FB), Tesla (TSLA), and LinkedIn (LNKD); rising home prices; and plans for a public offering last month by a company called Fantex, whose sole source of revenue at the time was a share in the future earnings of an NFL running back.

Companies are borrowing on increasingly friendly terms, says Chris Oberbeck, chief executive officer of Saratoga Investment (SAR), which specializes in financing businesses with $150 million or less in annual revenue. “The supply of debt right now is large relative to the amount of people who really need the credit,” he says. “We’re at leverage levels and market ebullience not so far off from 2007.”

Why aren’t business owners feeling buoyant about the economy? For one, fewer than 1 percent of companies ever get venture funding. And memories of the financial crisis, Great Recession, and partial government shutdown, combined with uncertainty about the future effects of health-care reform, are likely giving many Main Street entrepreneurs pause, curtailing efforts to land expansion dollars from more traditional sources.

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