CEDCO Small Business Finance inline

How Do Small Businesses Help The Economy?


The SBA recently increased its size standards for small businesses in an effort to expand access to its loan programs. This is an important step in the association’s ongoing quest to support small business owners. In 2022 alone, the federal government awarded $163.9 billion dollars to small businesses, accounting for nearly a quarter of all federal spending that year. This amount certainly underscores the importance of small business to the US economy. But exactly how do small businesses help the economy? Let’s take a closer look.

How Many Small Businesses Are There?

In 2023, small businesses made up 99.9 percent of all firms in the United States. To clarify, a “firm” is simply a for-profit business organization. It may be in the form of an LLC, sole proprietorship, partnership, or corporation. 

In numeric terms, there are around 33 million small businesses in the US. The majority of these are non-employer firms–predominantly private contractors or one-member businesses, such as real estate agents. A little over 6 million small businesses have paid employees. These are known as “employer firms.”

Economic Impact of Small Businesses

Job Creation

Despite the relatively small number of employer firms compared to non-employer ones, small businesses with paid workers generated over 17 million new jobs between 1995 and 2021. In comparison, large businesses (of which there are only around 21,000) created around 10 million new jobs in the same time period. 

Overall, small businesses account for 46.4 percent of all private sector employees. This amounts to over 61 million jobs across the country. 

Goods & Services

Small businesses contributed to 43.5 percent of the country’s gross domestic product in 2023. The US GDP last year was around $28 trillion, which means small businesses were responsible for over $12 trillion in combined goods and services nationwide.

Small businesses also contributed 32.6 percent of the US’s known export value in 2023, sending over $413 billion in products overseas. 

Success Rate of Small Business in the US

Despite their proven importance for the US economy, small business owners continue to face challenges. The five-year survival rate of new businesses hovers around 48 percent, and the rate decreases with time. Small businesses that have been open for 15 years have just a 25 percent survival rate. 

The reasons why small businesses fail vary, but generally involve a combination of the following:

Lack of Capital

Access to financing for a business is critical. Business owners need to be able to pay employee wages, taxes, utilities, and rent. They need to buy inventory and equipment. Most rely on loans to accomplish all this, with around 68 percent of small business owners utilizing some sort of bank credit in 2023. Defaulting on these loans can also lead to small business failures. 


Running a business is expensive, and inflation can deeply affect profit margins. This was one of the primary reasons the SBA published an Alternative Size Standard this year. 

Supply Chain Interruptions

Small businesses suffered greatly during COVID-19, largely due to supply chain issues. Unable to maintain or afford enough inventory, many businesses were forced to shut down at least temporarily. Negative impacts from COVID are on a downward trend, although certain industries are still recovering.

Timing and Location

Often, poor timing is simply to blame for a failed business venture. No one could have predicted the Pandemic shut-down, for example. A business that had just opened its doors that month was unlikely to survive. 

Location is also important for many businesses. If there is too much competition nearby,  not enough traffic, or business depends too much on the seasons, it can be challenging to remain liquid. 

Support for Small Business Owners

Knowing how important small businesses are for our country’s economy, the Federal government created certain loan programs to help offset at least part of the largest hurdle faced by these entrepreneurs: financing. 

One of the best loan programs available is the SBA 504 loan, which can be used to purchase fixed assets for a business. This includes real estate, furniture, computers, land, renovations, upgrades, and specialized machinery needed to run the business. 

The SBA 504 is attractive for a few reasons:

  • Fixed Interest Rate: no surprises during the repayment term. 
  • Long Repayment Terms: up to 25 years for real estate, and 10 years for equipment
  • Low Down Payment: as low as 10 percent is required of the borrower. Many conventional loans require 20 percent or more. 
  • Green Incentives: borrowers who use the funds toward energy efficient upgrades may qualify for additional financing

How to Qualify for an SBA Loan?

Despite being one of the best small business loans available, the SBA 504 loan is under-utilized. Some business owners may not consider it at all, while others might assume they do not qualify. 

The truth is, nearly every small business may be eligible to apply for an SBA 504, so long as they are:


You must meet the size requirements to be counted as “small.” This generally means less than $20 million net worth, less than 6.5 million net income (after taxes) for two years prior to the application, and less than 500 employees. 

For Profit

You must be a for-profit business in order to be eligible.

Based in the US

Only businesses that operate within the United States are able to apply for the SBA 504 loan. 

Buying Fixed Assets

You can only use the SBA 504 loan to purchase fixed assets. It cannot be used to purchase things like inventory or to pay employee salaries. 

Apply for an SBA 504 Loan in Colorado

If you are a small business owner in need of a loan to buy fixed assets, your first step should be to contact your local Certified Development Company (CDC). These non-profit organizations are certified by the SBA to facilitate the 504 application process. Among other things, they help determine a business’ eligibility and ensure the necessary forms and documentation are submitted. 

In Colorado, CEDCO has been helping businesses secure SBA 504 loans for more than 40 years. We will help you determine if you meet eligibility requirements and, should you qualify, we will be with you through every step of the application process. Your success is our success! Call or go online today to schedule a free consultation. 

author avatar
CEDCO Small Business Finance
woman in yellow top and apron holds a sign that says "open" in chalk. She is a new business owner.
Tags :
504 Loan,Small Business
Share This :

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent Posts

Want to Discuss a Loan