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US recovery depends on small business: TD Economics


June 3, 2010
by PLANT Staff

The recession hit small to medium sized businesses (SMBs) harder than larger firms, but according to a recent report by TD economics, SMBs are a pivotal component of the US economy, making up more than 99.7% of the nation’s firms and representing 50% of employment.

In fact, small businesses are largely responsible for generating employment south of the border, and new businesses have been responsible for driving net job growth over the past two decades, according to the study.

“It’s easy to see that as the US economy continues on the road to recovery, the success of small businesses will be of paramount importance,” says James Marple, author of the report and TD US economist.

Through what’s been deemed the worst recession in modern history, access to credit was a major issue for SMBs, forcing many layoffs and cost cutting.

For small companies dependent on bank loans, “the situation has been slower to improve. Credit growth of the non-financial non-corporate business was up over 10% from a year ago, while bank loans were down over 18%,” Marple says.

According to the National Federation of Independent Businesses, the net-per cent of businesses reporting trouble around accessing credit was at its highest level in mid-2009, at 16 per cent. However, as of April that number has improved slightly, resting at 14 per cent.

But as the US starts to make its slow climb to recovery—job growth has been positive over the past four months and household spending is starting to rebound—the report says SMBs will play a vital role in the recovery, according to the report. As private demand rebounds, so will sales and revenue.

Click here to download the report.