What Foremost Avenue and the financial system want from Congress: Goldman Sachs CEO 

The U.S. financial system goes by one of the vital troublesome intervals I’ve seen in my 40-year profession. Inflation, labor shortages, provide chain disruptions — all of them are hitting massive enterprise laborious and small companies even more durable.

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 latest 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 quite than go 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 received quite a lot of assist in the course of the early days of the pandemic. It was solely final 12 months that Congress handed the American Rescue Plan, which offered grants and loans to thousands and thousands of small companies so they may preserve their doorways open and their workers on their payrolls.

However now that the financial system is working sizzling, the restoration is at risk. Based on a current survey of 1,533 graduates of Goldman Sachs’ enterprise training program, 10,000 Small Companies, 93 % are involved that the US will enter a recession throughout the subsequent 12 months. Eighty-nine % of small enterprise homeowners say financial tendencies like inflation, provide chain points, and workforce challenges are having a damaging impact on their enterprise. Eighty % say inflationary pressures have risen within the final three months and 75 % say inflation is hurting their companies’ monetary well being.

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

First, small companies are struggling to search out and preserve good employees. Lawmakers ought to take into account new applications to assist small enterprise compete with massive enterprise to retain and develop expertise. For instance, Congress may improve paid depart applications and create new tax credit to assist small companies’ hiring and retention efforts.

Second, the pandemic not solely elevated the necessity for capital but additionally starkly uncovered gaps in credit score markets, particularly for Black-owned small companies. Based on Goldman Sachs survey information, 48 % of Black small enterprise homeowners say they count on 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’ skill to entry capital. And so Congress ought to strengthen the capability of Neighborhood Growth Monetary Establishments (CDFIs) to offer extra credit score to small companies in underserved communities. 

Third, little one care is likely one of the most vital financial vulnerabilities highlighted by the pandemic. Based on Goldman Sachs survey information, 80 % of small enterprise homeowners assist Congress growing entry to inexpensive little one care. Congress may assist by increasing and enhancing applications designed to decrease the price of little one 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 frequent services and products to the federal authorities shrank by 38 %. Much more alarming, the variety of new small-business entrants into the federal procurement market fell by 79 %.

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

A modernized SBA may assist set issues proper. Congress ought to stage the enjoying discipline by streamlining processes and widening the scope of procurement alternatives, significantly 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 homeowners stay optimistic concerning the monetary trajectory of their enterprise this 12 months. With a modernized SBA, and different efforts from policymakers, Congress will help be certain that small companies stay pillars of our financial system and native communities.

The trail forward shall be bumpy, little doubt, but when there’s one factor I do know, it is that it is best to by no means wager towards America. It is our entrepreneurial spirit that drives essentially the most resilient financial system on this planet. And if the private and non-private sector work collectively, we will be sure that small enterprise homeowners have the instruments they should preserve the financial system heading in the right direction. 

—By David Solomon, CEO of Goldman Sachs