Leveraging and Deleveraging in the Small Business Sector

Data from the Federal Reserve’s Flow of Funds report shows that non-financial, non-farm, proprietorships and partnerships have deleveraged considerably since 2009. From 2009 to 2013, liabilities as a share of proprietors’ equity of these businesses declined from 92.4 percent to 68.8 percent.

While that reduction is substantial, the ratio of borrowing to net worth will need to fall further to return to historical levels.

Leveraging and Deleveraging in the Small Business Sector