The Role of Small Businesses in the American Economy

According to the SBA, a small business is one that is owned and operated independently. Small businesses are the driving force of the U.S economy, since they create more than two-thirds of net-new jobs, push innovation, and foster competition. An Office of Advocacy report shows that small businesses account for 44% of U.S. economic activity. Even though this share has declined gradually, it is a significant contribution.

The meaning of small businesses to local communities is deeply rooted in buying and selling with friends and neighbors. In certain towns and villages, small enterprises are the only sort that can thrive while serving a reduced population. Small restaurant businesses use restaurant financing services to acquire equipment or get loans. In major cities, small businesses also sell a more varied inventory or specialize in delivering exclusive or personalized customer services. To do so, they rely on services like working capital loans to meet their requirements.

Small businesses often work hard to keep things local. This includes collaborating with and helping other small businesses—including incorporating local products. Additionally, successful performances in small industries means more local tax revenue, which continues to enhance schools and other local programs. Small businesses can also retain a significant portion of their earnings and channel them back into other community projects. While large corporations can provide local jobs, small businesses provide the most local employment. For every Walmart, there are hundreds of smaller shops employing local area residents.

Perhaps most noticeable in employment figures is the importance of small business growth in local economies. According to the SBA, since 2000, small businesses have created 4 million more jobs than large businesses and represent approximately 99% of all national companies that have paid employees. Small companies prefer to attract workers who work in the proximity of the areas in which they work, thus increasing local job rates.

With resources open and available to big corporations, you would expect them to launch nearly all the new products that have entered the market. According to the SBA, small businesses produce more patents per employee than larger companies. Over the past four years, big companies have produced 1.7 patents per hundred workers, while small firms have produced 26.5 patents per employee. They get help from flexible funding to acquire small business loans, or for equipment financing. 

Another reason that small business owners are vital to the economy is that they offer both alternatives and competition to larger companies. For example, a local farmer selling on a roadside stand or through a farmer\’s market might set cheaper rates than a grocery store. This happens because he does not have to pay shipping charges. It also offers local people a different variety of vendors and guarantees that the money goes straight to the local economy.

With 30.2 million small businesses established around the country, the impact of small businesses on the local economy cannot be overlooked. Statistics published by the United States’ Small Business Administration (SBA) have shown that businesses working in local neighborhoods are the backbone of the American economy as a whole. Not only do they bring value-added goods and services to customers, but they also fuel local markets with tax dollars, improve jobs, and build neighborhood pride and growth. This not only tells you that the role of small businesses in the country is a big one but also a vital one, so go on, and support your local businesses whenever you can!