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Impact of Economy on Small Business

Introduction

Small business plays a significant role in contemporary economic system. Especially, it is more important for developing economies having major employment and income distribution challenges. It not only contributes to a greater output, but to the formation of jobs in chunks and become basic platform for future's large enterprises. Moreover, it adds directly to collective saving and investments and is involved in the development of a nation's economy. However, when there is economic downfall, the first category of business that gets affected is a small business; this is due to the fact that small businesses have fewer revenues, small projects and less funding.

Small business means lesser worries to cope with compared to those with larger scale in crunch times. They have less complex decisions to make and have less people to think about when making bigger decisions that involved leadership. Larger companies need to take numerous people and stakeholders on board to make plans and take decisions that affect thousands of people, and have deeper impacts on the economy. Smaller businesses can take decisions quicker than their larger counterparts and can move on quickly to adapt to recent changes; however, have an equally smaller impact on the economy.

They may not have a big impact on the overall economy of a region, but small companies undoubtedly have a lot say in matters of a local economy as it can help shape it. They have the power to provide jobs to the local people and can actually help larger companies of the United States.

Discussion

Role of Small business in Economy

In case of US, Small business played a pivotal role in growth and development of the economy. In 2005 Development Report, the growth of Small business, in 2004, accounted for 99.3% of the total national enterprises, 55.6% of GDP, 74.7% of industrial value, 58.9% of social sales, 46.2% of taxation 0.3% of total exports and of about 75% of the country's urban jobs were provided by Small Business. This is due to the fact that, in US economy, Small business proved to be an engine of growth and development. When we talk about mushroom growth of Small business in US, one cannot neglect the fact that the Small business sector is also facing difficulties due to economic downturns that hinders its efficient development. Surveys show that the total lending of Small businesses from four state owned commercial banks is only 12 %, while the total amount of financial lending from the other financial institutions for small business support is not sufficient enough to meet the development needs of small business in US. This financial borrowing problem due to bad economic condition for small business is a global phenomenon; in developing, as well as, developed countries, this problem has been looked and solved by efficient and well-established financial systems, supportive policies, rules, and regulations. However, due to economic problems in US that acknowledges impact of a bad economy on small businesses, market-financing strategies, legal rules, regulations, ...