What the Fed Decision does for Entrepreneurs?

If any entrepreneurs have been watching Federal Reserve Chairman Ben Bernanke explain this year’s FOMC decision, I hope you’re ready for meager profits and slow growth. The FOMC has decided to finish its current round of economic easing and keep the interest rate at 0.25%. Banks and large corporations will be happy because they are, in essence, receiving “free” money leading to the continuation of rising inflation in commodities and the devaluation of the US Dollar.

Cash flow and profits, for startup companies and small businesses, are a delicate balance. Gas prices shooting up a dollar over a two month period can put many small businesses out of business. More small businesses will fail to make it through the rest of the current recession and many startup companies will fail to launch. A squeeze on profits for a company that is barely profitable isn’t sustainable.

Why will large companies succeed? Large companies can survive extended periods of time at low profit margins because of their high volume. If something goes wrong, it is easier for them to gain financing because they can use the millions of dollars of assets on their books as collateral. This allows large companies to expand or maintain while their smaller competition is forced to cut operations or go bankrupt leading to larger more powerful corporations created by the Federal Reserve.