Redefining "Small Business"

Mary Ann Moon, CEcD, FM, HLM, Executive Director, Prosper Economic Development Corporation, Prosper, Texas

The COVID-19 pandemic is an occurrence unlike anything most of us have ever experienced.  Natural disasters leave devastation which is easily seen. Hurricanes, tornadoes and flooding leave a path of visible destruction in their aftermath.  This ‘disaster’ is one which has invaded us quietly and with little warning. Addressing its impact is tough at every level.    

Small businesses employ approximately 47% of private sector workers in the United States. Small businesses range from mom-and-pop restaurants to CPA firms, boutique retail stores, cleaners and start-up tech firms.  Cash flow is a concern to small companies. Anytime a disruption occurs which impacts that flow, these businesses often close.  

Lawmakers have taken some significant steps toward helping our businesses but they have done so with little knowledge of what small businesses immediately need to survive. And, to some degree, they have failed to understand the composition of the small business owner and the impact they have on their respective communities.  Most of our rural communities primarily rely on their small businesses to provide essential goods and products. Without them, the communities face a multitude of problems; reduced sales tax revenues to support necessary services, loss of jobs and growth opportunities and an overwhelming decline in community morale. The small businesses are often the positive element which provides community cohesiveness.  It is interesting that Amazon has established a $5 million program, Neighborhood Small Business Relief Fund, for small businesses in the Seattle area only. Applications for funds are made on a case by case basis, are available for businesses with 50 or less employees and have less than $7 million in revenues. This is the same company which has annihilated small businesses and the retail industry as we know it.  Yet, they are reaching out to them. One must ask, “why?”

The Small Business Administration is an incredibly effective agency.  They have a long history of supporting businesses and advocating for fairness. However, like most Federal agencies, their programs have failed to reflect certain realities. If one thing is learned from the impact of COVID-19 it should be that the SBA must redefine “small business.”  According to the SBA, depending upon the industry, a small business could be defined as a maximum of 250 employees or a maximum of 1,500 employees. Or the company could be defined by a maximum of $750,000 to $38.5 million in average annual receipts. To a solopreneur, these numbers do not equate to their definition of a small business.

While the Paycheck Protection Program (PPP) may be impactful, it requires at least 75% of funds to be used for “payroll costs.” Many small businesses have larger operating expenses; rent, inventory, equipment leases and most have employee and property insurance costs.  The original idea to provide grants up to $75,000 should be quickly revisited.

It’s not too late to address this paradox.  As Secretary Mnuchin seeks an additional $250 billion to replenish the $349 billion small-business Coronavirus Program, the Small Business Administration in concert with the US Chamber of Commerce and the Treasury Department, should offer an equitable small business scale. A specified pool of funds should be earmarked for the 89.6% of businesses with 20 employees or less. Also, local banks and small lenders should be given the authority needed to work with local small businesses, enabling them to stay afloat and return to operation following this economic and health crisis.

Economic Developers need to champion this change.  Most of us work in small, rural and/or suburban communities.  We have a responsibility to educate others regarding the impacts our small businesses have on the overall wellbeing of our society.  Helping others to understand the need for fairness will ultimately help us help those to whom we have a great responsibility.

Mary Ann Moon, CEcD, FM, HLM, Executive Director, Prosper Economic Development Corporation, Prosper, Texas


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