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Characteristics
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Concepts of small business, self-employment, entrepreneurship, and startup
Size definitions
Demographics
Franchise businesses
Retailers' cooperative
Advantages
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Independence
Financial reporting
Challenges
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Bankruptcy
Social responsibility
Job quality
Cyber crime
Marketing
Contribution to the economy
Sources of funding
Government support
Business networks and advocacy groups
See also
References
Further reading
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Historiography
External links
Small business

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From Wikipedia, the free encyclopedia

Small businesses on Dalrymple Street in Girvan, Scotland

Small businesses are types of corporations, partnerships, or sole proprietorships
which have a small number of employees and/or less annual revenue than a regular-
sized business or corporation. Businesses are defined as "small" in terms of being
able to apply for government support and qualify for preferential tax policy. The
qualifications vary depending on the country and industry. Small businesses range
from fifteen employees under the Australian Fair Work Act 2009, fifty employees
according to the definition used by the European Union, and fewer than five hundred
employees to qualify for many U.S. Small Business Administration programs. While
small businesses can also be classified according to other methods, such as annual
revenues, shipments, sales, assets, annual gross, net revenue, net profits, the
number of employees is one of the most widely used measures.[1]

Small businesses in many countries include service or retail operations such as

convenience stores, small grocery stores, bakeries or delicatessens, hairdressers
or tradespeople (e.g., carpenters, electricians), restaurants, motels,
photographers, very small-scale manufacturing, and Internet-related businesses such
as web design and computer programming. Some professionals operate as small
businesses, such as lawyers, accountants, dentists, medical doctors and developers
(although these professionals can also work for large organizations or companies).
Small businesses vary a great deal in terms of size, revenues, and regulatory
authorization, both within a country and from country to country. Some small
businesses, such as a home accounting business, may only require a business
license. On the other hand, other small businesses, such as day cares, retirement
homes, and restaurants serving liquor are more heavily regulated and may require
inspection and certification from various government authorities.

Characteristics

Small businesses in the Central Zone of São Paulo

Researchers and analysts of small or owner-managed businesses generally behave as
if nominal organizational forms (e.g., partnership, sole-trader, or corporation),
and the consequent legal and accounting boundaries of owner-managed firms are
consistently meaningful. However, owner-managers often do not distinguish between
their personal and business interests. Lenders also often skirt organizational
(corporate) boundaries by seeking personal guarantees or accepting privately held
assets as collateral.[2] Because of this behavior, researchers and analysts may
wish to be cautious in assessing the organizational types and implied boundaries
relating to owner-managed firms. This includes the analysis of traditional
accounting disclosures and studies that treat the firm as defined by a formal
organizational structure.

Concepts of small business, self-employment, entrepreneurship, and startup

Portici di Sottoripa, Genoa, Italy. Galleries tend to form clusters of small

business owners over time.
The concepts of small business, self-employment, entrepreneurship, and startup
overlap but also carry important distinctions. These four concepts are often
conflated.Their key differences can be summarized as:

self-employment: an organization created primarily to provide income to the

founders, i.e. sole proprietor operations.
entrepreneurship: all new organizations.
startup: a new organization created to grow (and have employees).
small business: an organization that is small (in employees or revenue) and may or
may not have the intention to grow.
Many small businesses are sole proprietor operations consisting only of the owner,
but many also have additional employees. Some small businesses that offer a
product, process or service, do not have growth as their primary objective. In
contrast, a business that is created to become a big firm is known as a startup.
Startups aim for growth and often offer an innovative product, process, or service.
The entrepreneurs of startups typically aim to scale up the company by adding
employees, seeking international sales, and so on, a process which is often but not
always financed by venture capital and angel investments. Successful entrepreneurs
have the ability to lead a business in a positive direction by proper planning,
adapting to changing environments, and understand their own strengths and weakness.
Spectacular success stories stem from startups that expanded in growth. Examples
would be Microsoft, Genentech, and Federal Express which all embody the sense of
new venture creation on small businesses.[3]

Self-employment provides work primarily for the founders. Entrepreneurship refers

to all new businesses, including self-employment and businesses that never intend
to grow big or become registered, but startups refer to new businesses that intend
to grow beyond the founders, to have employees, and grow large.

Size definitions
The legal definition of "small business" varies by country and by industry. In
addition to the number of employees, methods used to classify small companies
include annual sales (turnover), the value of assets and net profit (balance
sheet), alone or as a combination of factors.

In India, all the manufacturing and service enterprises having investment "Not more
than Rs 10 crore" and Annual Turnover "not more than Rs 50 crore" come under this
category.
In the United States, the Small Business Administration establishes small business
size standards on an industry-by-industry basis but generally specifies a small
business as having fewer than 500 employees for manufacturing businesses and less
than $7.5 million in annual receipts for most non-manufacturing businesses.[4][5]
The definition can vary by circumstance—for example, a small business having fewer
than 25 full-time equivalent employees with average annual wages below $50,000
qualifies for a tax credit under the health care reform bill Patient Protection and
Affordable Care Act.[6] By comparison, a medium-sized business or mid-sized
business has fewer than 500 employees.
The European Union generally defines a small business as one that has fewer than
fifty employees and either turnover or balance sheet less than €10 m.[7] but the
European Commission is undertaking a review of this definition.[8] By comparison, a
medium-sized business has fewer than 250 employees and either turnover less than
€50 m. or balance sheet less than €43 m.[7]
In Australia, a small business is defined by the Fair Work Act 2009 as one with
fewer than 15 employees, although the Australian Bureau of Statistics uses less
than 20 employees as its threshold. By comparison, a medium-sized business or mid-
sized business has fewer than two hundred employees.
In South Africa, the National Small Business Amendment Act (Act 26 of 2003) defines
businesses in a variety of ways using five categories previously established by the
National Small Business Act (Act 102 of 1996), namely, standard industrial sector
and subsector classification, size of class, equivalent of paid employees, turnover
and asset value excluding fixed property.[9]
Small businesses usually do not dominate their field.[10]

The following table serves as a guide to business size nomenclature.

Business size definitions (by number of employees)

AUS US CAN EU
Minute/micro 1-2 1-6 1-4 <10
Small <15 <250 1-99 <50
Medium <200 <500 100-499 <250
Large <500 <1000 >500 <1000
Enterprise >500 >1000 N/A >1000
Most cells reflect sizes not defined in legislation.
Some definitions are multi-parameter, e.g., by industry, revenue, or market share.
Demographics
In 2016 a study that examined the demographic of small business owners was
published. The study showed that the median American small business owners were
above the age of 50. The ages were distributed as 51% over 50 years old, 33%
between the ages 35–49, and 16% being under the age of 35. As for sex: 55% were
owned by males, 36% by females, and 9% being equal ownership of both males and
females. As for race: 72% were white/Caucasian, 13.5% were Latinos, 6.3% were
African American, 6.2% were Asian, and 2% as other. As for educational background:
39% had obtained a bachelor's degree or higher, 33% had some college background,
and 28% received at least a high school diploma.[11]

The United States census data for the years 2014 and 2015 shows the women's
ownership share of small businesses by firm size. The data explains percentages
owned by women along with the number of employees including the owner. Generally,
the smaller the business, the more likely it to be owned by a woman. The data shows
that about 22% of small businesses with 100-500 employees were owned by women, a
percentage that rises the smaller the business. 41% of businesses with just 2-4
employees were run by women, and in businesses with just one person, that person
was a woman in 51% of cases.[11]

Franchise businesses
Franchising is a way for small business owners to benefit from the economies of
scale of the big corporation (franchiser). McDonald's and Subway are examples of a
franchise. The small business owner can leverage a strong brand name and purchasing
power of the larger company while keeping their own investment affordable. However,
some franchisees conclude that they suffer the "worst of both worlds" feeling they
are too restricted by corporate mandates and lack true independence. It is an
assumption that small business is just franchisees, but the truth is many
franchisers are also small businesses, Although considered to be a successful way
of doing business, literature has proved that there is a high failure rate in
franchising as well, especially in the UK, where research indicates that out of
1658 franchising companies operating in 1984, only 601 remained in 1998, a mere
36%.[12]

Retailers' cooperative
A retailers' cooperative is a type of cooperative that employs economies of scale
on behalf of its retailer members. Retailers' cooperatives use their purchasing
power to acquire discounts from manufacturers and often share marketing expenses.
They are often recognized as "local groups" because they own their own stores
within the community.[13] It is common for locally owned grocery stores, hardware
stores, and pharmacies to participate in retailers' cooperatives. Ace Hardware,
True Value, and NAPA are examples of a retailers' cooperative. Retail cooperatives
also allow consumers to supply their own earnings and gain bargaining power outside
of the business sector.[13] Retail cooperatives mainly reside within small
communities where local businesses are often shut down.[13]

Advantages

Small business in Bursa, Turkey. One of the claimed advantages of small business
owners is the ability to serve market niches not served by mass production
industries. Consider how few major corporations would be willing to deal with the
risks and uncertainty that small antique store deals with buying and selling non-
standardized items and making quick assessments of the value of rare items.
Many small businesses can be started at a low cost and on a part-time basis, while
a person continues a regular job with an employer or provides care for family
members in the home. In developing countries, many small businesses are sole-
proprietor operations such as selling products at a market stall or preparing hot
food to sell on the street, which provide a small income. In the 2000s, a small
business is also well suited to Internet marketing; because, it can easily serve
specialized niches, something that would have been more difficult before the
Internet revolution which began in the late 1990s. Internet marketing gives small
businesses the ability to market with smaller budgets. Adapting to change is
crucial in business and particularly small business; not being tied to the
bureaucratic inertia associated with large corporations, small businesses can
respond to changing marketplace demand more quickly. Small business proprietors
tend to be in closer personal contact with their customers and clients than large
corporations, as small business owners see their customers in person each week.

One study showed that small, local businesses are better for a local economy than
the introduction of new chain stores. By opening up new national level chain
stores, the profits of locally owned businesses greatly decrease and many
businesses end up failing and having to close. This creates an exponential effect.
When one store closes, people lose their jobs, other businesses lose business from
the failed business, and so on. In many cases, large firms displace just as many
jobs as they create.[14]

Independence
Independence is another advantage of owning a small business. A small business
owner does not have to report to a supervisor, manager, or a board to report to,
which is the situation for a corporation's CEO. Also, many people desire to make
their own decisions, take their own risks, and reap the rewards of their efforts.
Small business owners possess the flexibility and freedom to make their own
decisions within the constraints imposed by economic and other environmental
factors.[15] However, entrepreneurs have to work for very long hours and understand
that ultimately their customers are their bosses.

Small businesses (often carried out by family members) may adjust quicker to the
changing conditions; however, they may also be closed to the absorption of new
knowledge and employing new labor from outside.[16]

Financial reporting
Small businesses benefit from less extensive accounting and financial reporting
requirements than those faced by larger businesses.

The European Union's Directive on annual financial statements of 2013 aims to

"limit administrative burdens and provide for simple and robust accounting rules,
especially for small and medium-sized enterprises (SMEs)".[17] In the UK, the
Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015
transposed the EU Directive into UK law and amended the reporting regime for
reduced disclosure accounts for any accounting period commencing on or after 1
January 2016.[18] "Abbreviated accounts" were permitted for smaller entities under
"FRSSE", the Financial Reporting Standard for Smaller Entities). Until 2015,
companies deemed small under the UK Companies Act 2006 were allowed to use this
standard.[19] For accounting years ending on or after 1 January 2016, FRSSE is no
longer available,[20] but there are options known as "abridged accounts" and
"filleted accounts":

Abridged accounts: accounting for profit / loss begins with the declaration of
gross profit or loss, not turnover
Filleted financial statements or filleted accounts: profit and loss accounts are
excluded, but balance sheet and balance sheet notes are to be disclosed.[21]
Alternatively, the smallest companies are able to file "micro-entity accounts".[22]
FRS 105 is a Financial Reporting Standard applicable to the Micro-entities Regime.
[23]

Challenges
Small businesses often face a variety of problems, some of which are related to
their size. A frequent cause of bankruptcy is under capitalization. This is often a
result of poor planning rather than economic conditions. It is a common rule of
thumb that the entrepreneur should have access to a sum of money at least equal to
the projected revenue for the first year of business in addition to the anticipated
expenses. For example, prospective owners anticipating 100,000 in revenue the first
year with 150,000 in start up expenses should have at least 250,000 available.
Start-up expenses are often grossly underestimated adding to the burden of the
business. Failure to provide this level of funding for the company could leave the
owner liable for all of the company's debt in bankruptcy court under the theory of
undercapitalization.

In addition to ensuring that the business has enough capital, the small business
owner must also be mindful of contribution margin (sales minus variable costs). To
break even, the business must be able to reach a level of sales where the
contribution margin equals fixed costs. When they first start, many small business
owners underprice their products to a point where even at their maximum capacity,
it would be impossible to break even. Cost controls or price increases often
resolve this problem.

In the United States, some of the largest concerns of small business owners are
insurance costs (such as liability and health), energy costs, taxes, and tax
compliance.[24] In the United Kingdom and Australia, small business owners tend to
be more concerned with perceived excessive governmental red tape.[25]

Contracting fraud has been an ongoing problem for small businesses in the United
States. Small businesses are legally obligated to receive a fair portion (23 per
cent) of the total value of all the government's prime contracts as mandated by the
Small Business Act of 1953. Since 2002, a series of federal investigations have
found fraud, abuse, loopholes, and a lack of oversight in federal small business
contracting, which has led to the diversion of billions of dollars in small
business contracts to large corporations.

Another problem for many small businesses is termed the 'Entrepreneurial Myth' or
E-Myth. The mythic assumption is that an expert in a given technical field will
also be an expert at running that kind of business. Additional business management
skills are needed to keep a business running smoothly. Some of this
misunderstanding arises from the failure to distinguish between small business
managers as entrepreneurs or capitalists. While nearly all owner-managers of small
firms are obliged to assume the role of capitalist, only a minority will act as
entrepreneurs.[26] The line between an owner-manager and an entrepreneur can be
defined by whether or not their business is growth-oriented. In general, small
business owners are primarily focused on surviving rather than growing; therefore,
not experiencing the five stages of the corporate life cycle (birth, growth,
maturity, revival, and decline) as an entrepreneur would.[27]

Another problem for many small businesses is the capacity of much larger businesses
to influence or sometimes determine their chances for success. Business networking
and social media has been used as a major tool by small businesses in the UK, but
most of them just use a "scattergun" approach in a desperate attempt to exploit the
market which is not that successful.[28] Over half of small firms lack a business
plan, a tool that is considered one of the most important factors for a venture's
success. Business planning is associated with improved growth prospects. Funders
and investors usually require a business plan. A plan also serves as a strategic
planning document for owners and CEOs, which can be used as a "bible" for decision-
making [29]

An international trade survey indicated that the British share of businesses that
are exporting rose from 32% in 2012 to 39% in 2013. Although this may seem
positive, in reality, the growth is slow, as small business owners shy away from
exporting due to actual and perceived barriers. Learning the basics of a foreign
language could be the solution to open doors to new trade markets, it is a reality
that not all foreign business partners speak English. China is stated to grow by
7.6% in 2013 and still, 95% of business owners who want to export to China have no
desire and no knowledge to learn their local language.[30]
Bankruptcy
When the small business fails, the owner may file for bankruptcy. In most cases,
this can be handled through a personal bankruptcy filing.[31] Corporations can file
bankruptcy, but if it is out of business and valuable corporate assets are likely
to be repossessed by secured creditors, there is little advantage to going to the
expense of a corporate bankruptcy.[32][33] Many states offer exemptions for small
business assets so they can continue to operate during and after personal
bankruptcy.[34] However, corporate assets are normally not exempt; hence, it may be
more difficult to continue operating an incorporated business if the owner files
bankruptcy.[35] Researchers have examined small business failures in some depth,
with attempts to model the predictability of failure.[36][37]

Social responsibility
Small businesses can encounter several problems related to engaging in corporate
social responsibility, due to characteristics inherent in their size. Owners of
small businesses often participate heavily in the day-to-day operations of their
companies. This results in a lack of time for the owner to coordinate socially
responsible efforts, such as supporting local charities or not-for-profit
activities.[38] Additionally, a small business owner's expertise often falls
outside the realm of socially responsible practices, which can contribute to a lack
of participation. Small businesses also face a form of peer pressure from larger
forces in their respective industries, making it difficult to oppose and work
against industry expectations.[38] Furthermore, small businesses undergo stress
from shareholder expectations. Because small businesses have more personal
relationships with their patrons and local shareholders, they must also be prepared
to withstand closer scrutiny if they want to share in the benefits of committing to
socially responsible practices or not.[38]

Job quality
While small businesses employ over half the workforce in the US [39] and have been
established as a main driving force behind job creation,[40] the quality of the
jobs these businesses create has been called into question. Small businesses
generally employ individuals from the Secondary labor market. As a result, in the
U.S., wages are 49% higher for employees of large firms.[40] Additionally, many
small businesses struggle or are unable to provide employees with benefits they
would be given at larger firms. Research from the U.S. Small Business
Administration indicates that employees of large firms are 17% more likely to
receive benefits including salary, paid leave, paid vacation, bonuses, insurance,
and retirement plans.[41] Both lower wages and fewer benefits combine to create a
job turnover rate among U.S. small businesses that is three times higher than large
firms.[40] Employees of small businesses also must adapt to the higher failure rate
of small firms, which means that they are more likely to lose their job due to the
firm going under. In the U.S. 69% of small businesses last at least two years, but
this percentage drops to 51% for firms reaching five years in operation.[39] The
U.S. Small Business Administration counts companies with as much as $35.5 million
in sales and 1,500 employees as "small businesses", depending on the industry.
Outside government, companies with less than $7 million in sales and fewer than
five hundred employees are widely considered small businesses.

Cyber crime
Main article: Cyber crime
Cybercrime in the business world can be broken down into 4 main categories. They
include loss of reputation and consumer confidence, cost of fixing the issue, loss
of capital and assets, and legal difficulties that can come from these problems.
Loss of reputation and consumer confidence can be impacted greatly after one
attack. Many small businesses will struggle to gain confidence and trust in their
customers after being known for having problems prior. The cost of fixing the cyber
attack would require experts outside of their field to further the investigation
and find the problem. Being down for a business means losing money at the same
time. This could halt the online operations and mean the business could potentially
be down for a long period of time. Loss of capital and assets ties well in with the
cost of fixing the issue. During a cyberattack, a business may lose its funds for
that business. Worst-case scenario, a business may actually lose all its working
capital and funds. The legal difficulties involved with cybercrime can become pricy
and hurt the business itself for not having standard security measures and
standards. Security not only for the business but more importantly the customer
should be the number one priority when dealing with security protocol.[42]

The monetary dollar damage caused by cybercrime in 2016 equaled out to be over 1.33
billion dollars in the United States alone. In 2016, California alone had over 255
million dollars reported to the IC3. Certain cyber attacks can vary on how long it
takes to solve a problem. It can take upwards to 69 days for an average everyday
attack on a business. The types of attacks include viruses and malware issues.
Employee activities within the workspace can also render a cyber attack. Employees
using mobile devices or remote work access off the job makes it easier for a cyber
attack to occur.[43]

Marketing
Although small businesses have close relationships with their existing customers,
finding new customers and reaching new markets is a major challenge for small
business owners. Small businesses typically find themselves strapped for time to do
marketing, as they have to run the day-to-day aspects of the business. To create a
continual stream of new business and find new clients and customers, they must work
on marketing their business continuously. Low sales (the result of poor marketing)
is one of the major reasons for small business failure. Common marketing techniques
for small business include business networking (e.g., attending Chamber of Commerce
events or trade fairs), "word of mouth" promotion by existing customers, customer
referrals, Yellow pages directories, television, radio, and outdoor ads (e.g.,
roadside billboards), print ads, email, and Internet marketing. TV ads can be quite
expensive, so they are normally intended to create awareness of a product or
service. Another means by which small businesses can advertise is through the use
of "deal of the day" websites such as Groupon and Living Social. These Internet
deals encourage customers to patronize small businesses.

Example of keyword analysis based on market competition

Many small business owners find internet marketing more affordable. Google AdWords
and Yahoo! Search Marketing are two popular options of getting small business
products or services in front of motivated web searchers. Social media has also
become an affordable route of marketing for small businesses. It is a fraction of
the cost of traditional marketing and small businesses can do it themselves or find
small social marketing agencies that they can hire out for a small fee.
Statistically, social media marketing has a higher lead-to-close rate than
traditional media.[citation needed] Successful online small business marketers are
also adept at utilizing the most relevant keywords in their website content.
Advertising on niche websites that are frequented by potential customers can also
be effective, but with the long tail of the Internet, it can be time-intensive to
advertise on enough websites to garner an effective reach.

Creating a business website has become increasingly affordable with many do-it-
yourself programs now available for beginners. A website can provide significant
marketing exposure for small businesses when marketed through the Internet and
other channels. Some popular services are WordPress, Joomla, Squarespace, and Wix.
Social media has proven to be very useful in gaining additional exposure for many
small businesses. Many small business owners use Facebook and Twitter as a way to
reach out to their loyal customers to give them news about specials of the day or
special coupons, generate repeat business and reach out to new potential clients.
The relational nature of social media, along with its immediacy and twenty-four-
hour presence lend an intimacy to the relationships small businesses can have with
their customers while making it more efficient for them to communicate with greater
numbers. Facebook ads are also a very cost-effective way for small business owners
to reach a targeted audience with a very specific message. In addition to the
social networking sites, blogs have become a highly effective way for small
businesses to position themselves as experts on issues that are important to their
customers. This can be done with a proprietary blog and/or by using a back-link
strategy wherein the marketer comments on other blogs and leaves a link to the
small business's own website. Posting to a blog about the company's business or
service area regularly can increase web traffic to a company website.

Marketing plan

Market research – To produce a marketing plan for small businesses, research needs
to be done on similar businesses, which should include desk research (done online
or with directories) and field research. This gives an insight into the target
group's behavior and shopping patterns. Analyzing the competitor's marketing
strategies makes it easier for small businesses to gain market share.
Marketing mix[44] – Marketing mix is a crucial factor for any business to be
successful. Especially for a small business, examining a competitor's marketing mix
can be very helpful. An appropriate market mix, which uses different types of
marketing, can help to boost sales.
Product life cycle[45] – After the launch of the business, crucial points of focus
should be the growth phase (adding customers, adding products or services, and/or
expanding to new markets) and working towards the maturity phase. Once the business
reaches the maturity stage, an extension strategy should be in place. Re-launching
is also an option at this stage. Pricing strategy should be flexible and based on
the different stages of the product life cycle.
Promotion techniques – It is preferable to keep promotion expenses as low as
possible. ‘Word of mouth’, ‘email marketing’, ‘print-ads’ in local newspapers, etc.
can be effective.
Channels of distribution – Selecting an effective channel of distribution may
reduce the promotional expenses as well as overall expenses for a small business.
Contribution to the economy
In the US, small businesses (fewer than five hundred employees) account for more
than half the non-farm, private GDP and around half the private sector employment.
[39] Regarding small business, the top job provider is those with fewer than ten
employees, and those with ten or more but fewer than twenty employees comes in as
the second, and those with twenty or more but fewer than one hundred employees
comes in as the third (interpolation of data from the following references).[46]
The most recent data shows firms with fewer than twenty employees account for
slightly more than 18% of the employment.[47]

According to "The Family Business Review", "there are approximately seventeen

million sole-proprietorship in the US. It can be argued that a sole-proprietorship
(an unincorporated business owned by a single person) is a type of family business"
and "there are twenty-two million small businesses (fewer than five hundred
employees) in the US and approximately 14,000 big businesses". Also, it has been
found that small businesses created the newest jobs in communities, "In 1979, David
Birch published the first empirical evidence that small firms (fewer than 100
employees) created the newest jobs", and Edmiston claimed that "perhaps the
greatest generator of interest in entrepreneurship and small business is the widely
held belief that small businesses in the United States create most new jobs. The
evidence suggests that small businesses indeed create a substantial majority of net
new jobs in an average year." The U.S. Small Business Administration has found
small businesses have created two-thirds of net new private-sector jobs in the US
since 2007.[48] Local businesses provide competition to each other and also
challenge corporate giants. Of the 5,369,068 employer firms in 1995, 78.8 per cent
had fewer than ten employees, and 99.7 per cent had fewer than five hundred
employees.[49]

Sources of funding

Small businesses in Biloela, Central Queensland, Australia, 1949

See also: Small business financing
Small businesses use various sources available for start-up capital:

Self-financing by the owner through cash savings, equity loan on his or her home,
and or other assets
Loans or financial gifts from friends or relatives
Grants from private foundations, government, or other sources
Private stock issue
Forming partnerships
Angel investors
Loans from banks, credit unions, or other financial institutions
SME finance, including collateral-based lending and venture capital, given
sufficiently sound business venture plans
Some small businesses are further financed through credit card debt—usually a risky
choice, given that the interest rate on credit cards is often several times the
rate that would be paid on a line of credit at a bank or a bank loan and terms can
change unpredictably.[50][51] Recent research suggests that the use of credit
scores in small business lending by community banks is surprisingly widespread.
Moreover, the scores employed tend to be the consumer credit scores of the small
business owners rather than the more encompassing small business credit scores that
include data on the firms as well as on the owners.[52] Many owners seek a bank
loan in the name of their business; however, banks will usually insist on a
personal guarantee by the business owner.

In October 2010, Alejandro Cremades and Tanya Prive founded the first equity
crowdfunding platform[53] for small businesses in history as an alternative source
of financing. The platform operates under the name of Rock The Post.[54]

Government support
Several organizations in the United States also provide help for the small business
sector, such as the Internal Revenue Service's Small Business and Self-Employed
One-Stop Resource.[55] The Small Business Administration (SBA) runs several loan
programs that may help a small business secure loans. In these programs, the SBA
guarantees a portion of the loan to the issuing bank, and thus, relieves the bank
of some of the risk of extending the loan to a small business. The SBA also
requires business owners to pledge personal assets and sign as a personal guarantee
for the loan. The 8(a) Business Development Program assists in the development of
small businesses owned and operated by African Americans, Hispanics, and Asians.
[56]

Canadian small businesses can take advantage of federally funded programs and
services. See Federal financing for small businesses in Canada (grants and loans).

In the United Kingdom, the Small Business Commissioner (SBC) provides information
and advice for small businesses and deals with complaints resolution with specific
reference to late payment problems and other unfavourable payment practices. The
SBC's role is to make non-binding recommendations advising on how the parties can
resolve a dispute.[57]

Small businesses are also encouraged per public policy on taxation. For example,
from January 1, 2020, Armenia introduced a special micro-entrepreneurship tax
system with a non-taxable base of 24 million AMD. Accordingly, a micro-business
will be exempted from taxes other than income tax which will not exceed 5,000 AMD
per employee.[58]
Business networks and advocacy groups
Small businesses often join or come together to form organizations to advocate for
their causes or to achieve economies of scale that larger businesses benefit from,
such as the opportunity to buy cheaper health insurance in bulk. These
organizations include local or regional groups such as Chambers of Commerce and
independent business alliances, as well as national or international industry-
specific organizations. Such groups often serve a dual purpose, as business
networks to provide marketing and connect members to potential sales leads and
suppliers, and also as advocacy groups, bringing together many small businesses to
provide a stronger voice in regional or national politics. In the case of
independent business alliances, promoting the value of locally owned, independent
business (not necessarily small) through public education campaigns is integral to
their work.

The largest regional small business group in the United States is the Council of
Smaller Enterprises, located in Greater Cleveland.[59]

United Kingdom Trade and Investment gives out research in different markets around
the world, and research in program planning and promotional activities to
exporters. The BEXA's (British Exporters Association) role is to connect new
exporters to expert services. It can provide details about regional export
contacts, who could be made informally to discuss issues. Trade associations and
all major banks often provide links to international groups in foreign markets, and
some help set up joint ventures and trade fairs.[60]

Several youth organizations, including 4-H, Junior Achievement, and Scouting, have
interactive programs and training to help young people run their own small business
under adult supervision.[61]

See also
icon Business and economics portal
American Independent Business Alliance
Big business
Distributism
Federation of Small Businesses
Home business
Independent telephone company
Localism (politics) versus transnational corporations
Market capitalization
Micro-enterprise
National Federation of Independent Business
S corporation
Small Business Administration
Small Business Commissioner
Small Business Innovation Research (SBIR)
Small business software
Small is Profitable
Small office/home office
Small-scale project management
Small start units
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Aoyama, Yuko, and Michael B. Teitz. Small business policy in Japan and the United
States: a comparative analysis of objectives and outcomes (Institute of
International Studies, 1996).
Aoyama, Yuko. "Policy interventions for industrial network formation: contrasting
historical underpinnings of the small business policy in Japan and the United
States." Small Business Economics 12.3 (1999): 217–231.
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perspective (Routledge, 2004).
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government's policies toward small business, 1936-1961" (PhD Diss. The Ohio State
University, 1994).
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the Small Business Administration (University Press of Kentucky, 2014) online
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Institute of Technology, prepared for the Economic Development Administration of
the U.S. Department of Commerce, Washington D.C.
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people to work (The Free Press, 1987).
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2003). online
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Britain (1988) online
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(1996): 11–16. in USA online
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Development". Economic Review. 1: 1–93.
Hillstrom, K., and L. C. Hillstrom, eds. Encyclopedia of Small Business (Gale, 2
vol. 2nd ed. 2002).
Lowrey, Ying. "Minority entrepreneurship in the USA." International Journal of
Business and Globalisation 1.2 (2007): 176–221.
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Australia and New Zealand." Small Enterprise Research 23.3 (2016): 239–261.
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racism and the US Small Business Administration's approach to minority business
lending in the post-civil rights era." Critical Sociology 37.5 (2011): 651-671.
Schaper, Michael T. "A brief history of small business in Australia, 1970-2010."
Journal of Entrepreneurship and Public Policy (2014).
Staff (17 November 2011), "Small-Biz Snapshot: Women-owned Companies",
Portfolio.com, retrieved 21 December 2011
Weems, Robert E. Business in black and white: American presidents and black
entrepreneurs in the twentieth century (NYU Press, 2009).
Wilson, John F. British business history, 1720-1994 (Manchester University Press,
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Historiography
Blackford, Mansel G. "Small business in America: A historiographic survey."
Business History Review 65.1 (1991): 1-26.
External links
Business.usa.gov, the official website for business-related activities in the US
Federation of Small Business, UK-based resource for small business owners
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