Dear Divided Congress: Small Business First

Carefully divided authorities, even with Republicans taking management of the Home of Representatives, is ready to proceed. The brand new Congress will want points that may each acquire bipartisan assist and stimulate the economic system. Right here’s a suggestion: begin with small enterprise.

Prioritizing small companies will loosen political gridlock as a result of they provide each events a technique to assist job creation, reinvigorate struggling communities, and improve U.S. competitiveness.

Even after the searing expertise of COVID-19, small companies proceed to be the spine of the American economic system. They account for 99 p.c of employer companies and make use of roughly half the nation’s staff. Yearly, younger small companies (these in enterprise for fewer than 5 years) account for the lion’s share of web new job creation.

To assist small companies, policymakers ought to give attention to three areas that enterprise house owners and entrepreneurs spotlight again and again in conversations and surveys. They’re workforce, capital, and workforce (once more).

Deal with Hiring Challenges

In a September survey by Goldman Sachs 10,000 Small Companies Voices, 47 p.c of respondent small enterprise house owners mentioned “problem discovering and retaining” workers was probably the most important drawback they face. That was up 4 factors from only a few months earlier. Equally, the Nationwide Federation of Impartial Enterprise (NFIB) discovered that 46 p.c of its survey respondents have job openings they’re unable to fill—and it’s not for lack of making an attempt.

NFIB finds that the web share of small companies which have elevated compensation, whereas ticking barely downward this yr, stays at traditionally excessive ranges. In line with the ten,000 Small Companies Voices survey, one of many largest hiring challenges is that “massive companies provide extra beneficiant retirement and medical health insurance advantages.” That’s not essentially shocking. Large companies are, properly, greater and might unfold the prices of retirement and well being advantages over a bigger pool of workers.

For small companies, the monetary and administrative burdens to this are excessive. In our conversations with scores of small companies over the previous two years, we have now heard repeated iterations of this remark: “tax credit are too costly for small companies to benefit from.”

Hiring challenges damage job creation and enterprise progress: 9 in 10 respondents within the Voices survey say problem hiring impacts their backside line. And whereas many small companies do provide these advantages—52 p.c of staff at companies with fewer than 50 workers have entry to a retirement plan—extra might be completed. Congress might assist by directing the Small Enterprise Administration (SBA) and different businesses to extend consciousness of what’s already out there for small companies, reforming current tax credit for small employers, and creating choices that work higher for small companies. Promisingly, a set of bipartisan payments that would move this yr, referred to as “SECURE 2.0,” would increase the tax credit score for small employers establishing retirement plans. This might be a powerful sign of assist for small agency job creation.

Develop Entry to Capital

Financing is a perennial problem for small companies, a lot of whom function on skinny margins or with just a few weeks’ price of money buffer. They want exterior capital to rent, make investments, and put aside for powerful instances.

Rising from the pandemic, small companies are able to develop. Over half of respondents within the NFIB survey have made a capital expenditure within the final six months and one quarter plan to take action within the subsequent few months, figures roughly corresponding to pre-pandemic ranges. Half of small companies surveyed in a current Bipartisan Coverage Heart report plan to put money into digital instruments throughout the subsequent yr.

Many, nonetheless, proceed to endure a COVID hangover, with broken steadiness sheets and maybe decrease credit score scores. Some 40,000 small companies additionally stay in a sort of purgatory, imploring SBA to behave on their purposes for Financial Harm Catastrophe Loans (EIDL) filed previous to the Could 2022 deadline however caught in bureaucratic limbo. Congress might request that SBA clear this EIDL backlog.

SBA has additionally been shifting to increase entry to capital, from allowing larger rates of interest on small loans in its 7(a) mortgage warranty program to proposing adjustments to underwriting standards for government-guaranteed loans. Lawmakers will help by pushing SBA to handle questions on regulatory oversight and capability to make sure that adjustments work for each small companies and lenders. Additionally useful can be incentives to encourage lenders to work carefully with small companies to restore steadiness sheets in ways in which don’t unintentionally limit credit score.

Improve Employee Abilities

Discovering staff—and providing advantages—will not be the one labor-related problem bedeviling small companies. Amongst these companies actively hiring within the 10,000 Small Companies Voices survey, 86 p.c say it’s tough to recruit certified candidates. Within the NFIB survey, labor high quality has spiked in relative significance amongst small employer corporations. On this entrance, Congress has two main alternatives to enhance workforce coaching and make sure the wants of small companies are being met.

Two main items of workforce laws are up for reauthorization by Congress within the subsequent few years: the Workforce Innovation and Alternative Act (WIOA) and the Perkins Profession and Technical Training Act (Perkins Act). The previous offers federal funding for workforce coaching applications and public-private partnerships; the latter helps profession and technical education schemes at secondary and postsecondary ranges. Whereas small enterprise participation in these efforts is all the time desired, it’s onerous to use for and profit from these applications. Streamlining and making certain that small employers are concerned in design will help be sure that staff develop the abilities they want.

Lawmakers ought to begin with these prime points. Small companies can proceed to be an engine for progress—they only want a bit spark.