What Would The U.S. Economy Be Like Without Small Businesses?

In short, the United States economy would be in shambles without small businesses to support it. Well, no, not exactly – the ways that American consumers spend their money would, of course, change, but things wouldn’t be that bad if small businesses suddenly and somehow ceased to exist. Or would they? Time and time again, our small business working capital lenders have constantly pointed out the importance of small business, and for good reason. Small businesses are the “backbone” of the economy, right? It’s true.

Helping Your Small Business Thrive

Well, hopefully that introduction paragraph didn’t confuse you too much, but our point is that the economy would drastically change without the presence of small businesses. So, in today’s blog post, our factoring company in Atlanta is going to take a stab at just how much the greater economic landscape would change without small businesses. We’d also like to take the opportunity to thank readers and small business owners like you who support the domestic economy and give our invoice factoring company purpose by helping our clients grow and achieve true success. To our money factoring experts, helping you finance your business is our business.

Learn more about our receivable factoring services, or feel free to get in touch with our Atlanta lenders with any questions about how we can help you and your small business. The Commercial Finance Group is excited to work with you!

What Constitutes As a “Small Business”?

Oftentimes, the criteria for what actually constitutes as a small business can be a little ambiguous. Indeed, to help assess the value of small business within the context of the U.S. economy, it’s important to clearly define what a small business is. Why not turn to the Small Business Administration for some guidance? According to this authority on small businesses in the United States, a small business is one that is independently owned and operated, exerts little influence in its industry, and (with a few exceptions), has fewer than five hundred employees. Of course, there is a great deal of information out there when it comes to the size standards of small businesses, but that’s the jist of it right there.

A Massive Economic Force

With more than twenty-seven million small businesses in the country, there’s hardly any doubt that these companies represent a major force in the United States economy. Generating roughly 50 percent (!) of our gross domestic product, the countless individuals who have successfully founded and grown their own business stateside have helped shape the global economy and business world as we know it today. Ever heard of companies like Microsoft, Wal-Mart, eBay, Apple, or Google? Of course you have, because these are some of the largest and most influential companies on planet Earth. Well, though these companies are economic giants, they started as modest small businesses, some of which were even out of a garage.

Creating a Broad Impact

So, besides contributing to our general economic well-being as a country (and global economy), successful small businesses also help in the way of economic and socioeconomic development. By contributing to the growth and vitality in specific areas of this development, small businesses help create countless jobs and spark innovation in many different industries. Not only that, but the presence and influence of small businesses also provide opportunities for people from all walks of life to achieve financial success and independence. And, if that wasn’t enough already, small businesses also complement the economic activity of large organizations by providing them with components, services and distribution of their products.

Jobs, Jobs, Jobs

Steve Jobs created many jobs; perhaps that’s why he was named “Jobs.” Jokes aside, small businesses create so many job opportunities that, according to 2011 data from the U.S. Small Business Administration, half of all U.S. adults are either self-employed or work for businesses with fewer than five hundred employees. Not only that, but the majority of workers in the United States first entered the business world working for small businesses to begin with.

While the split between those working for small companies and those working for larger companies is roughly even, small firms tend to hire more frequently than big companies do. Why? Well, at any given point in time, many small businesses are launched, and other established small businesses are expanding. As such, these new(er) companies require more employees, so more hiring takes place. With that being said, survival and expansion rates for small businesses are volatile, and so at any given point in time, many small businesses close or contract and those workers lose their job.

All things considered, this might make it sound like small businesses are too volatile to create consistent job growth across the board, but the truth is quite the opposite. Over time, more jobs are added by small companies than those that are taken away, resulting in a net increase in the number of employed workers in the United States. So, when you acknowledge the overall trend of job growth and the number of employed citizens, small businesses play a key role. It’s fair to say that, without the ever-presence of fluctuating small businesses, there wouldn’t nearly be as many new jobs created.

Bringing Forth Great Products and Services

In the business world, competition drives innovation, and the more competition there is, the more pressure is put on companies to innovate their products and services, better serving the consumer. Because a greater number of small businesses means more competition than a smaller number of large businesses, small companies develop more patents per employee than large companies do (according to the SBA). Over the years – decades, really – the list of important innovations by small firms has included everyday and important things like the defibrillator, DNA fingerprinting technology, oral contraceptives, overnight national delivery services, the safety razor, strobe lights, airplanes, and even something as simple yet frequently-used as the zipper. Thank you, small businesses!

Encouraging Innovation

Why is it that small businesses are so innovative? For one, they tend to offer environments that appeal to individuals with the talent and skills to invent new products or improve the way that things are currently done. The business models of many small companies promote this type of thinking by encouraging fast thinking, providing focused research programs, and rewarding top performers in terms of compensation. So, when workers are free to innovate (and even incentivized to do so), great products and services make their way to the market.

Make Your Mark On The Economy With Our Small Business Lenders

If you have a unique product or service, or you just want to take an idea and grow it into fruition, The Commercial Finance Group has the working capital solutions in the form of invoice factoring, a small business line of credit, and more. Contact us today to learn more about helping your small business!