From 1991 to 1993, the latest Census data available, produced under contract for SBA indicate that small firms with 0-4 employees created most of the net new jobs. A major share of jobs also came from births of new small firms. The small business share of net new jobs increases most rapidly during the recovery stage of a cycle, and during the earlier parts of the expansion phase of a cycle. Jobs generated by small firms are more likely to be filled by younger workers, older workers and women. Overall, small firms rely more on owner capital and less on external debt capital than larger firms.
Most small firms use external financing only occasionally.
Less than 50 percent of small firms borrow once or more during a year. However, a portion of small firms, those experiencing rapid growth or those with high volumes of receivables, require frequent use of external financing. The cost of borrowed funds is higher for small firms. Interest rates on bank loans for small businesses average 2 or 3 percentage points over the prime rate. Fixed rate loans are usually more expensive than floating rate loans.