Time’s Scott Gerber predicts some of the fallout from going over the fiscal cliff: big business will turn against small business in order to survive. This Hobbesian business climate is not hard to imagine:
Big businesses will need to hedge their bets to maintain their stock valuations, which means they will continue to hold onto the cash, as they’ve been doing in recent years. The fact that many big businesses count the defense department and other government agencies as some of their key clients certainly won’t help either. As a result, budgets will be cut and projects will be stopped and stalled — and this spending slow-down will be devastating to the thousands of small businesses that participate in this broader ecosystem.
But even when big business vendor spending isn’t altogether stalled, small businesses will feel a subtler — but often just as devastating — problem. As they often do during difficult times, many large businesses will slow down payment periods to existing vendors, even to those that have already completed contractual obligations. Getting accounts receivable into a small business’s bank account is already slow process, with the typical timeline in the range of 60 to 90 days. But if we take a jump over the cliff, that period will likely be extended to 90 to 120 days or more, which can amount to a death sentence for the countless small and medium-sized businesses that face perpetual cash-flow challenges as they struggle to pay employees, rent, health insurance, and a myriad other budget line items.