What Major Avenue and the economic system want from Congress: Goldman Sachs CEO

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The U.S. economic system goes by some of the troublesome durations I’ve seen in my 40-year profession. Inflation, labor shortages, provide chain disruptions — all of them are hitting large enterprise arduous and small companies even tougher.

And so this week, at Goldman Sachs’ 10,000 Small Companies summit in Washington, D.C., I will be becoming a member of leaders from throughout the nation to name for motion. The pandemic created a slew of recent challenges for small companies, however the federal applications they depend on aren’t well-equipped to assist. It is time to give these applications an improve so small companies have the instruments they should navigate the turmoil forward.

And somewhat than cross these reforms one after the other, Congress ought to put them collectively in a single legislative bundle: the primary reauthorization of the Small Enterprise Administration (SBA) in over 20 years.

Now, it is true small companies bought lots of assist in the course of the early days of the pandemic. It was solely final yr that Congress handed the American Rescue Plan, which offered grants and loans to tens of millions of small companies so they might maintain their doorways open and their staff on their payrolls.

However now that the economic system is working sizzling, the restoration is at risk. Based on a latest survey of 1,533 graduates of Goldman Sachs’ enterprise training program, 10,000 Small Companies, 93 p.c are involved that america will enter a recession inside the subsequent yr. Eighty-nine p.c of small enterprise house owners say financial traits like inflation, provide chain points, and workforce challenges are having a adverse impact on their enterprise. Eighty p.c say inflationary pressures have risen within the final three months and 75 p.c say inflation is hurting their companies’ monetary well being.

David Solomon, chief govt officer of Goldman Sachs & Co., speaks in the course of the Milken Institute World Convention in Beverly Hills, California, U.S., on Monday, April 29, 2019.

Kyle Grillot | Bloomberg | Getty Photos

We have already got a variety of federal applications designed to assist, however they should be reformed to deal with the challenges forward. Congress can help by taking motion on the next 4 points. 

First, small companies are struggling to search out and maintain good employees. Lawmakers ought to think about new applications to assist small enterprise compete with large enterprise to retain and develop expertise. For instance, Congress might improve paid depart applications and create new tax credit to help small companies’ hiring and retention efforts.

Second, the pandemic not solely elevated the necessity for capital but in addition starkly uncovered gaps in credit score markets, particularly for Black-owned small companies. Based on Goldman Sachs survey knowledge, 48 p.c of Black small enterprise house owners say they anticipate to take out a mortgage or line of credit score for his or her enterprise in 2022 — but simply 19% are “very assured” of their companies’ means to entry capital. And so Congress ought to strengthen the capability of Group Improvement Monetary Establishments (CDFIs) to supply extra credit score to small companies in underserved communities. 

Third, baby care is without doubt one of the most important financial vulnerabilities highlighted by the pandemic. Based on Goldman Sachs survey knowledge, 80 p.c of small enterprise house owners help Congress growing entry to reasonably priced baby care. Congress might assist by increasing and enhancing applications designed to decrease the price of baby care and growing entry in what are generally known as “childcare deserts” throughout the nation. 

Fourth, the obstacles to entry for small companies trying to win contracts with the federal authorities are too excessive. From 2010 to 2019, the variety of small companies offering widespread services to the federal authorities shrank by 38 p.c. Much more alarming, the variety of new small-business entrants into the federal procurement market fell by 79 p.c.

The federal authorities already has targets for the share of contracts awarded to varied kinds of small companies, together with these owned by ladies and people positioned in traditionally underutilized enterprise zones (HUBZones). But the women-owned small companies federal contracting objective has been met simply twice because it was established in 1994 and the HUBZone objective has by no means been met.

A modernized SBA might assist set issues proper. Congress ought to stage the taking part in discipline by streamlining processes and widening the scope of procurement alternatives, notably for minority- and women-owned small companies.

All of those reforms would go a great distance towards making small companies as resilient and tenacious as ever. Regardless of the challenges they face, 65% of small enterprise house owners stay optimistic concerning the monetary trajectory of their enterprise this yr. With a modernized SBA, and different efforts from policymakers, Congress can assist be sure that small companies stay pillars of our economic system and native communities.

The trail forward might be bumpy, little question, but when there’s one factor I do know, it is that you need to by no means wager towards America. It is our entrepreneurial spirit that drives probably the most resilient economic system on the planet. And if the private and non-private sector work collectively, we are able to be certain small enterprise house owners have the instruments they should maintain the economic system on the right track. 

By David Solomon, CEO of Goldman Sachs

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