Jobless Entrepreneurs A Factor In Economic Recovery

Earlier this month, the Kauffman Foundation issued a report detailing an increase in the number of small businesses being formed in the U.S. However, the news is exactly as good as it seems. While new entrepreneurship is at its highest rate in 15 years, a significant percentage of those new business owners are running one-man shows. They are the so-called, ‘jobless entrepreneurs.”

Jobless Entrepreneurs

During the Great Recession, unemployment skyrocketed, and even as the country is recovering, unemployment remains high. With no one hiring, many jobless people have turned to entrepreneurship to keep themselves working. The problem lies in the fact that so many of these jobless entrepreneurs are not creating companies with employees; they’re simply working for themselves. So, while there’s an economic benefit to keeping people working, the reported increase in small business startups is not indicative of an imminent uptick in hiring.

According to the Kauffman Foundation’s report, “…0.34 percent of American adults created a business per month in 2010, or 565,000 new businesses, a rate that remained consistent with 2009 and represents the highest level of entrepreneurship over the past decade and a half. In contrast, however, the quarterly employer firm rate has dropped from 0.13 percent in 2007 to 0.10 percent in 2010.”

Going it Alone

With so many small business owners striking out on their own, financing is a major concern. In order to stay in business, entrepreneurs need feasible working capital solutions so they don’t end up sidelined by startup costs, overhead, or lagging accounts receivable. Services provided by factoring companies are a safe option for today’s jobless entrepreneurs, particularly as they begin to take on larger, creditworthy customers and slowly start hiring employees.

Beyond providing those necessary working capital solutions, factoring companies offer tremendous benefits to small businesses, including startups with no employees. For example, running a single-person operation means the owner not only does all the work but also manages all the books. With accounts receivable financing through a reputable company (always look for the International Factoring Association and Factors Against Fraud logos when hiring a factoring company), much of the burden of managing accounts receivable, financing worries, and stress of going it alone is alleviated.

Factoring companies are great partners for jobless entrepreneurs and other startups. For more information, contact your financial advisor today.