Today is a great day to be an American entrepreneur. It might seem counterintuitive, with much of the country slowly re-emerging from months of physical and economic lockdown, businesses shuttered across the U.S. and some industries poised to never fully recover. At the same time, the attention of policymakers, advocates and lenders has never been more focused on small business owners.
Entrepreneurs should make the most of this moment—not only for their own advancement, but to advance our nation as a whole.
Whatever our economic recovery looks like, small businesses will lead the way. For that, we not only need existing businesses to survive the pandemic—through PPP and other support—we also need new businesses to be created. Despite the current downturn, this isn’t as crazy as it might seem. According to a 2009 study by the Kauffman Foundation, more than half of the companies on that year’s Fortune 500 list were started during a recession or bear market. Big name companies like GE, IBM, Disney, Hewlett Packard—even Internet-age firms like Uber, Slack and Venmo—were all founded at a time when our economy was in dire straits.
At the moment, there are good reasons to follow in the footsteps of these businesses. The Fed indicated last week that it plans to keep interest rates near zero through 2022, in part to support struggling businesses. Many of the upfront costs of starting a business—equipment, supplies and office/retail space—may be cheaper right now due to a lack of demand. As businesses shutter or downsize, their former customers will be looking for new sources of reliable goods and services. Their former employees will be looking for jobs. And there are opportunities to create new industries and markets based on our current moment, as changes to the ways we work, consume and entertain solidify into our new normal.
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If you’re looking to start a business right now, it’s probably out of grim necessity. Maybe you’re one of the 21 million Americans who are now unemployed and looking for a viable income. The good news is that small business ownership is a proven path to building household wealth and financial security.
But despite all of the incentives to start a small business, there are still risks. Given the role that Main Street will play in pulling the country out of this recession, policymakers have a patriotic duty to encourage American entrepreneurship right now—and to ensure entrepreneurial opportunities are accessible to all.
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How can policymakers incentivize new business creation? A number of bipartisan proposals have already been put on the table. For example, Senators Cory Booker (D-NJ), Patty Murray (D-WA) and Steve Daines (R-MT) introduced the Recharge and Empower Local Innovation and Entrepreneurs Fund (RELIEF) for Main Street Act, and a group has worked across the aisle to introduce the same legislation in the House. This $50 billion fund would build on what’s already working at the city-, county- and state-levels by providing cash to seed and scale small business relief funds. While the fund is focused on relief to existing businesses, experts are calling for some of the funding to create “Main Street Regenerators” that would be responsible for speeding the overall recovery of local business districts. These Regenerators would fulfill a number of critical roles, including seeding new entrepreneurship to revitalize vacant business spaces. To do so, Regenerators would need flexible capital, which Congress could appropriate either through the RELIEF for Main Street Act or other legislation.
Another example: Before COVID-19 hit in full force, Democrats in both the House and Senate introduced the New Business Preservation Act, which proposed a Treasury-administered program to incentivize venture capital investment in innovative and promising start-ups. This legislation would allocate $2 billion for states to attract private venture capital to promising start-ups by offering a one-to-one match of federal investment. According to the Center for American Entrepreneurship, which supports the bill, thousands of start-ups have been shut out of the PPP and other pandemic relief. The New Business Preservation Act would help ensure that innovative start-ups are a core part of America’s resurgence post-COVID-19.
Finally, policymakers need to ensure that capital and other support is equitably distributed to new business creators. The Start Us Up Coalition (of which my organization is a member) has proposed a number of policy solutions for every level of government, focused on both short- and long-term support for entrepreneurs. Among them is a call for Congress to make substantial funding available to states to expand access to capital for new businesses, especially for female, minority, immigrant, and rural entrepreneurs. But the plan also goes beyond access to capital. Recognizing that personal financial obligations—such as student loan payments and retirement contributions—make it even harder to start a new business, the plan proposes tax deferrals and incentives that would strengthen the social safety net. It also proposes including information and tools on entrepreneurship in workforce development programs to help young Americans take the leap into business ownership. These types of comprehensive, non-capital support would provide critical incentives for would-be entrepreneurs.
The bottom line is that some businesses will not weather the current crisis. We can’t let our economy suffer a war of attrition, with no new businesses to replenish those that fail. Policymakers have always played a vital role in supporting American entrepreneurship, and they have a duty to step up once again.
And for the would-be business owners out there: The future of our country depends on you.