Folks here may know that I volunteer with score.org which is a resource partner of the SBA.
We had our bi-monthly Chapter meeting last week and we had the privilege to have as our guest speaker the New England District Director of the SBA. He joined to provide us with an update on trends that he is seeing in New England as they pertain to small business health and financing. I thought I would share these two slides that I thought might give folks some “on the ground” evidence of how small businesses are doing, and the challenges that they are now facing with regards to working with banks on small business financing.
Table 2 on this slide shows that there was a large number of bigger businesses (>500 employees) that died during COVID, but the number of small businesses (<500 employees) that were born exploded as a result.
Table 3 on the slide shows the initial and following years effects on the impact that COVID had on businesses as determined by employment conditions / job creation.
I think this slide is the most concerning to me however, and the SBA Director informed us that this trend has continued. Small businesses are growing and hiring and in order to continue to grow and hire, they need capital. However, as interest rates rise, banks are tightening their belts - especially for new business startups - which causes a significant constraint on capital that small businesses need to grow.
This does not bode well for the health of the economy in the foreseeable future, and until larger businesses either start growing faster, or banks loosen up capital for small businesses to grow, we could be in a constrained economic business cycle for a while.
You may ask - well how much do small businesses contribute to the overall economy anyway? You may be surprised. Here’s the view from the SBA:
Here’s the definition of a small business according to the SBA:
What is a Small Business?.
Just some Macro fuel for thought.