One in every five businesses operating last January has stopped doing business entirely, according to Womply, a business services website that estimates most of those idle businesses have closed permanently.
Of 6,325 small businesses surveyed by business network website Alignable, 40 percent reported being at risk of failure before 2020 is over.
Bank loans are the principal source of funding for small business. In July, 70 percent of senior loan officers told a U.S. Federal Reserve survey they had tightened requirements for loans to small businesses – the highest number since 2008’s fourth quarter at the depths of the Great Recession.
In contrast, despite high-profile bankruptcies of corporate icons such as JC Penney and Hertz, fewer large businesses have failed than during the Great Recession.
Large businesses have a greater range of financial resources open to them, including the bond and equity markets and an array of aid programs from the U.S. Federal Reserve.
During the first nine months of this year, corporations issued $1.9 trillion worth of bonded debt, according to the Securities Industry and Financial Markets Association, $800 billion more than the same period in 2019.
Through September this year, companies have issued $185.4 billion in new equity offerings, in contrast to $111 billion during the first three quarters of 2019.
The loss of small businesses turns off two key economic engines.
First, as they grow, small businesses typically provide more jobs than large, established companies. The loss of small enterprises costs the economy the main source of future jobs and robs existing businesses of an incentive to compete for good workers, depressing wages and perks. That can limit workers’ lifetime earning power.
Second, small businesses tend to be more innovative than large ones. Without small businesses nudging them, bigger corporations have less incentive to explore new technologies, processes, and markets. That could surrender future U.S. market shares to other countries.
TREND FORECAST: Across the business spectrum and around the world, as we had forecast, the entrepreneur sector will shrink and the Bigs will get bigger. This trend will highly accelerate in the hospitality sector that is now in deep depression, where small operators will be unable to service their debt and multinationals will take them over.
As we have noted, across the globe, new anti-establishment political parties will be formed and “Break up the Bigs” will be a major platform. Other platforms will trend toward socialist/communist as out-of-work-workers will support more government control of enterprises.
