President-elect Joe BidenJoe BidenF-35 program embodies defense acquisition issues – here’s how we solve them Cindy McCain talks about Hunter Biden, sacrifices and Meghan in new interview Senate Democrats push Biden to raise cap on refugees PLUS has appointed Isabel Guzman to lead the Small Business Administration at a time when the stakes are the highest they have ever been for the person in the chair of the administrator. Guzman is certainly ready for the task of leading the organization at a time of great need.
More than two million, or 15%, of small businesses across the country have closed due to COVID-19. Due to long-standing biases in our financial system that leave them under-capitalized and under-funded, businesses owned by people of color the biggest pain. More than 26% of blacks, 19% of Latinxes and 21% of Asian businesses have closed, according to research by the Federal Reserve Bank of New York, and the wealth of countless hard-working families has evaporated.
Small businesses must become a priority for federal decision-makers working on our economic recovery. the troubled launch and execution The Paycheque Protection Program, our country’s primary effort to support small businesses during the pandemic, clearly shows that we have a long way to go. Our shortcomings in creating a fair recovery have illuminated – and exacerbated – long-standing inequalities in our small business credit markets, but Guzman and other leaders can take steps to spark a strong and inclusive recovery for all. Main Street entrepreneurs. For starters, establishing a strong partnership between the Treasury, SBA and Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) will be essential to ensure that federal funding reaches small businesses that need it most.
Small businesses need bold and immediate action
It is clear that without major federal intervention, entire swathes of the small business sector will never come back. These challenges open a window of opportunity for important and overdue reforms. I recently joined a group of senior leaders, former federal officials and public policy experts to free a five-step plan to create a more inclusive, vibrant and productive small business sector. The SBA will be essential for the execution of this plan, but to do so, it must be modernized and supported by new investments.
Three innovative ideas included in the document specifically address some of our long-standing challenges:
- Debt and equity guaranteed by the federal government: Entrepreneurs of color struggle to access credit because they are more likely to have had personal or no credit issues, lack traditional documentation, have no assets as collateral, and are less likely to have social and commercial ties with the bankers. At the same time, the consolidation of the banking sector has dramatically reduced the number of community banks that invest a significantly higher percentage of their assets in small business loans and are more likely to lend holistically.
We can meet this challenge by creating a new generation of federally guaranteed debt and equity products that meet various market demands. For example, a federally guaranteed first-loss loan program for innovative and responsible fintech lenders, community development financial institutions like Opportunity Fund, and minority depositories could help disadvantaged entrepreneurs access bad credit loans. funded by the federal government that meet their unique needs without onerous paperwork.
- New private sector ESG standards for public procurement: Procurement, or the process of sourcing the goods and services that a business needs to achieve its business model, also offers a huge opportunity to support small businesses in low-income areas and those owned by women or men. people of color. Today, the federal government, a small group of Fortune 500 companies, and a handful of states account for the vast majority of underprivileged small business purchases. But the collective spending of these entities represents only a small share of the total public and private procurement in the United States.
We are proposing a new set of private sector environmental, social and governance (ESG) standards for purchasing from disadvantaged business owners, around which the private sector could mobilize to bring the benefits of outsourcing to a market. wider.
- Creation of a new federal small business ecosystem demonstration project: New, untested federal programs could help reverse the decline in small business creation, job creation, and under-representation of minority business owners – but we need to test the programs to find out what works. A new federal small business ecosystem demonstration project could catalyze and evaluate ways to generate transformative results for small businesses across the country.
As we recover from this crisis, our goal shouldn’t be simply to rebuild Main Street exactly as it was – our goal should be to rebuild it better. Our small business support systems and credit markets have failed small business owners, but now we have an unprecedented chance to reform them. I look forward to working with Isabel Guzman and the good men and women of the SBA to put new ideas into play to better rebuild our main streets and unleash a new era of opportunity and innovation that will reflect the spirit, the our nation’s value and tenacity. entrepreneurs have shown through this really tough time.
Luz Urrutia is the CEO of Accion Opportunity Fund, a community development financial institution and a leading nonprofit small business lender.