Ask not what the Government can do for Main Street, but what Main Street can for the Government

May 18, 2010

Based on the most recent reports from the SBA and US Census Bureau, small businesses represent 65% to 75% of all job growth and employ 80% of all employees.  Small businesses with less than 20 employees represent 18.4%, those with 21-49 employees represent 23.1% and those with 50-499 employees represent 38.5% of this 80%.  Over 41% are employed by firms with less than 50 employees.

Since 2007 we find ourselves sitting in the middle of a severe recession and job creation has been poor across businesses of all sizes.  But, small businesses have retained more employees then did their larger counter parts.  Data from ADP on private sector businesses that use their payroll service show two clear trends.  Large businesses have shed the most jobs over the last 10 years with employment down 15% overall.  During that same period, companies employing 1-499 workers employed 3.5% more then they did in 1997.  An SBA report also confirms the decline of employment at firms with more than 500 employees showing a 60% decline in hiring between 1998 and 2008.

With employment being a critical factor in reversing recessionary trends and small businesses having the single biggest impact on employment the governments desire to help small businesses is well placed. While the government can easily target programs at a small number of large businesses, the challenge of targeting the enormous number of small businesses is difficult at best.  Government is forced to try and push programs through alternate sources.  A method they don’t have direct control over.  So the challenge is how to accomplish this goal.  The same techniques they’ve used to help large businesses during the financial crisis aren’t the same things that will help small businesses.

For example a new jobs tax credit won’t help because small businesses won’t hire new employees unless they need them.  However creating demand and ensuring that the funding is available to help small businesses meet this demand will work hand in hand to put the economy back on track.  We shouldn’t wait to see how the government will accomplish this, we should help them accomplish it.

Thankfully these two requirements can be controlled by the 95% of the population that represents Main Street USA.  Focusing on buying goods and services from small businesses will result in growth and the need for more employees.  By helping small businesses get the funds they need to support this growth,  participation in Peer-to-Peer (or Peer-to-Business) social lending ensures that money is available regardless of how banks are lending.

After all, it’s the nature of Main Street USA to pull themselves up by the bootstraps and do what it takes to succeed.

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