ÉÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍ» º FACTS ABOUT SMALL BUSINESSES º ÈÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍͼ The number of small businesses in the United States has increased 54 percent since 1980. As of 1991, there were approximately 20.5 million non-farm businesses, of which 99 percent are small by size standards set by the U.S. Small Business Administration (SBA). These include corporations, partnerships and sole proprietorships. About half of the 20 million businesses operate full-time, the rest part-time. Under a broad definition - a definition which includes not only persons running a business full-time but also those doing so part-time - about 13 million American sole proprietors are engaged in some entrepreneurial activity. These 13 million enterpreneurs represent about 14 percent of all non-agricultural workers in the United States. The number of new small businesses has increased steadily during the past 30 years. In 1986, new business corporations reached a record 702,101 - 24 percent more than recorded five years earlier. During 1991, 628,580 were recorded. Part-time entrepreneurs have increased five-fold in recent years. The most recent statistics show that 1991 concluded with small business gains. During 1991 small business income, as measured by that of sole proprietorships and partnerships, was $369.5 billion as opposed to $352.6 billion for the same period in 1990, representing a 4.8 percent increase. Small businesses employ 57 percent of the private work force, contribute 54 percent of all sales in the country, and are responsible for 50 percent of the private gross domestic product. Data on women- and minority-owned businesses for 1982 and 1987--the latest data that are available--reveal that these businesses fared well in the strong economy of the mid 1980s. Between 1982 and 1987, the number of women-owned businesses rose from 2,612,621 to 4,112,787 an increase of about 58 percent. The total receipts of women-owned businesses nearly tripled over this same time period, rising from $98.3 billion in 1982 to $278.1 billion in 1987. Over this same time period, the number of black-owned businesses rose by 38 percent, from 308,000 to 424,000. As of 1987, the receipts of black-owned businesses totaled $19.8 billion, slightly more than double their $9.6 billion in receipts in 1982. In terms of numbers of businesses, Hispanic-owned businesses proved to be one of the fastest growing segments of the U.S. business population during the 1980s. Between 1982 and 1987, the number of Hispanic-owned businesses rose from 233,975 to 422,373, an increase of 80.5 percent; their total receipts rose from $11.8 billion in 1982 to $24.7 billion in 1987. Statistics for 1987 on businesses owned by Asians, American Indians, and other minorities have not yet been released, although they are expected to be by late-Spring 1991. The latest available data show that these businesses numbered 255,642 in 1982. ÉÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍ» º PROCUREMENT º ÈÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍͼ In Fiscal Year 1990, the major purchasing agencies and departments of the Federal Government contracted for $191.2 billion worth of goods and services directly from the private sector. This amounts to slightly over 15 percent of a total $1.3 trillion in total outlays in FY 1990 in all areas of the Federal Government. Of the total $191.2 billion in direct purchases 32.9 percent originated in small businesses. Small firms were awarded $35.7 billion directly by the Federal Government and $27.3 billion in FY 1990 through subcontractors to large prime contractors who are under principal contract to the Federal Government. Over half of all federal procurement to minority firms is achieved through the 8(a) program. In FY 1987, more than 4,200 contracts were awarded for approximately $3 billion. ÉÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍ» º EMPLOYMENT º ÈÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍͼ Over the course of past business cycles, small firms have always added a more than proportional share of new jobs relative to their employment share. The small business share of net new jobs increases most rapidly during the recovery stage of a cycle, and during the earlier parts of the expansion phase of a cycle. As the economy approaches full employment during the latter stage of an expansion, larger firms tend to produce a larger share of jobs, while the small business share falls somewhat. Between 1980-1982, small business employment proved a moderating force in the U.S. economy. During these years, small business produced a total of 2.65 million new jobs, while large businesses were cutting their employment by 1.7 million. Virtually all of the 984,000 new jobs generated in 1981-1982 came from small firms. Small firms have also led employment gains through the more recent period of economic recovery and expansion. Between 1981 and 1986, small firms with fewer than 500 employees created 62 percent - almost two thirds - of the 8.9 million net jobs in the economy. From 1986- 1988, small firms created 2.77 million new jobs, or 45 percent of new jobs, slightly less than their 50 percent employment share. Most recently, between December 1989 and December 1990, employment in small business-dominated industries increased 1.1 percent, generating 0.6 million new jobs. During the 1990-1991 recession, small firms helped stabilize the economy by generating jobs in the service sector (health services, business services in particular. Most of the job losses during this period came from contractions of large firms. For small firms, the sole exception for job occured in the construction sector in which small firm employment declined 6 percent during 1991. The fastest growing sectors of small business-dominated industries include eating and drinking places, trucking firms, office of physicians, computer and data processing services, amusement and recreation services. Jobs generated by small firms are more likely to be filled by younger workers, older workers and women. Many of these workers prefer or are only able to work on a part-time basis, and thus can be easily accommodated by small employers. Small businesses provide about 67 percent of initial job opportunities and are responsible for most of the initial on-the-job training in basic skills. ÉÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍ» º FINANCING º ÈÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍͼ Overall, small firms relay more on equity capital and less on external debt capital as compared to larger firms. However, small firms are more dependent on short-term debt relative to long-term debt than large firms. Most small firms use external financing only occasionally. Less than 50 percent of small firms borrow once or more during a year. However, a small group of small firms, those experiencing rapid growth or those with high volumes of receivables, require frequent use of external financing. The cost of borrowed funds is higher for small firms. Interest rates on bank loans for small businesses average two or three percentage points over the prime rate. Fixed rate loans are usually more expensive than floating rate loans. A recently completed national survey of small firms with one to 499 employees revealed the following financing patterns: o Of small firms with less than 50 employees, 23 percent had lines of credit, seven percent had financial leases, 14 percent had mortgage loans, 12 percent had equipment loans, and 25 percent had motor vehicle loans in 1987. o Of larger small businesses, with 50 to 499 employees, 59 percent had lines of credit, 23 percent had financial leases, 31 percent had mortgage loans, 26 percent had equipment loans, and 27 percent had motor vehicle loans in 1987. Banks are the dominant suppliers of these financings, except in leasing. Other suppliers include thrifts, finance companies, and other nonbank financial institutions. For the smallest firms, those "mom-and-pop" operations with or without hired employees, owner capital is the most important source of financing. Other sources of financing include trade credit, personal loans from financial institutions, and loans from friends and relatives. ÉÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍ» ºINNOVATION º ÈÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍͼ Studies show that small firms produce twice as many innovations as large firms relative to the number of persons employed, for the "most significant" as well as the "less significant" innovations, and including the employment of firms that do not innovate. Innovations coming from small high-tech firms are expected to increase in the coming years as a result of the Small Business Innovation Development Act. Under the Act, federal agencies with large research and development (R&D) budgets must direct designated amount of their R&D contracts to small firms - the source of most innovations and new technologies. Congress in 1986 reauthorized the Small Business Innovation Research (SBIR) program to continue through September 30, 1993. Since the inception of the SBIR program in FY 1983, more than $1 billion in competitive federal R&D awards have been made to qualified small business concerns under the program. Among the important innovations by U.S. small firms in the 20th century are the airplane, aerosol can, double-knit fabric, fiber optic examining equipment, heart valve, optical scanner, pacemaker, personal computer, soft contact lenses, and the zipper. ÉÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍ» º ADDITIONAL INFORMATION º ÈÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍÍͼ The SBA has a number of programs and services available. They include training and educational programs, advisory services, publications, financial programs and contract assistance.The Agency also offers specialized programs for women business owners, minorities, veterans, international trade and rural development. The SBA has offices located around the country. For the one nearest you, consult the telephone directory under U.S. Government, or call the Small Business Answer Desk at 1-800-U ASK SBA. All of SBA's programs and services are extended to the public on a nondiscriminatory basis.