It takes a lot of optimism to start a business.
Potential business owners and entrepreneurs see a chance, as they navigate the application processes, to fulfill a need in the local community or to create an online presence that can span all geographies.
The latest statistics from the US Census Bureau, released on Friday (January 10), offer what would be a sign of optimism in several key sectors – notably, professional services and construction.
The latest data shows that seasonally adjusted business applications for tax IDs totaled 457,544 in December, an increase of 1.5% compared to November. This represents an acceleration from the seasonally adjusted increase in the previous month (a revised 5.7% gain) although it is still a positive indicator given that it is only the fourth monthly increase in all of 2024.
Projected business formations, which are estimates of new startups that will result from filings, were 28,834, a 2.6% increase over November. The projected formations stand 5.8% above the level of December 2023.
Edging slightly, retail applications were 79,000, down 9% from November levels. But for Business Services (13% of total) and Construction (10% of applications), there was positive momentum.
Along with business applications, the bureau also provides projections on the likelihood that a business application will turn into an employer business and the subsequent number of startups that will result from these applications. This forecast results in a potential 28,834 businesses for 2025, 2.6% more than was forecast in November.
“Potential” businesses of professional services increased by 4.6%. Construction, among the same metric, had an increase of 3.2%.
The read here is that consumer demand for these businesses—think, for example, tax services, law firms, design companies and home contractors, including plumbers and painters.
It takes time to get a business up and running. And capital is needed to hire staff, make payroll, buy or lease the premises in which the small business will operate, and purchase inventory. At the same time, while all this is happening, there is a need and hope to be paid in due time.
In PYMNTS Intelligence data from November, we found that most SMBs do not have access to credit cards. Only 37% have access to any credit card, with 32% having access to business credit cards. In other words, approximately 5% of Main Street SMBs must rely exclusively on personal credit cards to finance their business.
The disparity is even greater between higher and lower income SMBs. Among firms generating $1 million or more in annual revenue, nearly half have access to credit cards. But a relatively small 25% of those with annual incomes of $150,000 or less say the same.
Special Intelligence PYMNTS has noted in past research that for the construction sector in particular, payment delays can be a challenge and eventually an existential threat. We have found that almost all firms in that sector are plagued by late payments, and project delays and contract cancellations are just some of the consequences of payment problems.
In the US alone, slow payments in the construction sector caused a staggering $280 billion financial impact last year. The data showed that 98% of general contractors reported an increased reliance on personal savings, credit cards and even retirement funds to keep their firms afloat while dealing with late payments.
The availability of instant payments would help smooth these cash flows. As PYMNTS reported Monday (Jan. 6), construction management platform Knowify announced its integration with Intuit’s suite of financial products for growing businesses, the Intuit Enterprise Suite. The integration will provide construction businesses with a single, unified platform through which firms can manage operations, finance and accounting.
