From the Advocate

By Tara Lynn Gray 

August 2024

The Health of Main Street and Our Economy: Still the Same Thing

I have no doubt that you’ve been hearing a lot lately about “the economy.” It may be just two words, but “the economy” holds a whole lot of different meanings depending on individual or family circumstances. That’s why, with this column, I just want to remind all of the candidates– and their surrogates and supporters – that the health and well-being of Main Street should be at the heart of every discussion about the economy and the election.

Throughout the pandemic, organizations that support Main Street – like the U.S. Small Business Administration (SBA) and my office, the California Office of the Small Business Advocate (CalOSBA), grew in a way never seen in the history of these organizations. While the COVID-19 crisis is now in our rearview window, we can’t forget one of its main lessons: that supporting small business must stay in the center of the conversation about economic policymaking.

I have witnessed first-hand how small businesses drive inclusive economic growth. Small businesses employ 61.7 million Americans, accounting for 46.4% of all private sector employees. Here in our Golden State, small businesses make up 99.8% of all businesses and, again, provide nearly half of private sector jobs. This is why it’s important for politicians across the spectrum to remember these “wins” from our economic recovery.

1. Record-breaking new business starts: Since 2020, the country has seen the first, second, and third strongest years of new business applications filed on record, with 17.2 million new business applications filed since President Biden took office. This is a nationwide phenomenon to the tune of 5.5 million business applications filed in 2023 alone. This surge started in 2020 and can be directly attributed to the Biden Harris Administration’s American Rescue Plan, which has fueled an increase in business applications, startups, and business establishment growth across the country. This remarkable rise in new businesses has the potential to reverse decades of stagnant business application numbers, opening up opportunities for job creation and prosperity.
2. Increase in Innovation Starts: Tech, SaaS, and other innovation startups with their limitless creativity have long proven that their advancements have shaken up the business world and changed our everyday lives. The impact of these innovative startups can be seen by just looking at the phone in your hand, while streaming Netflix, or using AI assistants like ChatGPT. The United States boasts one of the largest markets for technology startups globally with around 20-30% of all new business startups being technology or innovation companies. The U.S. also ranks first among countries with the most AI startups with California’s Silicon Valley attracting the lion’s share of global venture capital funding: 40-50% of all U.S. venture capital investments.
3. Continued Growth in Diverse Business Ownership: In California, nearly half (49.1%) of our small businesses are operated by people of color, contributing $193 billion to the state GDP every year. CalOSBA plays a leading role in supporting the growth of diverse-owned businesses including those owned by black, brown, AAPI, women, veterans, and LGBQT+.

Nationally, post-pandemic entrepreneurship has been particularly empowering for women-owned businesses, with a growth rate of 4.5 times that of male-owned businesses from 2022 to 2023. And, according to the SBA, black business ownership is currently growing at the fastest pace in 30 years while Latino business ownership is growing at the fastest pace in over a decade.

Still, much more work is needed to level the playing field for these communities and reduce the risk of business failure. Addressing systemic barriers is one area where our elected and hope-to-be elected officials must be more actively engaged.

4. Democratizing Access to Capital: Too often, one of these barriers for black and brown-owned businesses is equitable access to capital; this fact means that the failure of one of these businesses is also more likely to wipe out the owner’s personal savings and those of their friends and family. But it also means that these diverse-owned businesses have the biggest potential for growth, job creation, and the opportunity to achieve Governor Newsom’s vision of a California For All.

For those of you who may be skeptical that policy changes can make a difference, let me try to change your mind: since the Biden-Harris Administration implemented a number of policy reforms to facilitate greater small dollar lending, the number of smaller 7(a) loans (under $150,000) approved have almost doubled since 2020 to over $1.2 B. At the same time, the total share of government-backed SBA loans to Black and Latino-owned businesses has increased dramatically with the black-owned share of SBA loans doubling from 4% to 8% and increasing for Latino-owned businesses from 8% to 12%. Altogether, about $12 billion in total lending to these groups over the past three years.

5. Small Business Monopoly on Trust: Consider the trust you put in your banker, your landlord, your insurance broker. These relationships are personal and intimate; they know you and you know you. They provide services like cutting your hair or massaging your aching back. They take care of your pets and repair your car and other beloved possessions. We welcome them into our homes to help us fix and improve where we live. And they’re behind the counter at all hours to feed us. Most importantly, we trust them to take loving care of our children so the rest of us can go to work.

These relationships are why small businesses are THE most trusted cultural institutions in the country. Years of Gallup survey results confirm this fact: small businesses are more trusted than the military, the church, and way more than any level of government. In fact, Americans’ views on small businesses have become even more positive since the pandemic. In the latest poll, 86% of respondents believe small businesses contribute positively to the country, up from 80% in October 2022.

This reinforces my belief that jobs and GDP data are interconnected, reliant on each other, and that any truly successful economic policy cannot work without prioritizing them.

As he said in the documentary, ‘Working; What We Do All Day’, Barack Obama put it this way: “When everyone feels their work is respected…we reinforce the trust between us that makes everything in our lives possible.”

Looking Towards November

So, as we get closer to the election, let’s worry less about what side of the aisle we sit on and work collectively for Main Street. California and our country will continue to prosper if we continue to remember these seven words…Supporting Small Strengthens Us All

More Reading:

• Business Formation Statistics (census.gov)
• Biden-Harris Administration Announces Significant Increase in Lending to Black-Owned Small Businesses | U.S. Small Business Administration (sba.gov)