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Unless small businesses have easy access to more sources of commercial loans, the entire small business community in the USA could be headed for extinction. That is one of the shocking revelations that some small business industry analysts are pondering after a recent Gallup poll showed that the decline in the personal savings rate is tied to a simultaneous decline in business startups.Meghan Robinson, CEO of Sunovis Financial, helped to put the issue into perspective. “What happens is that small business owners that are turned down by banks for loans resort to spending their hard-earned savings in order to fund business startups. Many American entrepreneurs even tap into their precious retirement savings. That puts them into a precarious position in terms of their personal finances. But it also means that fewer new businesses get off the ground, which is bad for our whole economy.”
The U.S. Census Bureau reports, for example; that the pace of business startups has been slowing for more than three decades. The number of businesses that close each year is also rising and has hovered at just under 10% for about 30 years.
When fewer new businesses open but a significant number of existing businesses close each year, that leads to the net-negative impact on the business landscape. In 2008, America hit a critical benchmark. That year the number of business closures exceeds the number of new business launches, which meant that the USA was losing not just jobs but also entire businesses.
Gallup recently published research from data compiled at the Brookings Institute that shows that the sharp decline in business openings may be closely tied to a similar decline in the personal savings rate. That’s because small business owners consistently turn to personal savings to fund startups. One Gallup study reported that 77% of them have done so in 2014 while another focused on micro-businesses revealed that nearly 80% of those owners funded their business launch with personal savings.
Gallup's analysis further confirms that when the savings rate declines that usually means that the numbers of business startups a few years later will also decline. Many economists believe that banks have a responsibility to make it easier for entrepreneurs to borrow the money they need during this critical time in America’s economic recovery, to stem that loss of businesses.
“The obvious and best way to reverse this disturbing trend is to open up more lines of funding for small businesses,” Robinson says. “The Small Business Administration is an excellent source of small business loans, for example, as are the many reputable private lenders in America who tailor their loan products in order to meet the needs of the small business owner.”
Contact Info:
Name: Meghan Robinson
Email: Send Email
Organization: Sunovis Financial, Inc.
Address: 7500 College Blvd.
Phone: 855 243-7191
Website: http://sunovisfinancial.com/
Release ID: 62218
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