A recession is defined as a period of economic decline, one that historically lasts, on average, four to five years. During a recession, businesses may scale back operations or close their doors altogether. It doesn't have to be all gloom and doom, though. A recession can actually be a good time to start a business, provided you do your research and go into with solid advice and guidance. Read on to learn why.
Recessions are often considered a time where everything shrinks. That is true, but it’s also true that many companies actually get their start in these challenging climates. In fact, studies have found that 50% of Fortune 500 companies started in either a down market or full blown recession.
Why is that? Because, as more people get laid off or lose trust in traditional employment, it also creates opportunities — to try something new, to connect with new customers, and even potential for financial support, out-of-work talent, and more. Of course, that’s just the tip of the iceberg.
If you’re a Tampa Bay resident, there are a number of financial benefits to starting a business in this area. For starters, you can take advantage of the many qualified product- and service-based businesses in the area. Countless businesses exist to help you run your business, such as website designers, digital marketing agencies, staffing firms, manufacturers and suppliers. Supporting local businesses can strengthen the local economy, while forming new connections that help your own business grow.
As a recession hits, you may also benefit from a larger talent pool. An economic downturn often results in layoffs, making it easier to find skilled workers for your new venture. It’s also highly affordable to start a business in Tampa Bay, with low business filing fees and a sales tax rate of 7.5%.
For Tampa Bay area business owners, a recession can also offer unexpected financial benefits. For starters, tax credits may be created to stimulate growth and encourage economic activity. These tax credits serve as an incentive to engage in certain activities, such as hiring, research and development, implementing sustainable energy, and more.
These tax credits allow you to keep your capital, which you can spend on other aspects of running and growing your business. Here are just some of the common federal small business tax credits Tampa Bay area business owners might consider:
Of course, that’s only federal — there are also tax credits offered in Florida, including:
Financing a new business during a recession is often challenging. However the Federal Reserve typically reduces interest rates. Low interest rates mean that it is often easier to borrow capital to fund your venture and you are paying less to borrow the capital. This means you get the capital you need to grow your business and there is more left over after paying it back to help keep your business profitable.
In addition to tax credits and low interest rates, several other programs can help when it comes to funding a new business during a recession. Some of these resources are offered through federal programs, while others are privately funded. Additionally, each comes with its own terms, so always do your research or consult with a business advisor.
Grants are given under the pretext that certain work will be performed with the money provided and don’t have to be repaid. Various organizations offer grants to further specific work. Grants are also available for women, minority, and veteran-owned businesses. Popular grant programs include:
Hillsborough County specific grants include:
If you decide to start a business during a recession, you may also be eligible for disaster relief programs. Disaster relief could include programs related to flooding, drought, fires, storms, earthquakes, pandemics, etc. It’s important to keep in mind that these are temporary based on limited funding by Congress.
Small businesses can also get additional assistance through programs like:
A recession or time of personal change doesn’t have to be an excuse to not pursue starting your own business. In fact, quite the opposite! However, it’s important to have strong financial and accounting advice when starting a business during a recession.
A Tampa Bay area CPA qualified business advisor can help you set your business up for success by structuring your bookkeeping and reporting, planning your tax payments, and more. The experienced team at BAAP C.P.A. helps thousands of Florida-based businesses find the road to success every year, and we’re ready to help you get started, too.