Funding Increases and Job Creation Plummets for Small Business

Inc. recently released their Entrepreneurship Index, an amalgamation of data that gives an insightful look into the state of small business today. According to the index, the composite health score for the American startup economy is 85 out of 100, down 6% from last year.

This downturn is largely due to a decrease in job creation, one of the three key factors that influence the index. The job growth index is at 61, down 20% from last year, a pretty serious deficit, but not one that is inconsistent with economic history.

According to a Harvard Business School Study, “Small businesses are core to America’s economic competitiveness. Not only do they employ half of the nation’s private sector workforce – about 62 million people – but since 1995 they have created approximately 60% of the net new jobs in our country.”

Because of the crucial place of small businesses in the job creation economy, it may be worrisome to workers that small businesses are creating less jobs. Historically, however, small businesses tend to create fewer jobs in economic booms than large companies. It’s usually during or after recessions that small businesses create the most jobs.

On a more positive note, Inc’s index gave small businesses a score of 96 out of 100 for access to capital, up 1% from last year. Businesses have grown increasingly able to secure funding to grow their ventures.

“We’re seeing small-business growth take off, and many business owners are fueling that growth with funding that wasn’t available to them just five years ago,” says Rohit Arora, CEO of Biz2Credit. “Our data shows that loan-approval rates for small businesses have increased to record post-recession approvals. Women- and minority-owned businesses are benefiting the most from this new lending strength and are securing small-business funding in greater numbers than before.”

In Q2, big banks approved 25.9% of small business loan applications, as seen in the Inc. Entrepreneurship Index. While small banks and alternative lenders still have higher rates of approval for small-business loans, the addition of capital from big banks is more than welcome. More money means more small business owners get to bring their ideas to market—and who doesn’t want that?