You can’t build back better without small businesses

By Meco Shoulders and Zach Moller

Whether it’s a mom-and-pop shop in the deep south or a tech startup in Silicon Valley, 99.9% of all businesses in the United States are small. And a lot of small adds up. Before the pandemic those companies were responsible for nearly half of the nation’s GDP. But despite these facts, the big legislative packages moving on Capitol Hill are lacking on small business assistance and long-term investment in entrepreneurship.

So as Congress puts together bipartisan infrastructure plans or uses “budget reconciliation” for a large Democrat-only deal, it is imperative that small business infrastructure is front and center and is done in more diverse and equitable ways.

To his credit, President Biden has made an effort to look after small businesses. His $1.9 trillion American Rescue Plan injected needed funds into the existing Paycheck Protection Program that helped businesses stay afloat, provided a first of its kind effort to help restaurants keep the lights on, and pumped billions into the Economic Injury Disaster Loan Advance program which made emergency payments for businesses that were highly affected by the pandemic. Biden also gave a lifeline to entrepreneurs by reestablishing the State Small Business Credit Initiative that funnels equity capital and loans to startups, especially those in socially and economically disadvantaged communities.

More than 4 in 10 small business owners do not expect their business to return to normal for another 6 months, if at all.

But more needs to be done. Only 3% of the money in the American Rescue Plan went to small businesses and entrepreneurs. And because of the structure of the various aid programs, many small business owners and entrepreneurs of color are still experiencing difficulties with receiving their promised aid from the past year to keep their businesses afloat. As a result, more than 4 in 10 small business owners do not expect their business to return to normal for another 6 months, if at all.

The budget reconciliation package, which will be based on Biden’s American Jobs Plan and the American Families Plan, will have many priorities. Still policymakers must prioritize helping entrepreneurs, small businesses, and startups survive, thrive, and create good-paying jobs in the post-COVID economy. The American Jobs Plan, as originally proposed, was roughly a $2.25 trillion investment in our country’s future, but specified only about 5% for small businesses and entrepreneurs. The $1.8 trillion American Families Plan proposed some assistance for child care small businesses, but nothing further.

However, what’s in these proposals for small businesses is critical and shouldn’t be trimmed down as Democrats agree to limit the overall size of the budget reconciliation package. In the American Jobs Plan, small businesses will have more opportunities for federal contracting across multiple industries. Underserved communities will have access to resources with a new national network of small business incubators and innovation hubs. Biden wants to open more federal R&D initiatives to small businesses. And he is calling for meaningful expansions of the government’s small business loan, investment, and minority business development programs.

Policymakers must prioritize helping entrepreneurs, small businesses, and startups survive, thrive, and create good-paying jobs in the post-COVID economy.

The American Jobs Plan mentions infrastructure 71 times, but it’s a “jobs plan” first. So let’s keep supporting small business job creators. In fact, Congress has plenty of ideas to add in. Bicameral legislation introduced by Senator Amy Klobuchar (D-MN) and Representative Dean Phillips (D-MN), the New Business Preservation Act, would invest equity capital into new businesses in every state, with special consideration for women- and minority-owned enterprises. The Saving Our Street Act, introduced by then-Senator Kamala Harris and Representative Ayanna Pressley, would create a “Microbusiness Assistance Fund” that would let the smallest businesses, especially those owned by people of color, women, and veterans, apply for grants of up to $250,000. And we could continue to expand PPP related loans and forgiveness for businesses that work with minority-owned and community banks.

Building back better means large, structural reforms that tackle a new economic era ahead of us. The US economy will emerge from the COVID-19 pandemic; however, realities have permanently shifted for many business owners and entrepreneurs. But that does not have to be our destiny. Policymakers have an opportunity to create a post-pandemic economy that is stronger and more equitable than any US economy in the past. Let’s make sure small businesses and entrepreneurs are at the forefront of that.

Meco Shoulders is an economic policy advisor and Zach Moller is Director of the Economic Program at Third Way, a center-left think tank based in Washington, DC.