“Small businesses are the foundation of New York’s economy, stimulating economic activity in our cities and towns, spurring innovation across industries, providing a variety of employment opportunities, and enriching our communities,” DiNapoli said.  “However, growth in small business jobs and new startups lags the rest of the nation.  New challenges, like tariffs, have forced owners to make sacrifices and difficult choices.  The state and local governments should continue to look for ways to support small businesses by easing their entry into markets and helping them thrive in New York.”

DiNapoli’s report found:

• Data from the U.S. Census Bureau indicate there were 422,137 small businesses (with fewer than 500 employees) operating across New York in 2023, comprising 98.9% of all businesses in the state.
• Over 80% of all New York businesses had fewer than ten workers.  Small businesses employed 3.7 million people, close to 45% of the state’s jobs, earning an average of $60,579 in annual pay in 2023.
• The small business industries that provide the greatest total employment are health care and leisure activities, making up 33.7% of small business employment in the state.
• Small business owners are more diverse than those of large businesses: in New York, 23% are majority-owned by women and 26% by minority business owners — compared to less than 4% and 3%, respectively, for large firms.

In 2023, the percentage of jobs at small businesses averaged 47.5% nationally and was 44.7% in New York.

Trends in Small Business Creation

The report found that small business growth in New York has lagged the nation: between 2001 and 2023, the number of small business firms grew 9.5% in New York compared to 14.2% in the rest of the nation, ranking 22nd among states.  The COVID-19 pandemic hit New York’s small business economy particularly hard in 2020 and 2021, with a net decrease of 7,350 businesses in 2020 and 11,600 in 2021.  In contrast, the net number of small businesses in the rest of the nation grew in both 2020 and 2021, likely due to the fact that industries such as leisure, hospitality, and retail services, which were affected to a greater extent by the pandemic shutdowns, have high concentrations of small businesses in the state.  From 2022 to 2023, New York’s small business firms grew 0.7%, about two-thirds of the rate at which small business firms grew across the rest of the country (1.05%).  Business applications across the state have been underperforming national rates for more than a decade.  Between 2015 and 2019, both New York and the rest of the nation saw modest, but steady growth in business applications.  In 2020, following the onset of the pandemic, applications in New York fell to near 2015 levels, but then surged through the subsequent entrepreneurial boom.  However, growth still remained below national trends.

Challenges of Entrepreneurship in New York State

In July 2025, the National Federation of Independent Business (NFIB) Research Center released its survey report, Small Business Problems and Priorities, which asked small business owners to assess the severity of 75 potential business problems on a scale of 1 - “a critical problem” — to 7 — “not a problem.”  The survey found that most challenges faced by small business owners are prevalent across the nation.  For example, the cost of health insurance and supplies ranked as first and second in New York and nationwide.  Three issues stood out as more prevalent in New York.  According to the responses from 285 small business owners in New York, state taxes on business income, what the survey describes as unreasonable government regulations, and electricity costs rank as greater concerns for small businesses owners operating in New York than those operating in the rest of the country.  In addition to the regulations imposed by the state, local requirements can impact small businesses.  For example, a third of small businesses in New York City report waiting six months or longer to open due to the various licenses, permits, and waivers from as many as 15 different city agencies that must be obtained to operate.  As net small business job creation declines, New York has simultaneously seen a steady rise in “non-employer businesses,” firms that do not directly employ any workers.  Many non-employer businesses participate in the “gig economy,” a market characterized by short-term contracts or freelance work, often facilitated via digital platforms.  Short-term home sharing, ride-share, and delivery applications have caused a surge in non-employer businesses in New York’s leisure and accommodations industry, and various new professional services like social media management, content creation, as well as personal finance and consulting, are becoming more commonly offered by individual proprietors.

State Action

DiNapoli’s report highlights several programs available in New York offering financial support to small businesses.  In 2022, the state launched over $1 billion in new programs that provide grants and loans to small businesses to improve access to capital.  Though many startups encounter financial barriers in establishing their business, New York has programs to support and invest in the network of statewide alternative lenders, which are instrumental in facilitating the growth and strength of the state's small businesses.  After announcing an initiative as part of the State Executive Budget for Fiscal Year 2027 to review state regulations, the Executive announced the launch of EXPRESS NY (Expediting Processes and Regulations to Enable Streamlined Services), a new effort to identify unnecessary, outdated, or burdensome regulations for three key areas.  The effort includes a link to a portal that invites New Yorkers to submit recommendations for supporting small businesses by identifying “issues that make it difficult for businesses to launch, serve customers, or grow.”

Report

Challenges Facing Small Businesses in New York

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