4 Reasons Small Businesses Are Important for the Local Economy
By Jeff Bardos
CEO, Speritas Capital Partners
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In the USA, the Small Business Administration’s (SBA) size table standards defines ‘small business’ very specifically. First by revenue – from $1 million to over $40 million, and also by employment – 100 to over 1,500 employees. The levels are also industry dependent – based on the NAICS (North American Industry Classification System.)
In the world of the SBA, the classification of ‘small’ determines whether a business is eligible for SBA and Federal contracting programs.
But if you think about the very local economy, say in small towns of 5 to 100 thousand people, even smaller businesses drive those economies. SBA programs are a critical lifeline to those businesses as well.
Big businesses may seem to form the bedrock of our nation’s economy, but that’s not quite true. In reality, small businesses are just as important, if not more so. Not convinced? Here are four reasons that small businesses are the foundation of the local economy.
Big businesses provide some local jobs, but it’s really the small businesses in the area that provide most local employment. For every Walmart, there are hundreds of smaller shops employing local area residents.
Alternatives and Competition
Another reason that small business owners are critically important to the economy is that they provide both alternatives and competition to big companies. For example, a local farmer selling at a roadside stand, on his property, or through a farmers’ market could set lower prices than grocery stores, because he doesn’t have to pay to ship. It also provides local residents with a different choice of suppliers, and ensures that money goes directly to the local economy.
Why is failure important for the economy? Simply put, it means that business owners who fail learn the lessons they missed the first time around. It helps to build a more robust local economy and fosters stronger growth. It might sound odd, but failure ultimately builds a stronger local business network and more successful small business owners.
Diversification – Different Goals & Methods
Small businesses differ from the big boys in quite a few ways. They have different budgets, different operating methods, and focus on different aspects of their industries. They can drill down into a specific niche or product and flourish. They can also focus on a more specific, smaller audience and still succeed. Small business can innovate more freely than larger businesses.
This diversification results in better economic stability. The more diversification within the economy, the better it can withstand fluctuations and changes.
Small businesses have special financing needs and often need more help than larger companies on figuring out their financing options. An SBA 7a loan is a great place to start for small businesses.
Need help? Schedule a call with the author Jeff Bardos, or call/text him now at 203-247-4358.
About the Author
Jeff Bardos, CEO, Speritas Capital Partners
Jeff has over 30 years of experience in the financial services industry. After graduating from the Columbia Business School, he joined the New York Federal Reserve Bank as a senior staff member in Bank Supervision, leading the Bank Analysis department. From the nation’s central bank, Jeff moved into the private sector, working at senior levels in commercial banking, retail banking and risk management. He has also played senior founding roles in several start-ups. Learn more about Jeff.
Speritas Capital Partners specializes in complex credit, collateral and cash flow situations and we never take upfront fees.
Because Greenwich CT based Speritas Capital is a debt advisory firm, we have access to a wide variety of lending structures. We’re not beholden to any one lender or structure so we can use our creativity and experience to design a structure that truly fits the needs of our clients.