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. And new research shows small business lending levels are still lower than they were before the Great Recession. Though many small businesses are struggling to grow and thrive, they are still our nation’s biggest innovators and top job creators. In order to foster our economic recovery, 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 investments in the small business community can be ripe with opportunity. Here are a few reasons why accredited investors should consider taking stock in small businesses again.
Small Businesses Are Key to Economic Recovery
It’s no secret that credit is a long-standing problem for small business owners. And while the Small Business Administration is offering more loans to entrepreneurs than before the Great Recession, many are still having a hard time finding the credit they need. Small Business Majority’s scientific opinion polling reveals 90 percent of small business owners believe the availability of credit is a problem, and 61 percent agree it’s harder to get a loan than it was in 2008.
Despite a shortage of capital, small business is the engine that drives the economy and job growth in the U.S. Small businesses represent more than 99 percent of employer firms and employ 56 million of the nation’s private sector workforce. Small business job creation significantly outperformed that of big businesses last year, and small firms added 20,000 new jobs just last month.
A healthy small business community is crucial to our economic growth. In order to boost small businesses’ bottom lines, we need to ensure entrepreneurs have the capital they need to grow and hire.
Small Businesses are Innovative
As stated, entrepreneurs create more jobs than any other sector of the economy. But what many don’t know is that they are at the forefront of an evolving employment landscape—one where brick-and-mortar storefronts are being replaced by online retailers, and freelancers 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 more than one in three working Americans, and their numbers are expected to keep rising, with the self-employed projected to outnumber traditional full-time workers within the next decade. What’s more, entrepreneurs opened more than 630,000 new businesses in 2013, with eight in 10 of these proving successful through 2014.
While such entrepreneurs are innovative and savvy, they still experience many traditional barriers to access to credit, which is preventing many from taking the freelance economy even further.
Alternative Financing Options
Entrepreneurs are looking beyond traditional lending to find ways to move forward with a new business idea or grow their current enterprises. Crowdfunding is becoming a popular way for entrepreneurs to address credit problems by allowing them to raise capital via the Internet. And organizations like Funding Circle are helping match investors with small business owners looking for capital. How much about crowdfunding is hype?
Rapid growth in this space shows there is a community of individual investors who are interested in and also actively seeking opportunities to support innovative entrepreneurs in all parts of the country. And while these new financing options are helping address some barriers to entrepreneurship, there’s still more to be done.
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.
It’s time to start investing in the small businesses that will drive our nation’s growth, job creation and competitiveness.