Unlock Entrepreneurship: 3 Ways Lenders Can Support Small Business
Small businesses are the backbone of the American economy. They play an important role in job creation and economic growth.¹ Over 99% of paid-employee firms in the U.S. are small businesses.² That is why small businesses are important in shaping the nation's economic landscape. These enterprises employ nearly half of all American workers.² The enterprises enjoy wide support among the population. 86% of U.S. adults view them favorably.³
In recent years, there has been a surge in new business applications, indicating an interest in entrepreneurship. Since 2021, entrepreneurs have annually filed over 5 million new business applications.¹ This marks a substantial increase from previous records.⁴ But, not all applications become business formations.
Between 2020 and 2023, more than 20 million business applications were filed.⁵ Yet, the conversion rate from application to formation varies across states. In Illinois, for example, 6.2% of new business applications will become employer businesses. This will likely result in about 10,880 new businesses within four quarters.⁵
Tennessee saw an 8.2% rise in business applications in 2023 compared to the previous year. Over 96,000 new applications were filed. Arizona, on the other hand, demonstrated promising signs of economic activity. Arizona reached a series high in nominal lending by February 2024.⁵
Even with positive developments, access to capital remains an obstacle for many small businesses. The primary reason for small business failure is the lack of access to affordable credit.⁶ To address this challenge, lenders can use several strategies. These strategies support small businesses and foster entrepreneurship in their communities.
Maintaining strong community ties is essential. It helps to build trust and relationships with local businesses. By understanding the unique needs and challenges of small businesses within their communities, lenders can tailor their services to provide meaningful support.
Take a holistic approach to lending. Incorporating both traditional and non-traditional data can lead to more informed decision-making processes. By leveraging a diverse range of data sources, lenders can better assess risk and tailor financial solutions to meet the specific needs of small businesses.
Highlighting success stories and empowering entrepreneurs. Seizing hidden opportunities can inspire future generations of small business owners. With 21% of small business owners starting another venture, nurturing a culture of entrepreneurship can lead to long-term economic prosperity and innovation.⁷
Summary
Unlocking entrepreneurship needs both lenders and small business owners to work together. It is important to address the challenges of credit access and foster a supportive environment. That way we can empower entrepreneurs to realize their dreams and contribute to the American economy.
More free resources from Equifax:
Download the new Unlocking Entrepreneurship infographic for more statistics and market details.
For a deeper look at fraud and new business creation, make sure to watch Market Pulse: Confronting and Conquering Commercial Challenges in the Current Landscape on-demand. Or review highlights via the presentation.
Head to Strengthening Main Street America for bite-sized insights into small business lending.
Understand the financial health of businesses by uncovering What Makes Up a Commercial Credit Score?
Sources:
Recommended for you
Subscribe to our Insights Blog
