By David Lawder
WASHINGTON - U.S. small business startup applications are on the rise as sentiment in the sector improves following a turbulent post-pandemic period, fueled by a decrease in inflation, according to a recent U.S. Treasury report.
The analysis, released alongside Vice President Kamala Harris' proposal for a significant tax break for startups, reveals that the U.S. is seeing an average of 430,000 new business applications per month in 2024 - a 50% increase compared to 2019, the last pre-COVID year.
Applications for businesses likely to hire employees have also seen a 30% increase compared to 2019, with small businesses now accounting for 70% of net new American jobs, up from 64% in the previous business cycle.
Harris is set to unveil a plan for a small business tax deduction of up to $50,000 for startups, aiming to support entrepreneurs in launching their ventures. Currently, the deduction limit stands at $5,000, significantly lower than the average cost of starting a business, which is $40,000.
In collaboration with U.S. Treasury Secretary Janet Yellen, Harris has been working to provide additional lending resources to small businesses in minority and under-served communities, with over $8 billion invested in 162 community financial institutions through the Emergency Capital Investment Program.
"President Biden and I understand the importance of small businesses in our communities," Harris stated. "Thanks to our Administration's efforts, there have been a record-breaking 19 million new small business applications since taking office, including in overlooked and underserved communities."
The Treasury report highlights an improvement in small business sentiment measures as inflation levels decrease. Both the Small Business Optimism Index and the U.S. Chamber of Commerce Small Business Index have shown positive trends this year, reaching post-pandemic highs.
While tight lending conditions have posed challenges for small businesses, the report indicates that lending standards are beginning to ease, contributing to the growing optimism in the sector.
Analysis:
The surge in small business startup applications, coupled with improved sentiment in the sector, reflects a positive outlook for the U.S. economy. As inflation eases and lending standards become more favorable, entrepreneurs are seizing the opportunity to launch new ventures and create jobs. Harris' proposed tax deduction for startups and the Administration's focus on supporting small businesses in underserved communities are further catalysts for growth. Individuals looking to start their own businesses or invest in small enterprises should consider the current trend and take advantage of the favorable conditions in the market.