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Updated: Apr 1, 2020
Small businesses are kind of a big deal. There are some 30 million strong of them in the United States, and they have been called the “backbone of the American economy.” It’s clear to see why. Without them, the economy would go up in smoke. In addition to the ingenuity and competitive nature of entrepreneurs, small businesses contribute a whopping 44% of economic activity and are responsible for creating some 66% of net new jobs.
Yet the market environment for small businesses experienced a seismic shift in the wake of major events such as the Great Recession. These gave way to the rise of online lenders and leveled the playing field for business owners like you. Now the market is facing its next greatest challenge in the coronavirus pandemic. Small businesses made it through then, and they will survive this, too.
Funding Circle, the largest small business lending fintech is one of a few non-depository online lenders in the United States that was recently approved to provide Paycheck Protection Program loans. We offer the PPP application in four languages: English, Spanish, Mandarin and Hindi. It is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
Still, given this backdrop, it makes a whole set of small business facts even more relevant than they already were. It’s useful to take a step back and examine exactly how far small businesses have come and where they are going. One way to do this is to spotlight some of the most crucial small business statistics to know for 2020.
While the total impact that the COVID-19 outbreak will have on the business community is yet to be known, the industry is getting a lifeline. The Small Business Administration introduced emergency loans of up to $2 million as a result of this pandemic at an interest rate as low as 3.75%.
Business owners who had to close their doors temporarily or perform layoffs, relief is on the way. As it stands, approximately one-quarter of American small businesses are negatively affected by the coronavirus pandemic. The reasons vary. For instance, nearly 40% of those negatively impacted by the virus see disruptions in the supply chain; more than 40% are experiencing slower sales; thankfully less than 5% are reporting sick employees.
Here are some additional statistics on small businesses to consider: Nearly half, or 43%, of those businesses not yet affected, expect to be so if conditions worsen. A small amount, around 3% of businesses operate in industries that are benefiting from the crisis.
While the SBA’s emergency loans carry an interest rate of 3.75%, the trend is toward lower rates across the industry. That is because the Federal Reserve, in response to coronavirus, has slashed the rate that banks charge one another overnight to a range of 0 to 0.25%. This rate-reduction is a move that’s designed with business owners like you in mind to spur borrowing activity.
With borrowing costs so cheap, it’s a market condition that’s ripe for getting a loan. Doing so can help you do things like finally expand your business and open up another location or go on a hiring spree.
Despite the backdrop of the coronavirus crisis, the timing could be right to plan for growth. Low-interest rates had a hand in propelling entrepreneurs to move the economy forward after the Great Recession.
When you consider that roughly 20% of small businesses fail in their first year of operation, roughly 50% make it half-a-decade, and 33% continue to see their 10th anniversary, it demonstrates just how important it is for a startup to have a competitive advantage. More than 30% of business owners lose sleep about having to close their doors
Here are some small business statistics for you: In 2019, small businesses borrowed $28 billion backed by the SBA. Approval rates are at their highest levels since the 2008 financial meltdown. But as a small business owner, you’re not limited to an SBA loan. It’s not uncommon to hear about online lenders surpassing the $1 billion mark in small business loans.
Online lenders meet a need in the small business community where banks fall short. As this small business fact demonstrates, in the 2015-2017 period, online lenders were responsible for close to $10 billion in funding to small businesses. This injection of capital resulted in nearly 360,000 jobs and close to $13 billion in compensation across the United States. Funding Circle alone has lent $11.7 billion to businesses around the world.
There are several reasons to launch a business. The workdays might not be any shorter than a typical 9-5 job, but entrepreneurs like you are often driven by being their own boss and attaining financial freedom.
One survey suggests that two-thirds of business owners generate less than $100,000 per year in sales. Business owners that have surpassed the $100,000 threshold tend to be those that have been around for a while.
Another poll, the 2019 Small Business Credit Survey, which is done by a dozen Federal Reserve Banks, canvassed small -to-medium sized businesses with one to 499 employees. They interviewed thousands of entrepreneurs in 2018 and found a trend of robust growth in the small business community. The small business numbers they discovered included the following:
In the 16 years leading up to 2014, small businesses were responsible for 44% of economic expansion in the United States. That number was as high as 50% in the 1990s.
While small businesses comprise more than two-fifths of economic activity, their share used to be higher. The drop is due to a “one-two punch” from the 2008 financial crisis, and an ever-changing market landscape. Their market landscape includes competition from big-box retailers such as Walmart, regulation, and credit availability, according to the SBA’s Office of Advocacy.
Businesses who employ between 1-499 people represent 99% of businesses in the United States and give jobs to 48% of Americans. Despite their contribution to job creation, however, 24 million small businesses are “non-employer businesses.”
Some final statistics on small businesses to consider: Nearly 90% of small businesses employ fewer than two-dozen employees. Nearly 12 million businesses are owned by women, who give jobs to close to 9 million Americans. Meanwhile, 2.5 million U.S. businesses are majority-owned by veterans, who provide jobs for 5 million people.
These small business facts help demonstrate the state of current affairs. With COVID-19 making a massive impact on the economy, small business owners are some of the most affected parties. However, knowing these small business numbers can help owners like you by both contextualizing the effects and showing opportunities that this year may hold.
Jessica Holcomb is the Content Marketing Manager at Funding Circle, specializing in small business marketing and social media. She has a degree from the Fashion Institute of Design and Merchandising. Prior to Funding Circle, Jessica was a Marketing Manager at a successful social games company and a freelancer for many small businesses in the Bay Area. Her work can be seen in top retail, gaming, and financial small business resource sites.