Small Business Investing: Taking Stock in Main Street

Small Business Investing Is Medicine for the Economy

Ask an investor why they choose to fund small businesses and they will probably tell you they enjoy empowering the local economy. Or they need to diversify their portfolio. Or working with independent entrepreneurs is satisfying – and rewarding financially.

Entrepreneurs are our nation’s biggest innovators and top job creators. Consider the following statistics from the Small Business Association (SBA):

• There are 34.8 million small businesses in the US.
• Small businesses account for 99.9% of all US businesses.
• Between March 2022 and March 2023, small businesses created 2.6 million jobs and accounted for 80% of new jobs created in the US.
• Small businesses increase private-sector employment and generate much of America’s exports.

Small Business Needs Smart Investors

One of the biggest challenges facing small business owners and entrepreneurs has been and continues to be the inability to access sufficient credit and capital. While the majority of small employers are seeking capital for their businesses, lending has traditionally dried up for small employers. Eighty percent report that it is difficult to access affordable capital.

However, small businesses in under-resourced communities especially struggle to access capital. According to the Federal Reserve, older, larger and white-owned firms were more likely than their counterparts to be fully approved for a loan, line of credit, or merchant cash advance. Small business investing can increase equitable access to capital.

To maintain the health of our economy,  we need to help the small business community achieve its fullest potential. It’s important for investors to know that entrepreneurship is on the rise and that investments in the small business community can be ripe for opportunity.

Small Business Investing Helps Businesses Lacking Credit

It’s no secret that credit is a long-standing problem for small business owners. Lending to small businesses is considered riskier because they must prove that they can repay their loans. And while the Small Business Administration is offering more loans to entrepreneurs than before the Great Recession, many of those businesses are still having a hard time finding the credit they need.

Small Business Majority’s scientific opinion polling revealed that small business owners also were affected by higher interest rates when seeking new capital or taking on more debt on existing lines of credit or on credit cards. Nearly three-fourths of small businesses felt that higher interest rates have had an impact on their ability to access capital.

A 2025 survey also found that 68% of entrepreneurs think that increasing access to low-interest, small-dollar loans (under $100,000) and/or grants should be a top priority for Congress and the new administration.

In 2024, Truist reported small businesses are worried about inflation and that 90% have reacted to it by taking actions such as raising prices, cutting costs, or increasing efficiencies. As costs are rising, 71% of small businesses are experiencing cash shortfalls. That necessitates interim funding for many.

Despite a shortage of capital, small business is the engine that drives the economy and job growth in the US. A healthy small business community is crucial to our economic growth. Small business investing ensures that entrepreneurs have the capital they need to grow and hire.

Innovation

Entrepreneurs create more jobs than any other sector of the economy. But what became more evident during the COVID-19 pandemic was the digital transformation. There were new ways to find, sell to, and connect with their customers. Brick-and-mortar storefronts are being replaced by online retailers, and freelancers (or gig workers) are the new version of the 9-to-5 office worker. Many workers are using emerging technologies to leave the traditional workforce, and small businesses and the self-employed are leading this movement.

This new freelance economy is stimulating innovation and entrepreneurship in a way that has never been available before. In fact, independent workers now represent an estimated 15% of workers, and freelancers are projected to total 90 million workers by 2028. Such entrepreneurs are innovative and savvy, but they face traditional barriers to credit access. That prevents many from taking the freelance economy even further.

Alternative Financing Options

Almost all small business owners have taken pricing action to combat inflation, according to Truist. Entrepreneurs look beyond traditional lending to move forward with a new business idea or to grow despite challenges they face. Crowdfunding is becoming a popular way for entrepreneurs to address credit problems by allowing them to raise capital via the internet. And ‘fintech’ companies like Funding Circle match investors with small business owners looking for capital.

Rapid growth in this space shows there is a community of individual investors actively seeking opportunities to support innovative entrepreneurs. For instance: WeFunder connects startups with investors online and Kiva allows people to lend money via the Internet to low-income entrepreneurs and students in 77 countries. While these new financing options address some barriers to entrepreneurship, there’s still more to be done.

Note: Crowdfunding platforms are typically more useful for small businesses having trouble finding investors or businesses with limited access to investor networks. They are an available option but not always an attractive option for businesses or investors. They may raise less capital than traditional investing routes and increase the number of shareholders. Choose a platform open exclusively to accredited investors and do your due diligence.

Small businesses and entrepreneurs have long been America’s engine for job growth and innovation. To fully realize the economic potential of America’s primary job creators, we must ensure greater access and more options for obtaining capital. Small business investing is the driver of our nation’s growth, job creation, and competitiveness.

We think you’ll also like: 

1. Startup Survival: Raising Capital
2. Lead Generation Strategy Basics for Small Businesses
3. Navigating Business Financing: Understanding Your Loan Options

[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can listen to at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

1. The Start-Up/Small Business Advisor / What Every Founder/Entrepreneur Must Know
2. The Start-Up/Small Business Advisor / Raising Capital: Negotiating with Potential Investors
3. The Start-Up/Small Business Advisor / The Very Basics: Forming the Business

This article was originally published on November 15, 2019 and updated December 5, 2022.]

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