Small business earnings plunge despite GDP growth

The backbone of the U.S. economy, American small businesses, could be broken without any serious intervention, a new study from digital private Biz2Credit suggests.

The research data is drawn from more than 100,000 funding applications submitted to Biz2Credit between January 2022 and December 2024, and it shows a sharp decline in small business income by the end of 2024, a trend the lender sees through 2025.

The survey underscores concerns about the economy after four years of so-called Bidenomics, or President Biden’s policies that include taxes and regulations on the business community while providing tax incentives for some targeted sectors that align with his progressive agenda, despite growing GDP and low unemployment rates, problems such as inflation and regulatory costs have hit some sectors of the economy harder than others.

IN DECEMBER INFLATION INCREASED BY 2.9%, IN ACCORDANCE WITH EXPECTATIONS.

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“Small business owners went down the road in 2024. Revenues were up through July and down every month through December,” said Rohit Arora, CEO and co-founder of Biz2Credit by nearly $68,000 and was also lower than 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 the hardest by inflation, which, while easing, has led to higher prices for goods that don’t.

The incoming Trump administration has promised to ease regulations and taxes on small businesses to restore lost growth during the Biden years.

“Trump was elected on his promise to fix the economy, and he says that will be a priority from day one,” Arora said.

SMALL BUSINESS OPTIMISM AT SIX-YEAR HIGH AFTER TRUMP VICTORY

President Donald Trump pumps his fist after delivering a speech in the East Room of the White House, Wednesday, Nov. 4, 2020, in Washington, as Vice President Mike Pence and first lady Melania Trump look on. (AP Photo/Evan Vucci)

The survey, for example, shows that small businesses experienced a 43% drop in profits in 2024. In the first 11 months of 2024, the average monthly income of businesses surveyed was $86,809, compared to $150,000 in 2023, the worst annual average since 2020. Since then, the main problem for small businesses has been the high cost of doing business monthly expenses were $664,525 compared to $364,292 last year.

While the inflation rate is the lowest 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 previous month) , general costs for small businesses. rent, insurance and labor remain high and some are increasing.

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The National Federation of Independent Business (NFIB) released its Small Business Optimism Index on Tuesday, showing that optimism on Main Street rose 3.4 points to 105.1 in December, the highest since October 2018 business owners hope to improve economic conditions under Trump.