Orishich A. A., Mudrenko A. A., Shkut O. S.

Oles Honchar Dnipropetrovsk National University, Ukraine

RECOVERY STARTS WITH SMALL BUSINESS

All countries, all over the world agree that small business is an essential base of national economy. It’s generally known that it needs governmental support, but in our country we have some problems in this sector.

However, small business in Ukraine has certain features that distinguish it significantly from foreign business, including:

– low level of technical equipment at considerable innovative potential;

– low level of management, lack of knowledge, experience and culture of a market economy;

– striving for maximum independence;

– lack of self-organization and lack of infrastructure to support small business;

– lack of complete and reliable information on the state and the market conditions, the low level of consulting services and special education programs;

– the virtual absence of state financial support;

– distrust of Western partners and negative mental attitude towards entrepreneurs.

Small enterprises in Ukraine face major difficulties in their activity. The main problem of small business is low resource technical and financial base. The vast majority of the population live «from payday to payday» and they can’t save enough money which they will be able to invest in starting their own business. Clearly that very tight state budget can become their source. We can only hope for a credit, but these resources are very limited, so it’s difficult to use it optimally when inflation is so high.

It is unlikely that the situation will change in a positive way if don’t provide public support to constructive small business. The government should build mechanisms for preferential loans, taxes, various preferences, including related economic activities. The point is to make people meet the needs in creating the conditions for the consistent business deployment.

Reducing income population has led to a significant deterioration in consumption patterns. Profits are directed mainly to the acquisition of essential commodities, especially food and utilities. The same situation is with small businesses. Previously it had some savings, then after the first stage of reform it was forced to work on consumption mostly. We should begin serious adverse structural changes in small business.

The successful development of small business needs various means of its financing: self-financing public investment, bank lending and foreign investment. The problem of small business in Ukraine is linked to the provision of mechanisms for political stability, monetary, fiscal, «soapy policy», economic innovation, extensive privatization, democratization of society.

In Ukraine, the development of SMEs is essential for the transformation of the economy. Creating a large number of small businesses in the economy is a guarantee that economic system is able to adjust change quickly to circumstances and conditions in the market.

Taxes affect small business most of all. They lead to negative consequences such as the downturn of economic entities, the national capital outflow abroad, toning economy. A decrease in budget revenues forces the state to introduce new taxes or increase an existing base. Thus, everything revolves in a circle and prevents small business from prosperity. Under such circumstances, the state should promote the preservation of the small business sector by means of reasonable fiscal policy.

In addition, there is an active process of capital concentration while establishing financial and managerial control over independent businesses from large companies and the corresponding monopoly groups. Small business development has a significant impact on the national economy as a whole. We should pay sufficient attention to this issue while discussing the ways of solving economic problems in the country, because recovery always starts with small business.