A new study from Credit Suisse has found that the write-down of business capital is slowing down in the United States, with the US having the third lowest rate of write-offs per capita in the developed world.
But the researchers also found that a significant portion of the US economy was not only not losing capital but also was growing.
Credit Suisse’s study, titled How Capital Fails, found that in the US, the most common cause of write downs was the absence of sufficient cash to spend.
“For most businesses, the ability to sustain a growth rate of over 6% annually was critical to their ability to compete and thrive,” the report read.
The US is now second only to China in terms of the percentage of businesses reporting at least one write-off per year.
According to Credit Suiss report, this is an improvement from the past five years, when the US was in the third place in terms that the percentage had dropped to 22%.
“Despite these progressions, however, we see an increase in the share of business owners reporting at at least a one-time write-up, and a decrease in the number of businesses that have at least two business write-ups,” the authors wrote.
“In other words, business owners are facing the risk of having to re-insure their businesses with a negative financial impact on their businesses.”
The report found that in 2018, more than three quarters of businesses reported that they had lost more than $50,000 on their operations due to lack of cash, but the percentage has been falling over the past few years.
For example, in 2020, more businesses reported losing $50 million or more than a third of their capital, down from 42% in 2019.
A further seven quarters in 2019 saw businesses report losses of at least $20 million, a decline of 20 percentage points, the report said.
However, the increase in businesses reporting losses has not been uniform.
In 2020, only one quarter of businesses had losses that were at least four times their operating profits.
By 2021, the share had fallen to less than one third, the lowest in the past four years.
The study found that although the US is facing more negative trends, there is still a lot of work to be done in the area of business financing.
While there is a lack the ability of businesses to access funding from banks, there are ways that businesses can access credit, such as credit unions, payday loans and credit unions that offer loans for their businesses.
It is not just business owners that are facing financial challenges.
About one quarter (24%) of US consumers said that they have not had enough time to put money aside in case they were forced to take out a credit card or credit card loan, a rate that has dropped from 19% in 2018.
Nearly a quarter (23%) of consumers said they have had to cut back on spending in the last year due to economic factors, a fall from 19%.
A similar number (24% of consumers) said they are facing a “loss of faith in the economy” due to the economy’s recent sluggishness.
There is a need for more business owners to be more aware of the challenges they are dealing with.
Many people in the industry are also struggling to find financing options.
When asked about what is driving the write downs, the authors found that it was a combination of economic trends, consumer behaviour and the financial sector.
They said that this “cannot be understood without considering the role of the financial industry as a vehicle for facilitating financial transactions” as it “generates and supports capital”.
The authors also said that “the financial sector and its customers are not immune from the deleveraging process”, as consumers tend to be “more cautious about lending than previously”.
“In fact, it has been estimated that there is only a 2% chance that consumers will ever borrow in the future.
These deleverages have already had a negative impact on businesses and the economy as a whole,” the researchers wrote.
Meanwhile, the US financial system has struggled with an economy that is in its worst downturn since the Great Depression, which has resulted in the loss of more than 80,000 jobs and a $2.4 trillion dollar national debt.
President Donald Trump has promised to use his presidency to revive the economy and bring it back to full strength.
The Federal Reserve’s latest policy statement said that it will continue to hold rates low until the economy is healthy, which will take the pressure off the economy, and to reduce the size of the government deficit.
Trump also said he would “negotiate a balanced budget”, which would require the US to raise taxes and borrow more to fund its spending.
Despite these promises, analysts are worried about the long-term prospects for