Small Business Survival Series: Bruce Katz
On April 14, 2020, the Sorenson Impact Center convened a group of experts in policy, finance, and community development to discuss small business survival amid COVID-19. The transcript below is an excerpt from this virtual deep dive featuring Bruce Katz, Director of the Nowak Metro Finance Lab and co-author of “The New Localism.” It has been condensed and edited for clarity.
Bruce Katz: I run a finance lab at Drexel University and work as a partner with Accelerator for America. I’ve been very focused on trying to codify these local relief funds that are emerging around the country.
Grant Baskerville (Sorenson Impact Center): Bruce, if I can pick up on the excellent piece that you coauthored with Colin Higgins and Michael Saadine, you very effectively stratify the different levels of activity that happen city, state, and federal levels. We’d love your input on this.
Bruce Katz: Early on in this crisis, we began to see cities like Salt Lake set up local relief funds. What Michael and Collin and I found was it wasn’t all going through just city government or County government, like Erie County. It’s going through a public authority. In New Haven it’s going through the community foundation. In Indianapolis it’s going through the chamber. In other places it’s going either through financial institutions or working with CDFIs. And these funds are intensely and intentionally focused on micro businesses with fewer than 20 employees. They’re not likely to have engagements or relationships with mainstream financial institutions, but they may have relationships with some of these local intermediary groups.
So what we initially thought might be a finger-in-the-dike exercise — these local relief funds came into play prior to federal relief packages being enacted by Congress — we think they’re actually beginning to serve a substrata of small businesses in the United States. Small business in the U.S. is an over-broad definition: firms with fewer than 500 employees. What we’re talking about are firms with fewer than 20 employees, or firms that are located in low and moderate-income census tracts. So that’s why last week we called for what we called the Main Street Emergency Relief Act, so that we could send direct assistance to cities, counties and States, so they can prop up local and state relief funds through all these disparate distribution channels that can provide products that are more geared, tailored and customized to these kinds of small businesses.
Grant Baskerville: Cities, states and others have worked very hard to get money out the door as quickly as possible to support small businesses. What types of data do we need to be tracking on the front end, so as to get a sense of how funds are being used and applied?
Bruce Katz: I think this crisis has exposed an unbelievable structural deficiency on data, on products, on intermediaries, on business support organizations, on business models. The media is spending an enormous time, as they should, talking about deficiencies in the public health response. And we see that every day the same kind of breakdown is happening on the small business side. Coming out of this crisis, we have to start using data right now to understand what are the different situations that micro business and particularly businesses owned by people of color find themselves in with regard to access to mainstream financial capital.
We need to start building data infrastructure from the bottom up so that we can begin to layer products, intermediaries, and business support on top of it. The last survey of small business owners in the U.S. conducted by the federal government was in 2012. We have to get a lot more resources in the hands of different distribution channels or alternative lenders. But as we do that, we have to start building towards a different system. Out of every crisis in the history of this country comes institutional transformation. September 11: homeland security; we can decide whether that worked or not. The financial crisis of 2008: consumer protection. We have to start building towards those kinds of structural reforms.
Read the full Forbes article here.
