If you believe that foreclosures affect only the family living in the home and the mortgage lender, you are mistaken. Perhaps those two parties are most directly affected, but when you take into consideration the number of foreclosures in a general region, it stands to reason that the rates have an impact on others as well.
In areas where foreclosure rates are at their highest, other property owners feel the effects. Among homeowners and lenders the former are left without a home and latter are out significant amount of money, but foreclosures also affect other businesses who might need to turn to alternative options as a way to stay afloat.
How the foreclosure process spreads the pain
Home foreclosures at high rates can affect small business owners nearby to a substantial extent. As homes are foreclosed and neighborhoods empty of residents, businesses lose customers.
When a business loses one customer, it might not make much of a difference. When a business loses customers left and right due to foreclosures, it does make a difference. Small businesses especially rely on locals to grow and survive. When their neighbors lose their homes in record numbers, clientele can drop dramatically.
Other ways in which foreclosures affect businesses
When business owners can no longer support their business, chances are they can no longer support their families. When their business takes a big financial hit, so do their own families and financial situations; they are more likely to experience default and foreclosure as well.
Property values also decline in areas where foreclosure rates are high. This could mean significant devaluation of your business’s property, which could result in a financial loss. When your business loses money, you might have to downsize your employee base. If you have to start letting employees go, foreclosure rates have affected your business in yet another way.
How businesses can stay afloat
When foreclosure rates hit an all-time high in a particular neighborhood, it can be hard for businesses to stay afloat. While you can try additional advertising methods and businesses services, the only way for some small businesses to stay afloat until the economy picks back up may simply be by avoiding foreclosure through Chapter 11 bankruptcy proceedings.
High foreclosure rates do not merely affect the people who lose their homes and the lenders who forgo the money owed to them. They hurt entire communities, from businesses to employees and everyone in between.