45,000 small businesses have closed since the beginning of the year, compared with 58,000 in the corresponding period last year, according to figure from the Israel Association for the Self-Employed and Israel Small and Medium Enterprises Authority obtained by "Globes".
Small business are defined as businesses with up to 70 employees at a sales turnover of up to NIS 22 million.
The Association for the Self-Employed, which incorporates the Israel Bar Association, the Institute of Certified Public Accountants in Israel, the Association of Insurance Brokers and Agents in Israel, and retail organizations, says 160,000 small businesses employ an additional 180,000 people, and that 68,000 small business closed in 2003.
Association for the Self-Employed chairman Zeev Weiner believes that some of the small business that closed in 2004 had ceased operating during last year's crisis, but their tax files were only closed this year.
The figures indicate that 65% of the self-employed (included in the definition of small businesses above) have overextended their credit, which significantly raises the financing costs and harms their continued activity, up to a possible threat to their ability to operate.
Weiner said small businesses were unable to raise prices for goods and services in the current economic climate, even as their financing costs were rising, thereby contributing to the economy's low payment ethic. He added that small businesspeople believe that the payment ethic in Israel was now lower than in the corresponding period last year.
The Association for the Self-Employed believes 20,000 new small businesses will open this year, compared with 42,000 last year, provided that there are no extraordinary political or security shocks. The reason for the sharp drop is the banks' tight credit and guarantee policies for small businesses.
Weiner is about to ask Minister of Finance Benjamin Netanyahu to increase the state fund backing loans for small and medium-sized businesses from NIS 250 million this year to NIS 1 billion in 2005, leveraged by the participating banks: First International Bank of Israel (TASE:FTIN1;FTIN5) and Bank Otsar Hahayal.
Weiner said increasing this fund would make the establishment of new small businesses possible and prevent the closing of many current businesses.
Published by Globes [online] - www.globes.co.il - on November 3, 2004