Donald Trump left office. The era of Joe Biden has begun.
But the reality is that the crisis in small businesses continues, and so far, nothing has changed. What changes can we expect with the new administration? What proposals has Biden announced to strengthen small businesses?
During his campaign, the current president spoke about the situation and how he’s going to support small businesses. Based on everything mentioned in the presidential race and his actions in the first days of his term, we can get an idea of what business owners across the country can expect, especially Latinos.
Find out more about this topic in the episode “Small Businesses in Biden’s America“ of our podcast Fundamental Fairness.
Small businesses in America: some context
Oberlo revealed that, at the beginning of 2020, there were 31.7 million small businesses in the US, which generated 60.6 million jobs. These are the most important economic engine in the country.
According to data from The Hispanic Small Business Report, out of all these businesses, 4.65 million belonged to Hispanic owners, representing 14% of the total.
Small businesses were the most affected by the COVID-19 pandemic, both in their income, productivity, and operational processes.
The pressing situation and restrictions on mobility to avoid contagion forced most small businesses to close their doors. By August 2020, throughout the United States, more than 97 thousand businesses were reported as bankrupt, according to information from the Yelp: Local Economic Impact Report.
The challenge for the new administration is a big one. Biden’s policies must be effective and immediate, or small businesses will not be able to endure this situation any longer. Much less if we consider that the stimulus allocation process has various limitations, particularly for immigrant businesses.
As of August 2020, 33% of Latino businesses applied for government support, but only 10% succeeded, according to the study The Ongoing Impact of COVID-19.
Biden’s small business agenda
According to Joe Biden’s Proposals to Set Up Support For Deserving Small Businesses—where there is a strong criticism of the previous administration’s stimulus management—the United States’ current president has many good intentions we hope become realities.
The most important point within these proposals is the change of what is considered a small business.
According to the Defense Office, a small business has fewer than 500 employees. Under these parameters, a restaurant chain with eight locations and a beauty salon with only three employees are the same for the SBA.
This definition generates disparity in the distribution of support, made even more evident when we look at COVID funds distribution. According to information published in December by The New York Times, 1% of all companies that requested the PPP obtained more than a quarter of the total budget.
For these reasons, Biden’s policies seek to reserve 50% of the PPP budget for businesses with fewer than 50 employees.
“It is unacceptable to have a small-business program that is leaving minority business owners out in the cold, or that firms with fewer than 20 employees received only about 20% of the money – even though they make up about one-third of payroll. ” said the President of the United States in his text.
Biden’s plan for the Latino community
In Biden’s policies, one of the pillars that he plans to implement during his mandate is to solve the Latino community’s financial inequality.
He intends that this sector of the population can improve their economic situation, based on the following points:
- A position to help reduce social and economic inequality focused on minority income. By having an advisor within the immediate work circle at the White House, Latinos are expected to have the possibility of accessing better living, economic and working conditions.
- A rescue plan for small Latino and other minority businesses so that no one suffers from a business’s closure due to the pandemic.
- Boost the development of a strategy to support small Latino and other minority businesses’ creation and growth. This initiative intends that people in disadvantaged areas can start a business that improves their income and living conditions with the help of stimulus to create jobs. The government plans to expand access to financing with low-interest rates by increasing the state, local and tribal loan budget up to $100,000 million.
- Financing of more than $50,000 million for local and state initiatives through public-private venture capital funds (organizations that support businesses through investment).
- Improve access to low-interest business loans through a fund of $100,000 million.
- Another of Biden’s policies is focused on improving help and advice services for business owners. One of the main reasons that 45% of Latino business owners couldn’t access a PPP loan was the lack of guidance through the process.
Camino Financial’s recommendations for the Biden administration
Latinos in the United States have proven to be hardworking, resilient, and strong-willed people.
The reality is that Latino startups require double or triple the effort to be successful due to multiple factors, the main one being the lack of access to credit.
The reinvention of financing structures from government institutions and private companies is vital, not only for the good of this community but for the growth of the country’s economy.
For this reason, we recommend the following actions:
1. Differentiate micro-businesses from small businesses.
Most loan government programs are not designed for microbusinesses, but small businesses. Officially differentiating the two will help make all businesses in all communities visible, and it will help all businesses get the funding they need
2. Offer support to Latino businesses
87% of Latino-owned businesses are in low-to-moderate-income areas. For that reason, lenders don’t have the confidence to provide them with financial products.
Biden’s policies should focus on these businesses’ recovery by helping them access financing.
3. Generate onboarding and training programs
It should not be allowed that this community is faced with a barrier in the form of a lack of knowledge. According to our Annual Credit Survey, education and training can increase loan approval rates by 6.6x.
You Can Help Build a Bright Future
A new administration is always an opportunity to fix problems, inequalities, and gaps that could lead to a stronger country.
Biden’s policies can help all businessmen in the United States—including Latino-owned businesses,—we can only expect that these proposals remain a reality. Above all, they must be implemented realistically and appropriately to all citizens’ needs, not just a privileged sector.
If you’d like to know more about Biden’s policies, we invite you to listen to “Small Businesses in Biden’s America,” the latest episode of Camino Financial’s podcast, Fundamental Fairness.
Share with us what are your expectations for this new administration.
Do you think Biden’s policies are what you need?