60% of Private Businesses and Private Lenders Say an Increase in the $14.3 Trillion US Federal Debt Ceiling Would Be Detrimental to the Economy in the Next 12 Months

Location: Los Angeles
Author: Douglass Gore
Date: Tuesday, January 11, 2011

As the nation’s legislators face decisions about raising the nation’s $14.3 trillion debt ceiling, a survey from Pepperdine University’s Graziadio School of Business and Management shows 60% of privately-held businesses, capital suppliers, intermediaries, and service providers say an increase would be somewhat detrimental (29%) or detrimental (31%) to the economy over the next twelve months.

“Small businesses and lenders who serve small businesses have had to deal with the economic reality of limited borrowing and lending for the last three years. They may feel that a similar reality has eluded the Federal government and it is time to start owning up.”

Conversely, the survey (http://bit.ly/usdebtsurvey) among 915 privately-held businesses, capital suppliers, intermediaries, and service providers also shows that 22% of private businesses and lenders say raising the debt ceiling would be “somewhat beneficial” (15%) or “beneficial” (7%). Nineteen percent of respondents said “neutral.” These findings are part of data expected to be released within the next two weeks from the Pepperdine Private Capital Markets Project (http://bschool.pepperdine.edu/privatecapital), an investigation of the major private capital markets that examines the current state and outlook for the private capital industry.

“The majority of private privately-held businesses, capital suppliers, intermediaries, and service providers recognize the short and long-term harm to the economy if we dig deeper and deeper into debt,” said Dr. John Paglia, lead researcher of the Private Capital Markets Project and associate professor of finance at Pepperdine University’s Graziadio School of Business and Management. “Small businesses and lenders who serve small businesses have had to deal with the economic reality of limited borrowing and lending for the last three years. They may feel that a similar reality has eluded the Federal government and it is time to start owning up.”

With over 99% of companies having fewer than 500 employees, our economy is dependent upon the success of small businesses. The Pepperdine Private Capital Markets Project is a critical step along the path of understanding and increasing the value of private companies and our economy. Professionals who work in the lending or investment arenas either for an institution or a specific fund are excellent bellwethers of what is ahead for other businesses and consumers. Through two survey cycles and published summary reports per year, lenders, investors and the businesses that depend on them will be able to make optimal investment and financing decisions, and better determine where the opportunities to create lasting economic value may be realized.

The study is available at: http://bschool.pepperdine.edu/privatecapital.

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