"Small Business" Defined
The Small Business Administration, which has established a size standard for most industries in the economy, defines "small business" as follows:

• 500 employees for most manufacturing and mining industries;
• 100 employees for all wholesale trade industries;
• $6* million for most retail and service industries (*increased to $6.5 million last month for loans, contracts);
• $28.5 million for most general & heavy construction industries;
• $12 million for all special trade contractors; and
• $0.75 million for most agricultural industries.

About one-fourth of industries have a size standard that is different from these levels. They vary from $0.75 million to $28.5 million for size standards based on average annual revenues, and from 100 to 1500 employees for size standards based on number of employees.

Small Last Year Was Big
Ninety-nine percent of all businesses in the United States, as of mid-2005, were small businesses, according to an article in USA Today.

Although a "small business" is technically — and perhaps unrightfully — defined as a business with fewer than 500 employees, even if you look at…you know…real, actual small businesses — perhaps those with fewer than 50 employees — small businesses still make up 98 percent of all businesses. And more than half of all employees in the U.S. work for small businesses.

The SBA's data point to other numbers, wherein small firms:

• Represent 99.7 percent of all employer firms;
• Employ half of the country's private workforce;
• Pay 45 percent of total U.S. private payroll;
• Have generated 60 percent to 80 percent of net new jobs annually over the last decade;
• Supplied more than 23 percent of the total value of federal prime contracts in FY 2004; and
• Represent 97 percent of all the exporters of goods;
• Generate a majority of the innovations that come from U.S. companies; and
• Are employers of 41 percent of high-tech workers (e.g., scientists, engineers and computer workers).

Sources: USA Today, July 18, 2005; SBA Office of Advocacy, updated October 2005

Survival Rates
According to SBA data in May 2005's Monthly Labor Review: There were 572,900 new businesses, and 554,800 business closures (though not all closures were due to bankruptcies); two-thirds of new employer firms survive at least two years, and about half survive at least four; sixty-six percent of new establishments started in 1998 were still operating two years after they started; and forty-four percent were still operating four years later in 2002.

The number of self-employed workers in June 2005 fell 3.1 percent or 303,000 from the month before, recent Labor Department data show. Self-employment tends to fall as the economy grows. That's especially true among laid-off workers who start tiny companies after failing to find work in slow times.

Sources: USA Today, July 18, 2005; U.S. Small Business Administration, June 2004, updated October 2005

Women At Work
The number of women-owned firms continues to grow at twice the rate of all U.S. firms (23 percent versus nine percent). There are an estimated 10 million women-owned, privately held U.S. businesses. According to the SBA, "The greatest challenge for women-owned firms is access to capital, credit and equity. Women start businesses on both lifestyle and financial reasons. Many run businesses from home to keep overhead low."

According to American Express, women are more likely than men to seek business advice (69 percent women to 47 percent men. Where small-business owners go for advice: 52 percent from individual mentors; 51 percent from social networks; 44 percent from trade associations; 36 percent from business advisors; 31 percent from the Internet; and 27 percent from Chambers of Commerce.

Sources: SBA, Office of Advocacy and Business Times, April 2005; American Express

Financing Small-Biz
In 2005, small businesses received nearly 100,000 U.S. Government small-business loans, according to Small Business Center. Women and minorities registered double-digit increases in the number of government business loans received last year.

Commercial banks are the most important suppliers of debt capital to small firms, according to the SBA, as they supply more than 80 percent of lending in the credit line market and more than 50 percent in other markets, such as commercial mortgages and vehicle, equipment and other loans. In June 2004, small-business loans outstanding owed to commercial banks amounted to $522 billion, but small firms are not only receiving loans from smaller, relationship-driven banks. Very large banks with assets of at least $10 billion are making a significant percentage of small loans of less than $100,000.

According to All Business (via WebProNews), 95 percent of all entrepreneurs are estimated to have opened their businesses with capital from their own pockets, or from money they borrowed from relatives, friends or another person in their community. "Lenders want to see business owners risk their own funds in the business venture, and often require that the business owner or owners provide a minimum of 25 percent of the capital needed to start a business, and at least that much equity in the business if the business is already in existence." Simply, lenders aren't as willing to take a risk when a business owner doesn't even risk his or her own money in the investment.

Small Business Resources:

• www.SBA.gov
• www.SCORE.org
• www.Inc.com
• www.Entrepreneur.com
• www.Microsoft.com/smallbusiness
• www.NFIB.com
• www.Forbes.com/smallbusiness/
• www.irs.gov/businesses/small/
• www.Allbusiness.com/
• www.Businessownersideacafe.com/

References

You may not know it, but small business is bullish
by Steve Strauss
USA Today, July 18, 2005

Frequently Asked Questions
SBA Office of Advocacy

$19 Billion in Government Business Loans for Small Businesses
Small Business Center, Dec. 30, 2005

Successfully Obtaining A Small Business Loan
by Rebecca Game
All Business (via WebProNews), Jan. 11, 2006