Small Business Formation Slows in America

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According to the United States Census bureau, small business formation has been on a steady decline. In fact, a recent study found that only 403,765 new small businesses were formed in the period ending March 2009. That is 17% less than one year prior and the lowest amount of new businesses on record since 1977.

That may seem like ominous news but an entrepreneur might see a shiny silver lining in what appears to be this dark cloud.

Those who study small businesses know that the collective power of small businesses in the United States makes them far less than small.

Businesses less than one year old employed more than 3 million people in 2008 and 2.3 million in 2009. Not accounting for age, small businesses collectively employ more people than large corporations so the Federal Government is very much interested in small business trends.

In fact, the news appears to be even more ominous.

Economists note that we’re in a period of post-recession recovery and in past recessions, small business formation has quickly bounced back but not this time. It is taking much longer to see small businesses emerge. This is largely to the scarcity of credit and the amount of angel investors and venture capitalists who are still not lending.

The Good News

The good news comes from famed investor Warren Buffett.

Buffett, who is worth more money than some nations, said many years ago to buy when people are scared and sell when they’re not. Investors have taken his advice for decades and it has proven true many times before.

If you have a dream of being an entrepreneur, now is the time. The government has put in place numerous programs that give incentives to those who will form a business. Tax credit, grants, and free education are only
a few ways that new business owners are being supported like never before.

Additionally, the credit market is becoming more small business friendly. The United States Small Business Administration is making it easier to get the credit needed to start a business. Money is cheap right now
so a small business loan will be cheap to pay back.

Finally, if the amount of new businesses is at a historic low, that may fare well for you if you’re the only one in your field who is getting started. Take advantage of those who are scared. When others won’t,
those who will stand to gain much. That’s how Warren Buffett has always done it and it can work for you as well.