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The U.S. economy is going through one of the most difficult periods I’ve seen in my 40-year career. Inflation, labor shortages, supply chain disruptions — all of them are hitting big business hard and small businesses even harder.
And so this week, at Goldman Sachs’ 10,000 Small Businesses summit in Washington, D.C., I’ll be joining leaders from across the country to call for action. The pandemic created a slew of new challenges for small businesses, but the federal programs they rely on aren’t well-equipped to help. It’s time to give those programs an upgrade so small businesses have the tools they need to navigate the turmoil ahead.
And rather than pass these reforms one by one, Congress should put them together in a single legislative package: the first reauthorization of the Small Business Administration (SBA) in over 20 years.
Now, it’s true small businesses got a lot of help during the early days of the pandemic. It was only last year that Congress passed the American Rescue Plan, which provided grants and loans to millions of small businesses so they could keep their doors open and their employees on their payrolls.
But now that the economy is running hot, the recovery is in danger. According to a recent survey of 1,533 graduates of Goldman Sachs’ business education program, 10,000 Small Businesses, 93 percent are concerned that the United States will enter a recession within the next year. Eighty-nine percent of small business owners say economic trends like inflation, supply chain issues, and workforce challenges are having a negative effect on their business. Eighty percent say inflationary pressures have risen in the last three months and 75 percent say inflation is hurting their businesses’ financial health.
David Solomon, chief executive officer of Goldman Sachs & Co., speaks during the Milken Institute Global Conference in Beverly Hills, California, U.S., on Monday, April 29, 2019.
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We already have a wide range of federal programs designed to help, but they need to be reformed to address the challenges ahead. Congress can lend a hand by taking action on the following four issues.
First, small businesses are struggling to find and keep good workers. Lawmakers should consider new programs to help small business compete with big business to retain and develop talent. For example, Congress could enhance paid leave programs and create new tax credits to support small businesses’ hiring and retention efforts.
Second, the pandemic not only increased the need for capital but also starkly exposed gaps in credit markets, especially for Black-owned small businesses. According to Goldman Sachs survey data, 48 percent of Black small business owners say they expect to take out a loan or line of credit for their business in 2022 — yet just 19% are “very confident” in their businesses’ ability to access capital. And so Congress should strengthen the capacity of Community Development Financial Institutions (CDFIs) to provide more credit to small businesses in underserved communities.
Third, child care is one of the most significant economic vulnerabilities highlighted by the pandemic. According to Goldman Sachs survey data, 80 percent of small business owners support Congress increasing access to affordable child care. Congress could help by expanding and enhancing programs designed to lower the cost of child care and increasing access in what are known as “childcare deserts” across the country.
Fourth, the barriers to entry for small businesses looking to win contracts with the federal government are too high. From 2010 to 2019, the number of small businesses providing common products and services to the federal government shrank by 38 percent. Even more alarming, the number of new small-business entrants into the federal procurement marketplace fell by 79 percent.
The federal government already has goals for the share of contracts awarded to various types of small businesses, including those owned by women and those located in historically underutilized business zones (HUBZones). Yet the women-owned small businesses federal contracting goal has been met just twice since it was established in 1994 and the HUBZone goal has never been met.
A modernized SBA could help set things right. Congress should level the playing field by streamlining processes and widening the scope of procurement opportunities, particularly for minority- and women-owned small businesses.
All of these reforms would go a long way toward making small businesses as resilient and tenacious as ever. Despite the challenges they face, 65% of small business owners remain optimistic about the financial trajectory of their business this year. With a modernized SBA, and other efforts from policymakers, Congress can help ensure that small businesses remain pillars of our economy and local communities.
The path ahead will be bumpy, no doubt, but if there’s one thing I know, it’s that you should never bet against America. It’s our entrepreneurial spirit that drives the most resilient economy in the world. And if the public and private sector work together, we can make sure small business owners have the tools they need to keep the economy on course.
—By David Solomon, CEO of Goldman Sachs
