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Bankruptcies Plague Small Businesses

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March 2004--While job growth at big companies tends to make more headlines, job creation in the United States also comes from small businesses. And troubled small businesses may be a reason for the slow job growth so far this ear.

According to the Small Business Association, over the last three years, more small businesses have shut down than started up. Due to a number of factors--rising health care and energy costs, and lack of available funds from banks--more small businesses are finding it hard to stay afloat, and many are failing. Those managing to stay in business are finding outsourcing and downsizing a solution to problems like the rising cost of health care and energy.

Also, small businesses may be having a harder time getting banks to help out when they run into financial trouble. The growing consolidation of banks, according to a Small Business Administration study, has had a negative effect on the amount of credit available to small businesses. This is problematic for small businesses, which often rely more for their credit on bank lending than larger firms.

According to the National Federation of Independent Business Index study, only 12% of small businesses--those businesses with fewer than 500 employees--reported having a job opening for skilled employees in January 2004.




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