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. As the economy approaches full employment during the latter stages of an expansion, larger firms tend to produce a larger share of jobs, while the small business share falls somewhat. Jobs generated by small firms are more likely to be filled by younger workers, older workers, and women. Financing Overall, small firms rely more on owner capital and less on external debt capital compared to larger firms. In addition, small firms are more dependent than large firms on short-term debt.
Most small firms use external financing only occasionally.
Less than 50 percent of small firms borrow once or more during a year. The cost of borrowed funds is higher for small firms. Interest rates on bank loans for small businesses average two or three percentage points over the prime rate. Fixed rate loans are usually more expensive than floating rate loans. The majority of small firms used some form of financing in the past.