ByGlenda J. Wilson
It is well-known that small business plays a substantial role in our overall economy. More than 99 percent of all American businesses are small, according to the U.S. Small Business Administration (SBA). They create 75 percent of the net new jobs, and they employ more than half of the nation's nonfarm private employees, according to the 2003 State Small Business Profiles report from the SBA. The report shows small business dominates several sectors of the economy, such as construction; professional, scientific and technical services; and health care and social assistance. These data demonstrate the importance of supporting small-business development.
Access to capital and credit is one of the most critical elements to the success of these enterprises. Improving the flow of capital to small businesses has been a priority in public policy and private industry for decades, with market forces and technological advances constantly presenting new opportunities for accomplishing this goal.
Training and technical assistance in business administration are as important as financing to the viability of microenterprises. These companies often need guidance on the principles of operating a business—developing a business plan, implementing accounting and financial reporting systems, and creating marketing strategies.
One constant in this quest is the value of quality information. Providers of small-business capital face a challenge—how to obtain accurate, comprehensive information on the financial and managerial capacity of an enterprise. A problem facing small-business lenders or investors is the difficulty in gathering data that is certified or easily verifiable. Because little public information on small businesses typically is available, capital providers must collect proprietary data from the business owner. As a result, strong relationships between entrepreneurs and their capital providers are critical.
Given this situation and the economic impact of small businesses in both urban and rural communities, the Community Affairs Office of the Federal Reserve Bank of St. Louis is undertaking a comprehensive approach to help generate knowledge among market players. During 2004 and 2005, we will provide technical assistance, host workshops, sponsor a conference in the spring of 2005 in Memphis, publish newsletter articles and reports, and sponsor research related to entrepreneurship and small-business development. We believe these efforts and others will provide excellent opportunities for information sharing and networking, connecting entrepreneurs with the ideas and the resources that help foster new business growth.
We begin with an article in this issue of Bridges on the role of small-business startups in the life science and information technology industries in St. Louis.