Statement of Rep. Andy Kim on Exploring Challenges and Opportunities of Underserved Businesses in the 21st Century
Washington, February 7, 2019
Small businesses make up over 99 percent of all businesses in the United States and employ almost half of our nation’s workers. In 2018 alone, America’s small employers added 1.9 million net new jobs to the economy. As I’ve seen firsthand in my district in South Jersey, Main Street businesses are the backbone of our communities.
In my home state, small businesses employ nearly 2 million people, making up nearly half of the private workforce. Among them are approximately fifty-eight thousand veteran owned businesses and over two hundred and fifty thousand female owned businesses, which is why I’m particularly happy to be chairing this hearing today.
While nearly every entrepreneur faces obstacles when it comes to getting a new business off the ground and running, entrepreneurs from traditionally-underserved backgrounds tend to face even greater barriers to entrepreneurial success.
We often hear that access to capital is the biggest challenge facing aspiring entrepreneurs. As the lifeblood of all new businesses, affordable capital is crucial to starting a business. Without it, new firms often cannot buy inventory and equipment, pay their employees, or expand operations.
Unfortunately, studies have shown that women, minority, and veteran-owned businesses face heightened obstacles to securing affordable capital. For example, the Minority Business Development Agency found that minority-owned firms experience denial rates three times higher than other firms. Despite a similar demand, 60 percent of veterans reported a financing shortfall and had approval rates 10 percent lower than all other firms.
In response to these challenges, minority-owned firms are more likely to rely on personal sources of funding, such as savings, a family member, or credit. This unfortunate reality is not only unsustainable, it is also hindering small business growth.
Unfortunately, barriers to entering the federal procurement marketplace are also common for underserved firms. Federal contracts are a great source of potential for business growth and it is crucial that we find ways to make them more accessible to budding small firms.
Setting government-wide small business contracting goals was a meaningful step towards increasing small business participation in the federal procurement marketplace. However, as the numbers show, we still have work to do to level the playing field for underserved businesses.
For instance, women-owned businesses were awarded $21 billion of the total $500 billion in contracts forFY 2017. This is highly disappointing considering that women entrepreneurs contribute over $1 trillion a year to the U.S. economy.
Meanwhile, rural businesses are facing a unique set of challenges, including smaller labor pools, slow population growth, net outmigration, and health problems including diabetes and opioid addiction. Though these issues impact rural communities at large, they can also have a devastating impact on rural entrepreneurship and business growth.
To address these disparities, SBA created several initiatives which we will hear more about today.
For many underserved businesses, initiatives such as Small Business Development Centers, Women’s Business Centers, SCORE, and Veterans’ Business Outreach Centers are there to provide mentorship and other key services.
Today, I look forward to hearing the recommendations and feedback of our distinguished witnesses to strengthen these initiatives, as well as other federal programs and private sector actions serving underrepresented entrepreneurs.
I hope today’s hearing will be a productive opportunity to explore the challenges facing small firms while identifying areas where we can work together on legislation that seeks to level the playing field for America’s small businesses.