These days we can observe an extremely wide range of businesses, from a one-person tiny firm to large international companies. The definition of a small or a midsize company is different in many countries, but in general, it depends on the number of employees, revenues and assets. For example in the USA, SMEs are not defined, in the European Union the definition says that a small company is the one with the number of employees lower than 50 and the midsize enterprise has no more than 250 employees.
Such businesses frequently have to cope with some financial problems, since for them it is more difficult to gain the needed capital. Although they are innovative and promising in their ideas, SMEs’ starts are usually more likely to end up with failure because of the lack of funds. Hence, the governments and various national organizations take action to help SMEs by special programs involving business education and by opening the wider access to loans.
Are such enterprises significant for the economic growth or these are only large companies which bring considerable profit?
Whereas even more than a half of SMEs have trouble with raising capital by receiving bank loans, and thus, are forced to survive on the personal funds or family loans, they are the creators of 80% of new jobs in emerging economies. At the same time, for such businesses the door to growth and development is often closed. It is a sad fact which should be taken into consideration by the governments.
Not only emerging economies benefit from SMEs. How is it in Canada?
Surprisingly, SMEs created 77% of new jobs in Canada between 2002 and 2012. The importance of these firms is huge – SMEs not only create new work places but also generate tax revenues. The problem is that these companies often struggle to survive and sometimes do not comply with tax reporting laws. Canada decided to solve the problems by teaching SME owners how to make their business develop. Apart from this, there are special audit programs to improve tax compliance.
SMEs in the United States
In the United States there is no certain characteristics which identifies SMEs. Here the division is different: small businesses and self-employed individuals are in one group and the second group consists of midsize and large companies. Being classified as a small business means no more than $10 million of assets and to be considered a large business you must have assets of more than $10 million.