When small businesses get the financing they need to grow, it creates a ripple effect throughout the entire economy, according to a new report.
Small business is anything but small — there are more than 30 million small businesses across the United States, and these companies create two out of three net new jobs in the country, according to the US Small Business Administration. When each of these businesses grows and hires new employees, it can have an economic impact that stretches far beyond the four walls of the business itself.
To illustrate this, Funding Circle, the leading platform for small-business loans, recently commissioned Oxford Economics to research the impact of its financing to small businesses across the world. The platform connects businesses who want to borrow with investors who want to lend.
The report reveals that this lending had a massive economic impact in the United States:
* Almost 28,000 jobs created and sustained
* $2 billion contributed to the American economy in 2017 (measured in Gross Value Added)
* $170 million generated in annual tax revenues
Funding Circle was founded in 2010, just a few years after the global financial crisis.
“Today the economy has recovered, but it can still be very difficult to get a business loan through a bank,” said Bernardo Martinez, Funding Circle US managing director. “Many banks are held back by outdated systems and underwriting processes, which means that a small business could wait weeks to hear back after applying for a loan — just to be denied.”
Businesses that borrowed are widely spread across the United States and come from a diverse range of industry sectors, according to the report. Of the businesses that had first approached a bank, half said their application was rejected — which led to their decision to come to Funding Circle.
Financing fuels new opportunities. One business that used a loan to grow is Philosophie Group, a custom software solutions company based in Los Angeles and New York City.
With a burgeoning client base, cofounder Skot Carruth and CFO Jerry Signori soon found themselves in a crunch: With so many people in the New York office, there wasn’t enough room to bring in important clients. With new contracts in the wings, Philosophie needed a new office, and they needed it fast.
The founders found the perfect location close to their clients that had plenty of meeting rooms and creative thinking space for innovative developers. The rent was even affordable, which was especially surprising for a city like New York.
The catch? The lease required a full year’s rent as a down payment.
“When you’re growing a business organically, you’re very tight with cash,” Jerry says. “We had a wonderful opportunity that we would have lost if we hadn’t been able to act quickly and decisively.”
Knowing that a traditional bank loan would take too long, they applied — and their loan was funded within a few days. They moved into their new space and soon landed a project with one of the most prestigious accounting firms in the city. Within a year, Philosophie was producing enough revenue to pay down the principal on their loan.
To date, Funding Circle has helped thousands of American small businesses access more than $1 billion in financing. Learn more at www.FundingCircle.com.
Action on Trade is Necessary for Businesses to Unlock Net Zero Targets
For businesses to reach their emission targets, the global trading system needs to adapt, and businesses are calling for the change.
These are the main findings of the Delivering a Climate Trade Agenda: Industry Insights Report released today by the World Economic Forum, in collaboration with Clifford Chance.
The six-month study is based on research and interviews with global companies, across sectors including transport, energy, manufacturing, and consumer goods. The objective of the research process was to identify necessary changes to the current global trade system and how to better incentivize and accelerate decarbonization. The resulting study outlines eight key actions that, if taken by governments and businesses, could make global trade a better enabler of climate action.
Sean Doherty, Head of International Trade and Investment said: “Traditionally, trade and climate policy-making has happened in separate silos. The urgency of the climate crisis calls for us to break down these silos through public-private cooperation in order to accelerate emissions reductions while achieving prosperity for all. The good news for policy makers is businesses are ready and willing to support this change.”
Jessica Gladstone, Partner at Clifford Chance said: “International trade will play a key role in achieving a just transition to a low-carbon sustainable global economy. Businesses stand ready to lead in this transition, but governments can support by ensuring the right legislative and regulatory structures are in place. Our report explores global and domestic policy actions that can create climate-friendly trade that is fair, transparent, and has technology and innovation at its core.”
Interviews revealed the following ways for trade to support businesses to decarbonize and grow sustainably:
- Tariff reductions on key goods
- Addressing non-tariff distortions in parallel
- Phasing out fossil fuel subsidies
- Building coherence around carbon-based trade policies
- Supporting trade in digital and climate-related services
- Encouraging climate-smart agriculture
- Aligning trade agreements with climate commitments
- Facilitating green investment
The chart below provides examples of how the global trading system can through continued dialogue between governments and the private sector put trade to the service of climate action.
The report includes a jointly-authored foreword by the World Trade Organization (WTO) Director General Ngozi Okonjo-Iweala and the United Nations Framework Convention on Climate Change (UNFCCC) Executive Secretary welcoming the insights from business. Major intergovernmental meetings will be held under both organisations in the last quarter of this year.
Business can take steps to encourage alignment of trade rules with climate action. The Forum is today launching a two-year work programme – titled Climate Trade Zero – to support public and private exchange on these issues as part of building a more sustainable trading system.
Many companies also recognized that the transition is taking place at different speeds and levels of intensity across countries and sectors. Interviewees highlighted the importance of providing support and incentives to developing countries, and to supply chain partners in developing countries, to undertake the investments necessary to reduce their emissions.
Appliance standards and labelling is highly effective at reducing energy use
Policies that introduce minimum efficiency performance standards and energy-consumption labelling on appliances and equipment have led to reduced power consumption, lower carbon emissions, and cost savings for consumers, according to analysis published today by the IEA and the 4E Technology Collaboration Programme (4E TCP).
The report’s findings are drawn from nearly 400 evaluation studies covering 100 countries, including those with the longest running and strongest appliance policies, such as China, European Union, Japan and the United States.
“The findings from the study are important as they provide evidence that standards and labelling are highly effective policy instruments that bring benefits to consumers as well as lower emissions and lower energy demand,” said Brian Motherway, the Head of Energy Efficiency at the IEA.
The study shows the policies have had significant positive impacts:
- In countries with long-running policies, appliances are now typically consuming 30% less energy than they would have done otherwise.
- In the nine countries/regions for which data were available, such programmes reduced annual electricity consumption by a total of around 1 580 terawatt-hours in 2018 – similar to the total electricity generation of wind and solar energy in those countries.
- The programmes that have been operating the longest, such as those in the United States and the European Union, are estimated to deliver annual reductions of around 15% of their current total national electricity consumption. This percentage increases each year as more of the older, less-efficient stock is replaced with equipment that meets new higher efficiency standards.
- These energy savings represent a significant financial boon for businesses and householders. In the United States alone, utility customers are now economising USD 60 billion each year, or USD 320 per customer.
- Also, the United States, European Union and China together are avoiding annual CO2 emissions of more than 700 million tonnes, equivalent to the total energy-related emissions of Germany.
- Well-designed policies encourage product innovation and lead to economies of scale, which reduces the cost of appliances even without accounting for the efficiency gains. For example, in Australia the sticker price of appliances has typically fallen 40% over the last 20 years, while average energy consumption has fallen by a third.
“The message is simple: expanding standards and energy efficiency labelling programmes makes the energy transition challenge easier, more affordable and become a reality,” said Jamie Hulan, the Chair of the 4E TCP.
The IEA will continue to collaborate with 4E TCP to enhance and promote the use of such policies. 4E TCP is an international platform for fourteen countries and the European Union to exchange technical and policy information focused on increasing the production and trade in efficient end-use equipment.
Ahead of this November’s COP26 Climate Change Conference, the IEA is working with the UK Government via the Super-Efficient Equipment and Appliance Deployment (SEAD) initiative to coordinate and improve international action on product energy efficiency. The United Kingdom is leading the COP26 Product Efficiency Call to Action, which aims to double the efficiency of key global products by 2030, initially focusing on four key energy-consuming products: air conditioners, refrigerators, lighting and industrial motors systems. The IEA is supporting the implementation of this work and helping expand the number of countries ready to make this commitment.
Global economy projected to show fastest growth in 50 years
The global economy is expected to bounce back this year with growth of 5.3 per cent, the fastest in nearly five decades, according to the UN Conference on Trade and Development (UNCTAD).
In its new report released on Wednesday, the agency said that the rebound was highly uneven along regional, sectoral and income lines, however.
During 2022, UNCTAD expects global growth to slow to 3.6 per cent, leaving world income levels trailing some 3.7 per cent below the pre-pandemic trend line.
The report also warns that growth deceleration could be bigger than expected, if policymakers lose their nerve or answer what it regards as misguided calls for a return to deregulation and austerity.
Differences in growth
The report says that, while the response saw an end to public spending constraints in many developed countries, international rules and practices have locked developing countries into pre-pandemic responses, and a semi-permanent state of economic stress.
Many countries in the South have been hit much harder than during the global financial crisis. With a heavy debt burden, they also have less room for maneuvering their way out through public spending.
Lack of monetary autonomy and access to vaccines are also holding many developing economies back, widening the gulf with advanced economies and threatening to usher in another “lost decade”.
“These widening gaps, both domestic and international, are a reminder that underlying conditions, if left in place, will make resilience and growth luxuries enjoyed by fewer and fewer privileged people,” said Rebeca Grynspan, the secretary-general of UNCTAD.
“Without bolder policies that reflect reinvigorated multilateralism, the post-pandemic recovery will lack equity, and fail to meet the challenges of our time.”
Lessons of the pandemic
UNCTAD includes several proposals in the report that are drawn from the lessons of the pandemic.
They include concerted debt relief and even cancellation in some cases, a reassessment of fiscal policy, greater policy coordination and strong support for developing countries in vaccine deployment.
Even without significant setbacks, global output will only resume its 2016-19 trend by 2030. But even before COVID-19, the income growth trend was unsatisfactory, says UNCTAD. Average annual global growth in the decade after the global financial crisis was the slowest since 1945.
Despite a decade of massive monetary injections from leading central banks, since the 2008-9 crash, inflation targets have been missed. Even with the current strong recovery in advanced economies, there is no sign of a sustained rise in prices.
After decades of a declining wage share, real wages in advanced countries need to rise well above productivity for a long time before a better balance between wages and profits is achieved again, according to the trade and development body’s analysis.
Food prices and global trade
Despite current trends on inflation, UNCTAD believes the rise in food prices could pose a serious threat to vulnerable populations in the South, already financially weakened by the health crisis.
Globally, international trade in goods and services has recovered, after a drop of 5.6 per cent in 2020. The downturn proved less severe than had been anticipated, as trade flows in the latter part of 2020 rebounded almost as strongly as they had fallen earlier.
The report’s modelling projections point to real growth of global trade in goods and services of 9.5 per cent in 2021. Still, the consequences of the crisis will continue to weigh on the trade performance in the years ahead.
For director of UNCTAD’s globalization and development strategies division, Richard Kozul-Wright, “the pandemic has created an opportunity to rethink the core principles of international economic governance, a chance that was missed after the global financial crisis.”
“In less than a year, wide-ranging US policy initiatives in the United States have begun to effect concrete change in the case of infrastructure spending and expanded social protection, financed through more progressive taxation. The next logical step is to take this approach to the multilateral level.”
The report highlights a “possibility of a renewal of multilateralism”, pointing to the United States support of a new special drawing rights (SDR) allocation, global minimum corporate taxation, and a waiver of vaccine-related intellectual property rights.
UNCTAD warns, though, that these proposals “will need much stronger backing from other advanced economies and the inclusion of developing country voices if the world is to tackle the excesses of hyperglobalization and the deepening environmental crisis in a timely manner.”
For the UN agency, the biggest risk for the global economy is that “a rebound in the North will divert attention from long-needed reforms without which developing countries will remain in a weak and vulnerable position.”
The Post-US Withdrawal Afghanistan: India, China and the ‘English Diplomacy’
The recent developments in Afghanistan, the impatient Tri-axis and the emphatic India at SCO, with the ‘English Diplomacy’ at display...
COVID vaccines: Widening inequality and millions vulnerable
Health leaders agree that a world without COVID-19 will not be possible until everyone has equal access to vaccines. More...
Moscow electronic school — the future of education
The Moscow Electronic School (“MES”) project is a cloud-based Internet platform launched in 2016 that unites all educational institutions in...
Economy Contradicts Democracy: Russian Markets Boom Amid Political Sabotage
The political game plan laid by the Russian premier Vladimir Putin has proven effective for the past two decades. Apart...
Over 50 Companies Reporting on Stakeholder Capitalism Metrics as International Support Grows
The World Economic Forum announces today the continued growth of the coalition of companies supporting the Stakeholder Capitalism Metrics initiative....
Japanese firms’ slow and steady exit is sounding alarm bells in Beijing
Last year in March, former Prime Minister Shinzo Abe had indicated Japan would initiate measures to reduce the country heavily...
Bringing People Together with Easy to make Russian Comfort Food
Russia has a long history of droughts and famines. Although there have been no famines since 1947, the former Soviet...
Economy4 days ago
Russia, China and EU are pushing towards de-dollarization: Will India follow?
Middle East2 days ago
Turkey’s Destruction of Cultural Heritage in Cyprus, Turkey, Artsakh
Defense4 days ago
Developments on Korean Peninsula risk accelerating regional arms race
Americas3 days ago
Was Trump better for the world than Biden, after all?
Economy4 days ago
Today’s World Demands Sustainability
South Asia4 days ago
Opposing Hindutava: US conference raises troubling questions
East Asia4 days ago
How China Exacerbates Global Fragility and What Can be Done to Bolster Democratic Resilience to Confront It
Economy3 days ago
A New Strategy for Ukraine