Small businesses, which employ close to half of America’s private sector workforce, have endured considerable volatility during the COVID-19 pandemic. For many, the pandemic and its associated challenges spelled the end of their business. For others, the past two years have entailed oscillation between uncertainty and hope. The experience has not been completely uniform, with some sectors faring worse than others.
For all small businesses, the pandemic revealed longstanding challenges. COVID-19 exacerbated them, but they bedeviled small businesses for years prior to the pandemic. As small businesses look toward recovery and growth—and as policymakers seek to help strengthen small business resilience—those challenges must be addressed. This report looks at four such challenges. The pandemic has also heightened the importance of Congress finding bipartisan agreement on reauthorization of the Small Business Administration, which hasn’t occurred in over 20 years. Reauthorization can be an important vehicle for modernizing the policy infrastructure that supports small businesses.
The issues focused on in this report emerged from conversations with small business owners, national surveys conducted by Goldman Sachs’ 10,000 Small Businesses Voices, and discussions with current and former government officials.
The four areas are:
• Access to Capital
• Workforce & Competitiveness
• Procurement/Government Contracting
• Child Care
Access to capital is a perennial challenge for small businesses. Even as small business lending grew to hundreds of billions of dollars prior to the pandemic, many small businesses still faced difficulty accessing affordable, flexible sources of credit. Emergency lending programs in response to COVID-19 helped many small businesses survive and pivot to more robust business models. They also revealed stark gaps in the credit market that are critical to fill if more small businesses are going to start, recover, and grow.
Prior to the pandemic, small businesses faced hiring and retention challenges. Policymakers have sought to enhance small businesses ability to, for example, offer retirement plans or paid leave to help small businesses’ stay competitive and supportive of their workers. Those efforts have had mixed effects, as many small businesses still find it very difficult to offer such benefits—or are unaware of what resources are available to help them. Existing programs often have low uptake among small business owners because they aren’t always designed with the realities of small business in mind. The pandemic has heightened hiring and retention challenges, with many small business owners having significant difficulty finding and retaining qualified employees.
Procurement—contracting with the federal government—offers an important opportunity for small businesses of all types to increase revenues and enhance resilience. Over the last 10 years, however, the small business base of the federal procurement marketplace has shrunk considerably. Fewer and fewer small businesses are serving—or newly entering—as government contractors. Yet having small businesses involved in government procurement is crucial to expanding innovation, job creation, and competition Addressing the barriers to expanded small business participation in procurement—such as enhancing and streamlining procurement processes—is an important way to spur inclusive economic development across the country and advance national priorities.
Child care has been a persistent challenge for small businesses, affecting both child care providers and small businesses in other sectors whose employees rely on child care to participate in the workforce. Small business owners are acutely aware that their employees need access to affordable, high quality child care to be able to do their jobs—and they’d like to help them. Yet there are formidable barriers to offering such support and what child care options are available. The supply side of child care, too, is a small business challenge. The vast majority of child care providers are small businesses. Within the current operating environment and public policy framework, many find it difficult to stay in business, let alone grow.
In each of these areas, this report explores the nature of the challenges and presents policy options for the federal government and policymakers to consider.
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