Financial Poise
Small Business and the Economy

Investing in Small Businesses Is Key to Driving Economic Recovery

Investors, Small Businesses Need Your Backing to Drive the Economy Forward

In the middle of a global pandemic, small businesses have struggled to survive, and investing in small businesses has become crucial for the economy to recover. While the Small Business Administration is now offering a historic number of loans to entrepreneurs, many are still having a hard time finding the funds they need.

According to Small Business Majority, most small businesses have received a Paycheck Protection loan in 2020, but six out of ten are still struggling with overhead costs.

And in a recent survey from Guidant Financial and the Small Business Trends Alliance, 1 out of 3 small business owners cite the lack of capital or cash as their top challenge in 2020.

Despite a shortage of capital, small businesses have and will continue to drive economic recovery and job growth in the United States. In fact, small businesses represent more than 99% of employer firms and employ 60.6 million of the nation’s private-sector workforce. And small business job creation often outperforms that of big businesses.

A healthy small business community is crucial to driving the economy forward. To boost small businesses’ bottom lines, investors need to ensure entrepreneurs have the capital they need to survive, grow and hire.

Entrepreneurs Drive Economic Recovery Through Innovation

Entrepreneurs generate more jobs than any other sector of the economy. However, we’re living in an evolving employment landscape. Brick-and-mortar storefronts are being replaced by online retailers, and freelancers are the new version of the nine-to-five office worker.

Many workers are utilizing emerging technology to leave the traditional workforce. Small businesses and the self-employed are leading this movement. In 2019, 77% of freelancers said technology made it easier for them to find freelance work.

The freelance economy is growing and driving economic recovery by stimulating innovation and entrepreneurship in a way that has never been available before. In fact, independent workers currently represent more than one-third of working Americans. The total number of freelancers in the U.S. is now 57 million, an increase of 4 million since 2014. Indeed, by 2030, freelancers could represent up to 80% of the global workforce.

What’s more, entrepreneurs open more than 600,000 businesses in the U.S. every year, with half of these lasting past five years.

These entrepreneurs are changing the workforce. However, they still experience many traditional barriers when it comes to accessing credit, and COVID-19 has only heightened their need. While these barriers can prevent many entrepreneurs from driving economic recovery forward, private investors can help.

Seeking Out Alternative Financing Options

Entrepreneurs are looking beyond traditional lending, and they’re getting creative with raising capital. They’re seeking new ways to move forward with business ideas, grow their current enterprises or simply keep their doors open in the midst of a volatile year. Organizations like Funding Circle, Angel Investment or NextSeed help match investors with small business owners. Crowdfunding sites like GoFundMe or Kickstarter allow entrepreneurs to raise capital via the internet, and have become a  popular way for entrepreneurs to address credit problems.

But how much about crowdfunding is hype? Rapid growth in this space demonstrates that there is a community of individual investors interested in investing in small business and supporting innovative entrepreneurs. And it also shows that they are  actively seeking opportunities to support small businesses in all parts of the country. Indeed, in 2016 the total amount of crowdfunding raised in the US amounted to $738.9 billion. While these new financing options are helping address some barriers to entrepreneurship, there’s still more to be done.

Small businesses have been and will continue to be America’s engine for job growth and innovation. To fully realize the potential of America’s primary job creators and to drive economic recovery, investors must ensure that small businesses have greater access and more options for obtaining capital.

For the third year in a row, cash remains the most popular form of small business financing. In fact, 37% of small business owners utilized it to start their businesses, ahead of federal loans or backing from friends and family. With the impact of COVID-19 on the economy, small businesses need investors’ backing now more than ever.It’s time to start investing in the small businesses that will continue driving economic recovery, job creation and competitiveness.


[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: Personal Finance & Investing Fundamentals 1.0 – 2019, Basic Investment Principles 101 – From Asset Allocations to Zero Coupon Bonds 2019, What Every Founder/Entrepreneur Must Know.This is an updated version of an article originally published on August 20, 2018.]

©All Rights Reserved. November, 2020.  DailyDACTM, LLC d/b/a/ Financial PoiseTM

About John Arensmeyer

John Arensmeyer has used his long experience as a business owner to build Small Business Majority into a nationally recognized small business organization and the leading advocate for critical public policy issues facing America’s entrepreneurs—particularly healthcare, access to capital, taxes, retirement/asset building, and numerous workforce issues. The organization is focused on empowering America's entrepreneurs to…

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