First Trust Advisors chief economist Brian Wesbury reacts to Fed Chair Jerome Powell saying he won’t resign if President-elect Trump asks on ‘Making Money.’
The backbone of the U.S. economy – the American small business – may be breaking beyond repair without some serious intervention, a new study by private digital lender Biz2Credit shows.
Data from the study was pulled from more than 100,000 financing applications submitted to Biz2Credit between January 2022 and December 2024, and it shows a sharp decline in the earnings of small businesses toward the end of 2024, a trend the lender sees continuing into 2025.
The study underscores concern about the economy after four years of so-called Bidenomics, or President Biden’s policies that involve taxes and regulations on the business community while providing tax incentives for some targeted industries that align with his progressive agenda. Despite strong headline numbers of GDP growth and low unemployment, problems such as inflation and regulatory costs have hit certain segments of the economy harder than others.
INFLATION RISES 2.9% IN DECEMBER, IN LINE WITH EXPECTATIONS
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“Small business owners went on a roller coaster ride in 2024. Earnings grew until July and declined every month through December,” said Rohit Arora, Biz2Credit’s chief executive and co-founder. “Average monthly earnings dropped by almost $68,000 in comparison to 2023 and also were lower than they were in 2022.”
The reason for the decline, according to Arora, is that small businesses don’t have the scale to spread costs over a large balance sheet and are hit hardest by inflation, which, while abating, has led to high prices for goods that haven’t.
The incoming Trump administration has vowed to lighten regulations and taxes on small businesses to regain the growth lost during the Biden years.
“Trump was elected based on his promise to fix the economy, and he says it will be a priority from Day 1,” said Arora. “Based on our data on later months of 2024, the start of 2025 could be a rocky one for small businesses.”
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President Donald Trump pumps his fist after speaking in the East Room of the White House, early Wednesday, Nov. 4, 2020, in Washington, as Vice President Mike Pence and first lady Melania Trump watch. (AP Photo/Evan Vucci)
The survey, for instance, shows that small businesses suffered a 43% decline in profits during 2024. The average monthly earnings of surveyed businesses for the first 11 months of 2024 came out to $86,809 compared with $150,000 in 2023 – the worst yearly average since 2020. One major problem for small businesses has been the persistence of high prices. Business-related costs have dramatically increased with average monthly expenses coming in at $664,525 compared with $364,292 the year prior.
Although the rate of inflation has been trending lower since June 2022 when it hit a staggering 9.1% (Wednesday’s CPI report showed inflation rose to 2.9% in December, up slightly from the prior month), the overall costs for small businesses in the form of rent, insurance and labor remain high, and some are increasing.
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On a bright note, the National Federation of Independent Business (NFIB) published its latest Small Business Optimism Index on Tuesday, showing that optimism on Main Street jumped 3.4 points to 105.1 in December. It marked the highest reading since October 2018, as small business owners hope for improving economic conditions under Trump.