US small business startups surge in 2024 as inflation eases

Small biz surge: A new US Treasury report reveals a surge in small business startup applications this year, reflecting a rebound in sentiment after a challenging post-pandemic period. The uptick in applications comes as inflationary pressures ease.

According to the Treasury’s latest analysis, the US is witnessing an average of 430,000 new business applications per month in 2024, an increase of 50% compared to 2019, the last pre-COVID year under President Donald Trump’s administration.

Hiring potential soars

Applications for businesses with a high potential for hiring have risen to 140,000 per month, marking a 30% increase from 2019. Since 2019, small businesses have been responsible for 70% of net new jobs in America, up from 64% in the previous cycle.

Vice President Kamala Harris is set to announce an expansion of small business tax breaks on Wednesday in New Hampshire. The proposed plan includes increasing the tax deduction for startups to $50,000 from the current $5,000, despite the average startup cost being around $40,000.

In collaboration with US Treasury Secretary Janet Yellen, Harris has been working to enhance lending resources for small businesses, particularly in minority and underserved communities. This includes over $8 billion invested in 162 community financial institutions through the Emergency Capital Investment Program during the pandemic.

"Small businesses are the backbone of our communities," Harris stressed in a statement. "Under President Biden’s administration, we've seen a record 19 million new small business applications, including from underserved areas," he added.

Small business confidence up

The Treasury report highlights that several measures of small business sentiment have improved recently, thanks to declining inflation. 

The Small Business Optimism Index, from the National Federation of Independent Business, has seen a rebound this year, reaching its highest level since February 2022. Similarly, the US Chamber of Commerce Small Business Index hit a post-pandemic high in the second quarter of 2024.

Although tight lending conditions have posed challenges, the report indicates that easing lending standards are contributing to the sector's growing optimism.

(With Reuters Inputs)