If you’ve watched television, listened to talk radio or read a newspaper in recent days, you might have noticed it’s election season. And of course, as with every election, candidates from every political party are making lots of promises about the economy, taxes, the middle class and jobs. Some candidates have elaborate 10-point plans. Others offer little more than glittering generalities. But there’s one area most candidates consistently overlook, and it’s one area that can have the greatest impact on the economy, the middle class and job creation: small business.
Where the Jobs Are
When a large company lays off hundreds of workers or implements a hiring freeze, that makes the news. It’s a dramatic scene to see people walking out of a tall office building or huge factory carrying their belongings, headed for the unemployment line. But when small businesses stop hiring, there’s scant mention, even though statistics show it’s small businesses, not large ones, where you find the most jobs.
Many Americans don’t realize that small businesses (companies employing 500 or fewer workers) make up an astounding 99.7 percent of all businesses in America, according to the Small Business Administration. More than half of all U.S. workers are employed by small businesses, and these firms create two out of every three new jobs each year.
So, in order to fix the economy and provide more jobs, shouldn’t politicians focus on small businesses first?
Problems Facing Small Businesses Today
Warren Buffett is one person who definitely understands the important role small businesses play in the American economy. Wait, isn’t Buffett, chairman and CEO of Berkshire Hathaway, one of the biggest big businessmen in the country? Yes, he is. But Buffett has used his unique knowledge of how to build successful businesses to identify several problems keeping smaller firms from growing.
Joined by two other prominent business leaders – Lloyd Blankfein, chairman and CEO of Goldman Sachs, and Michael Bloomberg, founder of Bloomberg LP and former mayor of New York – and Harvard business professor Michael Porter, Berkshire Hathaway recently opined in USA Today that four areas are currently hampering small business across the country.
Capital: Unlike large public companies that issue stocks to raise capital, small businesses rely on banks for funding and loans to grow. Thanks to increased regulation, banks are becoming more hesitant to issue loans, and when they do, it’s often for less than the small business needs. Buffet and partners contend that more lenient and generous loan practices would lead to more small business hiring, investment and growth, both for the firms involved and the economy as a whole.
Regulation: Small business owners are experts in the products and services they provide. But these entrepreneurs have to spend more time complying with government regulations and less time growing their companies. While regulations serve to protect the consumer and the environment, they also create complexities that stifle small business innovation. Buffet and his partners call for a streamlining of regulations, to make it easier for businesses to understand and comply, as well as to help small business to open faster and expand more quickly.
Skills: Many small businesses, particularly those in the manufacturing sector, report a gap between the skills needed from employees and the skills currently available in the workforce. Buffet and company urge government, higher education and employer cooperation in worker development. Targeted community college curriculums, training programs and internships could close the skills gap.
Technology: While technology is one area where prices traditionally fall as innovation creates more efficient systems, technology still represents a major investment hurdle for small businesses. Technology can lead to greater productivity, but in order to access it, companies need funding to buy it and workers with the skills to use it.
Addressing these issues won’t be an easy undertaking. But coming up with workable solutions to each of these four problems would go a long way to providing a path to growth, jobs and a healthier economy.
Alternative Financing Options Can Help Solve Some of These Problems
Small businesses already have one unique avenue for financing and funding help. Cash flow is always a concern for any company, but more so for smaller businesses, which as mentioned above, have less access to capital than their big business counterparts. Getting every dollar for services rendered is critical.
When an invoice is unpaid or is slow to be paid, it denies the small business owner money to re-employ elsewhere and to grow. Invoice factoring is one means available that can speed payments and improve a company’s cash flow. Basically put, an small business owner can factor an unpaid invoice to a third party and receive immediate funding that can be put to use then and there to grow the business, hire new workers or invest in new technology. Invoice factoring is one painless means available right now that can address the issues Buffet and his partners bring up to fix the problems now facing small businesses across the country.
Calvin Coolidge once said, “The chief business of the American people is business.” And when small businesses prosper, the American people prosper.