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Small businesses continue to impact state's economy

In California, small businesses are vital to the financial well-being of the state's economy. Their contribution is essential for economic growth since they make up almost all employer firms in the state. As entrepreneurs and innovators, small business owners represented a diverse group in 2004 and continued to keep the state's economy productive.

Number of businesses

There were an estimated 3,320,977 small businesses in California in 2004, according to the SBA's Office of Advocacy. Of the 1,077,390 firms with employees, an estimated 99.2 percent, or 1,068,602, were small firms. In 2004, the estimated number of employer businesses increased by 1.3 percent. The number of self-employed persons (including incorporated) increased overall by 7.6 percent, from 1,986,534 in 2003 to 2,137,841 in 2004. Non-employer businesses numbered 2,252,375 in 2002, an increase of 4.8 percent since 2001, based on the most recent data available.

(Sources: U.S. Dept. of Labor, Employment and Training Administration; U.S. Dept. of Commerce, Census Bureau; U.S. Dept of Labor, Bureau of Labor Statistics)

Women-owned businesses

In 2002 women-owned firms totaled 871,617, an increase of 24 percent from 1997, and generated $140.9 billion in revenues. Firms owned jointly by women and men numbered 346,097 with revenues of $128.2 billion. Women represented 34.7 percent of the self-employed persons in the state.

(Sources: U.S. Dept. of Labor, Bureau of Labor Statistics; U.S. Dept. of Commerce, Census Bureau)

Minority-owned businesses

In 2002, Hispanic-owned firms numbered 427,805, an increase of 27 percent from 1997. Black-owned firms numbered 113,003, an increase of 43 percent; Asian-owned firms numbered 372,221, an increase of 19 percent; American Indian and Alaska Native owned firms numbered 40,541, an increase of 52 percent; and there were 7,308 Native Hawaiian and other Pacific Islander-owned businesses. Minority owners may be in more than one minority group.

(Source: U.S. Dept. of Commerce, Census Bureau)

Business turnover

There were an estimated 117,016 new employer businesses in 2004, 3.1 percent more than the previous year. Business terminations numbered 143,115 in 2004, an increase of 1.9 percent. Business bankruptcies decreased by 16.7 percent and totaled 3,748 in 2004.

(Sources: U.S. Dept. of Labor, Employment and Training Administration; Administrative Office of the U.S. Courts; U.S. Dept. of Commerce, Census Bureau)


Small firms with fewer than 500 employees numbered 669,132 in 2002 and employed 6,810,807 individuals, or 53 percent of the state's non-farm private sector.3 Net job gains among firms with fewer than 20 employees totaled 117,379, while large firms with 500 or more employees lost 263,913 jobs between 2001 and 2002.

(Source: U.S. Dept. of Commerce, Census Bureau, Statistics of U.S. Businesses)

Small business income

Non-farm proprietors' income, a partial measure of small business income, increased by 6 percent, from $129.7 billion in 2002 to $137.5 billion in 2003.

(Source: U.S. Dept. of Commerce)


Commercial bank lenders are an important source of small business loans, and small firms usually rely on them for financing. Over the last 10 years the number of banks in California has declined. The Office of Advocacy has identified banks in each state that make the most loans to small businesses. This information is available in its banking studies at www.sba.gov/advo/research/lending.html.

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