Entrepreneurs aren’t afraid of taking risks and finding new ways to tackle old problems, which is a reason why small businesses create two-thirds of all new jobs and support 55 percent of all jobs. Without small businesses, our economy – and our local communities – would crumble. That’s why it’s important to take time to appreciate our country’s entrepreneurs during November, which is National Entrepreneurship Month.
Whether entrepreneurs are creating jobs, pushing important new ideas or simply brightening up the main street of town, their hard work is vital to our economic fabric. But small business owners face too many challenges that keep their businesses from thriving. During National Entrepreneurship Month, we should focus on what we can do to help fulfill the promise of the small business economy.
Entrepreneurs are a crucial part of our economic fabric. They create jobs, challenge convention and find new ways to solve old problems. But U.S. entrepreneurship is on the decline. The number of companies less than a year old as a share of all businesses has fallen nearly 44 percent between 1978 and 2012, and in 2008, we hit a disturbing milestone: The percentage of new businesses created that year was smaller than the percentage of businesses that closed down. That’s a serious problem for our economy, which depends on new businesses to hire and pump new blood into our markets.
What prompted this turn for the worse? Many factors may have contributed, but one development is having a definite impact: It’s become harder for entrepreneurs to access loans or other sources of funding for their businesses. The recession choked off many traditional sources of financing, with a particular impact on bank loans. In fact, many banks, still cautious from the downturn, have reduced or eliminated loans valued below $250,000. Other banks simply won’t lend to businesses with annual revenues of less than $2 million. This change has hit small businesses particularly hard, as 68 percent of small businesses seek loans of $250,000 or less, and 50 percent seek loans of $100,000 or less.
Washington spends a lot of time talking about the importance of small businesses – but not nearly enough time passing legislation that actually helps small businesses grow and thrive.
Small businesses create two-thirds of all new jobs, and have supported 55 percent of all jobs since the 1970s. In cities hit hard by the recession, like Detroit, small employers have been particularly vital in rebuilding struggling neighborhoods. And, entrepreneurs continue to be leaders in innovating and finding better ways to solve old problems.
Clearly, small businesses are crucial to keeping our economy humming and our communities strong. Yet, Washington is more focused on paying lip service to small businesses than actually passing policies that help them thrive.
Since the financial crisis, regulators and policymakers have concentrated on making brick and mortar banks safe and secure. But, away from regulatory scrutiny, a new sector has emerged led by non-bank online lenders and, if we aren’t careful, it has the potential to harm millions of small business borrowers. Self-policing is a step in the right direction, but increased regulatory vigilance is both warranted and desired.
In 1963, President Kennedy proclaimed the first National Small Business Week to honor our nation’s entrepreneurs whose innovative spirit and hard work helped make our country great. For more than 50 years, we’ve carried on the tradition of celebrating small businesses, and for good reason.
Small businesses make up more than 99 percent of all businesses in this country, employ half of the private sector workforce and create the majority of net new jobs.
Despite the immense impact they have on our economy, they’re still struggling to thrive. In fact, a recent survey from Bank of America found nearly two-thirds of small business owners say they are still recovering from the aftermath of the Great Recession.
As we celebrate our nation’s innovators and job creators during National Small Business Week, we should remember to support small businesses not just this week, but every day of the year.
Let’s take a look at some policies that would help small businesses break through the barriers that are keeping them from prospering.