What Can Governments Do To Help Small Businesses Thrive?

It is no secret that small businesses outnumber corporations by far. Further, many more people work in small businesses than those in formal employment. Notably, statistics indicate that over 50% of global job opportunities come from small, informal businesses. However, it is also true that the small business sector is largely outside the radar of the financial sector.

Just like any other business venture, small businesses rely on external financing to get their wheels turning. Further, entrepreneurs that run such ventures usually lack enough funding sources to sustain the business. Therefore, it imperative that governments find ways and means to ensure that the ventures can meet their goals.

Usually, governments have the means to influence the environment in and around everything within their jurisdiction. Notably, the basic nature of small businesses should spur any government into action whenever there is a crisis in the sector.

Enabling access to cheap credit

As already noted, the availability of credit is vital towards the better performance of small businesses. Interestingly, this is one front in which governments can influence the sustainability of business for small scale entrepreneurs. Notably, authorities can mobilize financial institutions such that they come with a policy that favors easy access to credit. For instance, the central bank could reduce interest rates such that banks can access capital cheaply. Subsequently, the institutions will be able to extend cheap credit to the businesses.

Cutting taxes to less punitive levels

A government could also cut certain taxes that adversely affect small businesses. Notably, the value-added tax is a very common levy imposed on businesses. However, the taxes could sometimes disincentivize entrepreneurs due to its punitive nature. As such, governments should peg the VAT at a certain level that is not likely to hurt businesses.

Establishing a small business relief fund

Besides, some governments and their agencies maintain a certain kitty of a fund that provides relief to financially distressed entrepreneurs. With this fund, small businesses which may need emergency financing will be in a position to carry on business as other alternatives become available. This is on the assumption that most small businesses are unable to establish a line of credit. Notably, this facility is usually available to large businesses.

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