Low financial strength of small businesses as a reason for their mass regression to "micro" businesses
Year: 2025
Type: article
Abstract: Small business is an area that is expected to grow dynamically, this process having a positive impact on the domestic economy; therefore, support and stimulation tools are being developed and improved. However, today, statistics show that business is systematically transforming from "medium" and "small" to "micro", which suggests that there are many problems (which may not be affected by existing tools) that slow down development or force business entities to regress. As consequences of the events of 2014 (global economic crisis) and 2020 (COVID-19 pandemic), companies recorded reductions in orders, decreased cash receipts, and forced temporary shutdowns, while maintaining their obligations to employees, landlords and contractors; thus, only companies with good financial strength, or, in other words, with no problems in the financial block, could fulfill all these obligations. By "financial block", entrepreneurs most often understand the following: (1) reserves of cash and technical capabilities to use them to fulfill obligations, maintaining stable functioning even with the loss of the main stable income for a while, and (2) possibility to use part of these monetary resources to finance and launch new goods or products (as practice has shown, some entrepreneurs use microfinance loans as an alternative, which is undoubtedly a negative phenomenon). This work examines three components grouped into the definition "financial block" that are interrelated and determine the level of financial strength - current accounts (instrument), financial reserves of the entity, and sources of financing projects in the small business sector. This study can be useful in terms of improving the mechanisms and tools used to support small businesses. The author declares no conflicts of interests.
Author: Aleksey V. Khmelev
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4410988585