The 2015 Independent Business Survey from Advocates for Independent Business just came out. It’s the 8th year of the survey, and the findings are important for all of us working to foster small businesses and local economies to digest. It takes the pulse of America’s small and independent businesses, their triumphs, and what they see as the barriers to their growth.
We’ve been taking about the improvement of small businesses in growth and hiring over the last 14 months – and how they’re making inroads against multinational and big chain competitors. The shop independent and small business and shop local movements are continuing to thrive, and people are beginning to show a new desire to keep their money in the cities, towns, and neighborhoods where they live.
But this survey sheds light on the difficulty on that road ahead, due to ingrained rules and processes that tend to favor big companies over the small business sector.
So what did we learn?
- Small businesses as a whole pay better wages than big companies
- On average small businesses are showing better gains and growth vs bigger companies
- Big corporations get more favorable pricing over small businesses
- Big corporations have renewed access to credit since 2010, small businesses don’t
- Major online retailers who don’t need to collect sales tax are the biggest obstacle to small businesses growing
You can read the full report here.
Here’s The Synopsis
The survey results suggest that the strength of the independent sector is owed partly to an improving economy and partly to the spread of the “buy local” movement. Businesses located in cities with active Local First campaigns reported sales growth of 9.3%, compared to 4.9% for those elsewhere. They cited a wide range of direct benefits from these campaigns, with half saying the initiatives had generated new customers and 45% saying they had resulted in more awareness and support among city officials.
Despite these gains, independent businesses reported that they still face a decidedly uneven playing field. Nearly three-quarters of the local retailers surveyed said that the fact that many online retailers are not required to collect sales tax had negatively impacted their sales, with 39% describing the level of impact as significant. “As a local business owner with a brick-and-mortar location, we are automatically at a 8.1 percent price disparity because we are required to collect local sales tax,” commented a business owner in Arizona. With Congress failing to pass an e-fairness bill last year, the survey found that a large majority of independent retailers are now backing state legislation to level the playing field.
The survey also found that difficulty accessing credit continues to be a major barrier for new and growing small businesses. Of those who sought a loan in the last two years, 30% said they had been unable to obtain one. Businesses owned by people of color and women fared even worse. Over 44% of minority-owned businesses seeking financing and 35% of those owned by women failed to secure a lender. The survey findings echo federal data that show that bank lending for big businesses is well above its pre-recession peak, while small business lending remains depressed.
PCV And Its Partners Are Working To Change This
All of these institutional barriers to small business success are being tackled by PCV, the CDFI movement, and our partners advocating for local, state, and federal policy changes.
The “Donut Hole” Of Small Business Lending
Since the end of the Recession, major banks have begun to loosen up their lending practices and access to credit — but mostly to corporations and major firms. Small businesses aren’t seeing the benefits of that, and are having a hard time finding working capital. PCV and other CDFIs like us work in the center of that donut hole, providing working capital to established businesses beyond the startup phase, but who aren’t big enough for the major banks to lend to.
Impact Investing And Policy Changes
We know that providing small businesses with working capital doesn’t change the entire market landscape. To do that, our in-house InSight team is working on two fronts: to advocate for policies that make it easier for small businesses to compete, find investment, and get their goods to market, and measure the results of those changes to show that small business investment and equitable pricing can be a boon to the supply chain, infrastructure, and investors and lenders.
Closing The Funding Gap
All of this work is to create quality jobs in lower-income communities. It’s to support and secure small businesses and local economies. It’s to lower income inequality, and create a more equitable playing field – especially for women– or minority-owned small business. According to the “Kauffman Firm Survey,” men start firms with nearly twice the capital that women do. On top of that, only 4.4 percent of the total dollar value of all small-business loans goes to women. And according to the the National Community Reinvestment Coalition, African-American businesses received 2.3 percent of Small Business Administration loans last year, down from 11 percent in 2008.
Employees of small businesses need their paychecks. Lower-income communities need their fair share of economic opportunity. And small business owners need support in order to generate this kind of positive economic impact. We all know the growing need of the individual and of the community, and we have both a moral and an economic imperative to fuel social and economic mobility in this country. This survey sheds light on the 21st century problems that small business owners face. PCV offers a 21st Century solution to that problem.
How Can I Get Involved?
Help us make a difference by recommending a small business to BusinessAdvising.org, or volunteer your expertise and join PCV’s valued corps of small business advisors today!