It takes no small measure of optimism to launch a business.
Would-be business owners and entrepreneurs see a chance, as they navigate the application processes, to meet a need in the local community or establish a presence online that can cut across geographies.
Recent statistics from the U.S. Census Bureau, released on Friday (Jan. 10), offer up what would be a sign of optimism in a few key sectors — notably, professional services and construction.
The latest data shows that business applications for tax IDs, adjusted for seasonal variation, reached 457,544 in December, marking an increase of 1.5% compared to November. This represents a de-acceleration from the seasonally adjusted increase in the month prior (a revised 5.7% gain) although it is still a positive indication given that it is only the fourth monthly increase in the whole of 2024.
Projected business formations, which are the estimates of new startups that will result from the applications, were 28,834, an increase of 2.6% compared to November. Projected formations stand 5.8% above the December 2023 level.
Drilling down a bit, retail applications were 79,000, down 9% from November’s levels. But for Business Services (13% of the tally) and Construction (10% of applications), there was positive momentum.
Together with business applications, the bureau also provides projections on the likelihood that a business application turns into an employer business and the consequent number of startups that will derive from these applications. This forecast results in a potential 28,834 business for the year 2025, 2.6% more than forecasted in November.
Professional Services “potential” businesses were up a positive 4.6%. Construction, among the same metric, saw a 3.2% boost.
The read across here is that consumer demand for these businesses — think, for example, of tax services, law firms, design companies and home contractors, including plumbers and painters.
It takes time to get a business up and running. And it takes capital to hire staff, make payroll, purchase or rent the premises in which the small business will operate and buy inventory. Concurrently, while all that is going on, there’s the need and hope to be paid in a timely manner.
In PYMNTS Intelligence data from November, we found that most SMBs do not have access to credit cards. Just 37% have access to any credit cards, with 32% having access to business credit cards. In other words, roughly 5% of Main Street SMBs have to rely exclusively on personal credit cards to fund their business.
The disparity is even more stark between higher- and lower-revenue SMBs. Among firms generating $1 million or more in revenue annually, nearly half have access to credit cards. But a relatively meager 25% of those with annual revenues of $150,000 or less say the same.
Separate PYMNTS Intelligence has noted in past research that for the construction sector especially, that late payments can be a challenge and eventually an existential threat. We’ve found that almost all firms in that sector have been plagued by late payments, and project delays and canceled contracts are just some of the consequences of payment problems.
In the U.S. alone, slow payments in the construction sector have caused a staggering financial impact of $280 billion 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 going while grappling with late payments.
Instant payments availability would help smooth those cash flows. As PYMNTS reported on Monday (Jan. 6), construction management platform Knowify announced its integration with Intuit’s suite of financial products for growing businesses, Intuit Enterprise Suite. The integration will provide construction businesses with a single, unified platform through which firms can manage operations, finances and accounting.
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