Why the Real-Estate Slump Could be Killing Small Business Hiring

Guest Writer
Owner of Make a Living Writing
min read
Opinions expressed by Entrepreneur contributors are their own.
A lot of theories have been circulated for why small businesses aren't hiring -- the bank lending crunch, emotional nervousness about the economy, high taxes, low sales. This week, noted Case Western Reserve University professor Scott Shane weighed in with his theory: It's all about the residential real-estate collapse.

Shane gives several reasons why the real-estate bubble's pop has paralyzed entrepreneurs. Among them:

1) A disproportionate amount of the products and services small businesses sell are tied to home sales. Independent realtors, small contruction contractors, interior decorators, decor boutiques...they all take the hit when home sales slow.

2) Many entrepreneurs have historically used their own home as their business-funding piggybank. With many homes now devoid of equity, there's less cash cushion with which to take a risk and put on a new hire.

3) Banks' lending was choked off in part because of their mortgage-loan problems. So just when the home-equity piggybank ran dry, banks also balked at loans.

I've interviewed Shane before and found him a very knowledgeable source. His theory makes solid sense, and reveals how home sales ripple through the broader U.S. economy.

What do you think? Is real estate the man behind the curtain in the small-business hiring slump? Leave a comment and let us know if your own home-equity situation has impacted your hiring decisions.

More from Entrepreneur

Get heaping discounts to books you love delivered straight to your inbox. We’ll feature a different book each week and share exclusive deals you won’t find anywhere else.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Starting, buying, or growing your small business shouldn’t be hard. Guidant Financial works to make financing easy for current and aspiring small business owners by providing custom funding solutions, financing education, and more.

Latest on Entrepreneur

Entrepreneur Media, Inc. values your privacy. In order to understand how people use our site generally, and to create more valuable experiences for you, we may collect data about your use of this site (both directly and through our partners). By continuing to use this site, you are agreeing to the use of that data. For more information on our data policies, please visit our Privacy Policy.