As we wrap up this year’s National Small Business Week, the U.S. has some good news to report: Americans are starting new small businesses at a record pace. In fact, according to the US Business Formation Statistics (BFS), nearly 3 million new business applications were filed during the first half of 2021 — a 60 percent increase compared to the same period last year.
There is one caveat to this good news.
Unless Congress expands equitable access to capital for these local entrepreneurs through the Build Back Better Act, the majority of these new startups will no longer exist within the next five years.
Don’t just take my word for it. Based on data from the Bureau of Labor Statistics, about 20 percent of small businesses will close by the end of their first year. By their fifth year, half are shuttered. Of those, only about 30 percent ever make it to 10 years.
The top reason for closing: a lack of access to capital.
Nearly 75% of America’s small businesses say the current tax system favors big businesses over small ones, preventing them from obtaining sufficient capital to start or expand their operations. On top of this fact are long-rooted disparities preventing business owners of color and women entrepreneurs from receiving equitable financing from both private banks and the public government.
As a former small business owner, I know firsthand how access to capital — be it from a bank loan, a federal grant or microlending — is how businesses hire new employees, provide health insurance, stay competitive and meet its demand. And now serving as a United States representative and a member of the House Committee on Small Business, I know that Congress can do a helluva lot more.
Look no further than the $50 billion that was siphoned to entrepreneurs and workers when Democrats passed President BidenJoe BidenJill Biden campaigns for McAuliffe in Virginia Fill the Eastern District of Virginia Biden: Those who defy Jan. 6 subpoenas should be prosecuted MORE’s historic American Rescue Plan last spring. From keeping workers on the job through the Paycheck Protection Program to protecting restaurants and bars through the Restaurant Revitalization Fund, this package was a lifeline to millions of small businesses who would have been permanently closed without this critical support.
Although temporary COVID-19 pandemic relief programs carried small businesses through the storm, they were just that – temporary relief. By mid-summer, the funds from these programs were depleted and lending groups began shortening their application deadlines due to lack of available funds. Other options like the Small Business Administration’s (SBA) 504/CDC Loan Program historically exceed their lending authority, effectively shutting down for the remainder of the year. I’ve introduced legislation to replenish the funds at the 504 program so we don’t leave small businesses without access to loans they need to survive, but we must do so much more.
We need real, long-term solutions that will bring financial stability to small businesses for years to come. Thankfully, House Democrats are working to advance just that.
Later this month, Congress will vote to pass an additional $25 billion investment in small business programs through the Build Back Better Act. This generational investment will not only increase access to capital for America’s small businesses through critical SBA programs, but it’ll also provide a tax cut to nearly 4 million Main Street entrepreneurs by finally ensuring billion-dollar corporations on Wall Street pay their fair share of taxes.
This does not have to be a partisan issue. In fact, more than 60 percent of all likely voters — Democrat, Republican, and Independent — already support President Biden’s Build Back Better Act. And yet, due to a very select few members in the Senate, this legislation will face challenges as partisan divide and a worsening political climate supersede the needs of the ma-and-pop shops, family-owned restaurants, and local retailers that make our communities.
America’s small businesses represent two-thirds of all net new jobs and nearly half of all economic growth in this country. If Congress fails to pass the Build Back Better Act and deliver long-term capital access for small business owners, they are not only failing these new startups, but the health of our entire U.S. economy.
Rep. Marie Newman represents the 3rd District of Illinois is a member of the House Committee on Small Business.