The smallest of businesses can carry significant debts that present significant challenges and obstacles. A worldwide pandemic in 2020 saw smaller enterprises forced to shut down. While some companies adapted with reduced-contact services to stop the spread of COVID-19, others struggled.
Many entrepreneurs looked to coronavirus financial resources to fill their coffers somewhat and remain in operation. Fast forward to restrictions being lifted, and small business owners are overextending themselves when it comes to credit card debt to keep their operations afloat.
Data paints a picture of potential problems
Specific business debt statistics include:
- Overall, 70 percent of small businesses carry outstanding debt
- Small business debt increased more than nine percent compared to 2020, an overall increase of $425 billion, according to the Federal Reserve
- According to the Fed’s financial stability study, debt rose $17.7 trillion in 2022
- The Small Business Administration (SBA) claims that smaller proprietors are carrying $17.7 trillion in debt
- Published data from Experian and other companies reveal the average debt for small businesses perilously close to $200,000
- While 50 percent of firms addressed financial challenges by taking out debt, 36 percent pursued loans to resolve their debt loads
Smaller business survivability
While small business debt continues to grow, they continue to be statistically more likely to stay in business than their larger corporate counterparts. The lower profile of companies with 50 or fewer employees compared to a high-profile corporation with thousands and millions of staff keeps the public and media attention away from them.
Small businesses remain the glue that holds the national, state, and local economies together. Barring another health or economic crisis, smart business decisions can help to keep these much-needed enterprises in business. While survival is the objective, thriving in a competitive culture is paramount.
