Why Small Businesses are the Backbone of America

Guest blogger Katherine Pilnick is a personal finance writer, blogger and editor for Debt.org, a financial help website.

America’s small businesses are a vital part of the economy as a whole, and their success is essential to economic growth and prosperity. Small businesses have the unrivaled potential to create jobs and put money back into communities. They also tend to show more creativity than large competitors, introducing novel products and ideas into the market. To keep the economy growing and reduce unemployment, the country should lend support to its entrepreneurs.

Small businesses are responsible for creating more than three-fourths of the country’s new jobs, and they pay out more than 44 percent of the country’s private payroll. This makes smaller companies an indispensable asset to the workforce, as they help keep unemployment under control throughout any economic climate.

Global and Local Impact

In addition to helping individuals by keeping people employed, small businesses also support the national and global economies. They generate more than half of the country’s private gross domestic product. Moreover, 97 percent of exporters are small businesses, with innovative products spanning the world. They ensure that customers have more than enough product options to choose from, and the plethora of competition helps keep prices reasonable.

Small businesses also help their communities. A recent study found that for every dollar spent at a small business, 68 percent funnels back into the community, compared with just 46 percent at major retailers. That’s because small businesses are more likely to buy products and supplies from other local businesses, helping to enrich the town rather than buy goods elsewhere.

This also means small businesses are better for the environment. Since they buy many supplies locally and often sell to small customer bases, significantly less transportation is necessary during each step. And because most small businesses lease or buy already existing spaces, there’s less need for construction, clear-cutting or increased traffic.

And local vendors are better for the world around them. They are more altruistic, giving 250 percent more money to nonprofit organizations than larger companies do.

More Support Needed

With all the good that comes from small businesses, it’s a wonder we as a nation aren’t doing more to support them. About 70 percent of businesses are founded with less than $20,000 in capital, and most of this money comes from bank loans and credit cards.

The U.S. Small Business Administration (SBA) helps a bit. Through partnerships with banks, credit unions and other establishments, the SBA can help entrepreneurs gain access to business-specific loans. Select entrepreneurs, such as those with low incomes, may be eligible for grants to help kick off their businesses.
More help should be available for the private small business sector, as it truly is America’s backbone. They are good for the environment, local communities and the world as a whole. This is all while employing half of all private sector workers and remaining an environmentally friendlier alternative to big corporations.

Entrepreneurs deserve a pat on the back – and some more funding.