How Do Small Businesses Affect Our Economy?

How Do Small Businesses Affect Our Economy?


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Small businesses are a vital part of any economy. Small businesses create jobs, innovation, provide opportunities for individuals to succeed, and support large businesses with their products. Each of these characteristics is vital to keeping the economy strong.

During the COVID-19 pandemic, small businesses were forced to shut their storefronts. Many of them adapted and offered online services. Those that could not adapt or recover from months of lost revenue became the downfall of businesses across the nation. While the pandemic was raging, individuals turned to big companies to order supplies, companies who had the infrastructure and financial independence to keep thriving. Without needing it to begin with, Amazon reported a nearly 200 percent increase in profits. Every business, including Amazon, starts small. Our economy needs small businesses to spark innovation and create jobs. Leaving them to fend for themselves will lead to the downfall of our economy

Small businesses account for 44 percent of US economic activity. They are what stimulate the economy. Small businesses employ people locally which makes a big impact on the health of a community and its people. Keeping money circulation within a local community is vital to its success. Small businesses also increase competition in their local field. Competition breeds innovation and greater diversity. Without small businesses, the American economy loses out on 99.9 percent of currently existing business.

For a small business to grow, it needs additional capital. The safest way for a small business to acquire capital is by opening themselves up to small-cap stocks. Small-cap stocks are categorized as companies with a market capitalization of less than $2 billion. It is easier for small-cap companies to grow because they have a smaller operational and financial base. During times of economic recovery when interest rates are low, these small businesses do particularly well because of easy access to investment funds. However, in an economic downturn, they are usually the first to fail. Invest in small-cap companies to help them build capital and increase their economic growth.

Since the 1970s, small businesses have provided over 55 percent of all jobs. Over 50 percent of all commercial space is occupied by small businesses. If they disappear, at least half of the American economy will too. Supporting and investing in small businesses is a minor act that will ultimately save the economy.

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