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How The Brexit Vote Could Hurt Small Business Lending In The U.S.

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If the British vote to opt out of the European Union (EU) on Thursday, the referendum will shake up the global financial markets. London, of course, is a major financial center, and should the so-called "Brexit" could rattle investors in Europe, Asia, and the U.S. The markets loathe uncertainty, and a British departure from the EU would cause great uncertainty.

The vote is interesting because the UK has prospered since joining the European Union, according to a Conference Board study cited by the Financial Times. Whether or not EU membership was dirctly responsible is at the heart of the matter. The FT reported that according to professor Nick Crafts of Warwick University, one of Britain’s leading economic historians, the EU directly raised UK prosperity by about 10 per cent, due to increased competition and better access to the single European market. British economists are debating how much the Brexit might harm the UK.

How much would a Brexit impact small businesses here in the U.S.? On a macro level, there will be implications as markets will react. Trade agreements could be disrupted.  The Washington Post recently reported that leaving the European Union could jeopardize access British companies have to the 28 companies that comprise the EU. This result could negatively impact American companies with operations based in England. The paper further reported that The International Monetary Fund forecasted  that the impact of Britain's departure from the EU would be "negative and substantial."

However, at this point in time, the U.S. economy is relatively strong and the dollar becomes a safe haven in uncertain times. Fuel prices remain low and, at the same time, summer -- a time when many consumers spend their disposable income on travel, dining and other entertainment activities -- is now in full swing. Further, Janet Yellen, the Federal Reserve chair, told Congress that the U.S. economy is doing well and that she expects the economy to continue its steady growth. However, the Fed has given mixed signals as to when another interest rate hike might occur. Many people had expected an announcement of change at the Fed's meeting on June 14-15, but it did not happen. When the Fed meets again in late July, there could be a hike.

Bankers and other lenders are carefully watching such movements. Meanwhile, small business owners and aspiring entrepreneurs still benefit from low interest rates, relatively loose purse strings, and the efficiency of borrowing thanks to financial technology advances. On many levels, these are halcyon times for small business finance -- securing capital has rarely been easier and software programs enable novices to handle functions such as accounting (through programs like Quickbooks). Technology has made it easier than ever to do graphic design, and marketing.

Meanwhile, the draw of business ownership is as strong as ever. A generation has grown up having watched corporate downsizing and the phasing out of jobs in sectors including print media, retail, and the U.S. postal service. People are starting businesses at young ages, sometimes while they are still in college. At the same time, immigrants continue to come to this country in pursuit of the American Dream. Entrepreneurship is strong, and the overall domestic environment for small business growth is robust.

I look for small business finance to continue along a prosperous path. There will be ebbs and flows, of course. Activity typically slows down during the month of August, and some would-be entrepreneurs may watch to see what happens during the Presidential election before making the plunge. Overall, even with a potential for some market noise that would follow a Brexit, I believe the time is still ripe for the pursuit of business ownership.