The Impact Of Small Business On Recovering Economies

Everyone loves a good comeback story, right? In recent years there’s been a number of economic turnaround stories where beleaguered cities such as Detroit, MI, Youngstown, OH, and even Stockton, CA have been able to slowly battle their way back from the brink of economic ruin, and while they might never reach their previous heights again, there’s plenty of opportunity for the economy to stabilize itself in many areas.

The key to this new-found success? Small businesses.

Small business has always been a significant part of the American economy overall, with the American Small Business Administration (SBA) estimating that, as of 2012, small businesses made up 99.7% of all American employer firms and were responsible for nearly 50% of private-sector employment.

It’s that reliance on small business employment that has been helping with America’s economic comeback in a variety of ways. With small businesses generating over 65% of net new jobs since 1995, the ever-expanding success of locally-owned, entrepreneur-driven businesses has had much to do with the changing fortunes of many American cities.

Cities previously thought ‘ruined’ by the loss of major industries such as steelworking and automotive manufacturing have turned to small businesses to fill that employment gap and restore previous city business revenue. A series of studies done by business loan provider Credibly have shown that businesses with greater economic downturns tend to be more receptive to opening and supporting small businesses and local economic initiatives, and the numbers begin to add up quickly over time - in a variety of surprising ways.

Drive through any city hit by the recession and you’ll find a number of new businesses in surprising locations; coffeehouses and bars built into old warehouses, ballrooms and record stores occupying spaces that were previously set for demolition, or even an entire city block turned into a food court of locally-owned restaurants.

This sort of expansion and urban renewal serves two purposes in saving the fortunes of a economically failing city. Not only are these businesses restoring employment, revenue, and even tourism dollars in many cases, but entrepreneurs setting up shop and restoring old buildings saves the city further money in having to demolish and renovate previously empty buildings. If an old tire factory can be restored and converted into a restaurant, it’s a win-win situation for everyone involved.

But it isn’t a one-way street, and those cities that are experiencing the biggest turnaround are often responsible for their own success. Cities like Detroit have been instituting a series of programs such as the New Economy Initiative to provide funding and capital for both new startup businesses and old standbys, like the neighborhood bar or Mexican restaurant that’s been around forever. While the cost for this funding might fall onto the city itself, the gains they will make in restoring their economy and providing better lives for their residents will more than make up the difference.

Sure, things look good right now, but it’s fair to say America still has a long way to go when it comes to economic recovery. However, there’s one things experts, amateurs, entrepreneurs, and customers can all agree on - when it comes to salvaging American economies, small business is our best way to go.