This is my new favorite numerative juxtaposition: 42% of small business owners continue to struggle financially due to the pandemic’s effects, but 73% are optimistic about the financial trajectory of their business in 2022.
Those findings are from the most recent Goldman Sachs 10,000 Small Business Voices national survey, released in January. Along with other survey findings, insights from small business owners, and policy ideas, it is included in a new report out today from the Bipartisan Policy Center. the report, From Pandemic to Prosperity: Bipartisan Solutions to Support Today’s Small Businesseswas done in collaboration with 10,000 Small Business Voices. Conversations with many small business owners helped inform the report’s focus areas. Those focus areas are:
- Access to capital
- Workforce & competitiveness
- Procurement/government contracting
- child care
What do those have in common? Yes, they are areas where small businesses face difficulties today. Take workforce: small businesses of all types are tilling any survey taker who asks about their challenges in identifying, hiring, and retaining qualified workers. Yet each of these four was also an area of acute difficulty for small businesses prior to COVID-19. The pandemic greatly exacerbated them.
More Money, More Questions
Each year, millions of small businesses seek external credit from banks, online lenders, credit unions, and other sources. During the pandemic, the need for capital increased enormously. To its credit, Congress stepped in to help, creating the Paycheck Protection Program (PPP) and expanding the Economic Injury Disaster Loan (EIDL) program. Around $1 trillion was disbursed to small businesses through these.
The programs helped many small firms survive the crisis but also raised questions about persistent gaps in credit markets. Black-owned small businesses, for example, already faced challenges prior to the pandemic in raising money from traditional sources. That difficulty worsened during the pandemic.
A subsequent column will dig into the state of small business financing and some of what we learned the last two years. The new BPC report calls for policymakers to focus on technical assistance and finding ways to expand lender participation in government lending programs.
Bueller, Bueller …
As last week’s column explored, small businesses currently find it extremely difficult to find workers. Rising costs and worker fears certainly contribute to that. Yet small businesses also face a longstanding challenge: competing with their larger peers on pay and benefits.
“How can we be competitive with big companies and their incentives?” asked one small business owner during a roundtable convened by 10,000 Small Business Voices.
That’s a question that business owners have asked themselves for decades. Access to workplace benefits such as retirement plans and paid leave is typically lower at smaller employers. That’s not for lack of desire. And existing public policies, such as tax credits, exist to specifically help small businesses with these.
Part of the challenge is that small business owners are either unaware of what policies are available to help them or, if they are aware, find it costly and burdensome to try to take advantage of them. The BPC report suggests that policymakers find ways to increase utilization through greater awareness and easier compliance.
More Candy, Fewer Golden Tickets
Federal spending appears to only go in one direction: up. For small business procurement, that should be good news. By law, 23% of federal prime contract award dollars must go to small businesses. And that’s usually the case: the government has met that goal eight years in a row.
As explored in past work, however, that goal is being met with a shrinking base of small business participation. Fewer small businesses, one former government official told us, obtain the “golden ticket” of a federal contract. Those who hold that golden ticket are “in” at that point—they understand the processes, are known by contracting officers, and continue to secure contracts. Yet Willy Wonka makes more and more candy, but doesn’t expand the supply of golden tickets. Small business participation in procurement has, in terms of volume, shrunk size in the last decade.
The House Small Business Committee recently held a hearing on the 8(a) program, part of the government’s effort to expand participation and diversity in contracting. A subsequent column will look at takeaways from that hearing and go into some of the recommendations from the BPC report on this topic.
“America Literally Doesn’t Work Without Child Care”
In the latest Job Search Survey from Indeed, child care responsibilities were cited by jobless women as one of the main reasons for “not searching urgently” for work. Finding child care is easy for exactly no one: identifying a quality provider, figuring out how to pay for it, matching schedules, etc. All parents understand the challenge.
In the context of small business, that challenge is two-sided. Business owners and their employees seek to find affordable, quality care. That’s the demand side. On the supply side, 95% of child care providers in this country are small businesses. For many of them, the business model of child care is flawed, even fundamentally broken.
Based on extensive work done by BPC and others, the new report looks at ways that public policy can help address challenges on both sides of the child care equation.
Growth Hopes Spring Eternal
Recall the survey finding at the beginning of this column: four in 10 small businesses continue to struggle financially due to the pandemic, but three-quarters are optimism about their financial prospects this year. The recently released Small Business Credit Survey, carried out annually by the nation’s 12 Federal Reserve Banks, found that 59% of small businesses in its sample revenues expect to rise in the next 12 months. (That survey was fielded in the autumn of 2021.)
Small business optimism is partly due, of course, to the severe impact of the pandemic. If you operate a restaurant and bookings went to zero and then only crept back slowly, it would be surprising if you weren’t expecting revenues to rise. For many business owners, things in 2022 can only be better than 2021 or 2020.
Their optimism should be a reminder to policymakers that, today, what they need most from government is support that removes barriers to growth and helps pave a road to recovery.