Why this shopping season is make-or-break for small businesses, according to the SBA

By Clint Rainey

Last week, the U.S. Small Business Administration (SBA) reported that it has awarded just shy of $300 billion in COVID-19 recovery loans to nearly 4 million businesses. In the spring of 2020, one of America’s tiniest federal agencies found itself at the center of the biggest economic crisis in a generation, and it has been a lifeline for many Americans navigating how to stay afloat financially.

Like the rest of the country, though, life at the SBA is slowly returning to normal: Most federal pandemic funds are now used up (R.I.P., Paycheck Protection Program) or about to be (with Economic Injury Disaster Loans), and the agency is gearing up to launch new programs that continue helping U.S. small businesses transition back.

Meanwhile, the year’s busiest shopping months have arrived, and a profitable season is make-or-break for many of them. The SBA argues that makes this particular holiday season vital, and it’s urging Americans to think beyond Amazon—to venture back out and shop locally—by promoting events like Small Business Saturday, the shopping holiday wedged between Black Friday and Cyber Monday, invented (unironically) by American Express to encourage people to patronize local brick-and-mortar stores.

Earlier this week, SBA Administrator Isabella Guzman, who’s run the agency under President Biden since mid-March, called Fast Company to discuss the post-pandemic SBA, from a flower shop in Washington, D.C.’s Shaw neighborhood, apparently already doing her part.

Fast Company: Large companies are reporting record earnings this year, but this is sort of a sink-or-swim time for smaller businesses that are fighting to make comebacks. You’ve met with small business owners nationwide in recent months. What are the biggest obstacles they’re still facing?

Isabella Guzman: Well, definitely always capital. The relief the federal government has been able to provide has been critical for them to survive the decreased revenues or the supply-chain disruptions or the workforce shortages. They definitely needed that additional support to carry them through this period of time. And they’ve had to pivot and change their models in many cases, like bring in digital technology to improve operations or attract more customers. Those are some of the biggest challenges in terms of what businesses are facing, and that’s across the board.

All of this is underpinned by COVID, which is why it’s so important to make sure we increase vaccinations. That’s why Small Business Saturday is exciting this year, because more people are vaccinated than ever, and they’re starting to feel more confident about going out. We’re hopeful that people will want to get out and have that experience of shopping on Main Street or at their local mom-and-pops again.

FC: All Americans are about to benefit from the administration’s spending bill. The latest version of Build Back Better includes a lot of things that benefit small businesses, but also leaves a few things out. For instance, there was talk of SBA’s flagship 7(a) loan program receiving “billions of dollars,” but it only got $950 million. Could you give a quick cheat sheet to the key provisions in the current bill that should help small business owners?

Guzman: First off, of course we’re very excited about the Bipartisan Infrastructure Deal because it’ll really help small businesses on the infrastructure front. They rely on public transportation and our ports and our roadways. Some of those bottlenecks that have pressured us this season will hopefully be addressed with these key investments. And the same with climate, because when natural disasters affect communities, they impact small businesses disproportionately, for sure.

With Build Back Better, just from a broader perspective in the workforce, the investments will be really important, obviously, with the workforce shortages I mentioned. It’s always a challenge for small businesses to get a skilled workforce. In addition, we’re looking forward to making sure their workers have affordable child care, healthcare, and elder care that’ll go a long ways towards bringing people back to the the workforce.

But there are also critical investments to help better fund small businesses. You mentioned the investments in our 7(a). The money that will go toward our core 7(a) program to allow the SBA to do direct lending of small-dollar loans will be transformational. Other investment will expand our mission-based lenders, which we know are the institutions that go out and support underserved communities. The expansion of the Community Advantage program, making it permanent and funding it, will be critical for those lenders.

The bill should expand the number of investors that are participating in our small business investment companies. Growth with micro-funds in our small business company portfolio as well as emerging managers will go a long way toward funding our future businesses.

And we are excited about the investments in accelerators and business incubators that will help small businesses. Especially those that are growing and contracting, because, again, the bill will benefit small businesses, but we also know they’re going to benefit from the infrastructure spend—the contracts that will be available to address climate change and our infrastructure.

FC: We know the pandemic’s economic toll has disproportionately hurt disadvantaged communities. You’ve made empowering underserved small businesses a priority, and even before Build Back Better, you had already introduced new programs that tackle that gap specifically, right?

Guzman: Yeah, through the American Rescue Plan, we were funded to launch a Community Navigator pilot program. During COVID, we saw how quickly small businesses were able to get relief really depended on the networks they had established. So this is $100 million distributed to 51 grantees across the country to build those connections, with the focus being underserved communities to make sure that women and people of color who are starting businesses at such high rates are aware of all the capital resources, technical assistance resources, and market connections that the SBA and other local ecosystems have to offer.

FC: Almost two years in, one thing that’s clear is that the pandemic’s problems don’t have one-size-fits-all solutions. Now we’re seeing other problems too—inflation, the labor shortage. How can small business owners become better aware of the federal resources available to them? I know the SBA oversees dozens of different programs for business owners.

Guzman: Through our district offices and our resource partners, small businesses can connect and build this team of free resources from the federal government. Starting with SBA.gov and finding those local entities around you is really what’s needed.

But on the other side, consumers can also support small businesses. Strategies like Small Business Saturday help them compete during the busy holiday season. It was designed to try to help them get a bigger share of that spending each year. These additional programs or strategies are ones that SBA teams can help small businesses prepare for—you know, what’s your pricing strategy, and what’s your inventory look like, and how to navigate supply chains.

A significant portion of businesses say they’re still struggling, there’s still uncertainty. This holiday season will be a big indicator for a lot of them of whether they’ll be able to remain open into the next year.

FC: It’s well known that the Paycheck Protection Program was plagued by fraud and suffered technical glitches that frustrated business owners. What lessons did the agency take from observing the bumpy rollout earlier in the pandemic?

Guzman: It’s definitely been my priority to make sure we’re getting these programs out efficiently. With speed, but also with the certainty that they’re going into the hands of the businesses they were intended to serve. Across all our programs, we’ve made process improvements and adopted technology to be able to scale and more efficiently meet businesses where they are, which is oftentimes being more mobile- and tech-friendly.

We wanted to deliver on the promise of PPP and that forgiveness. So we launched a direct forgiveness portal, which can be done, you know, in less than six minutes. Sixty percent of the people who are processing through our direct forgiveness portal are doing it on a mobile device.

The other important program to mention is the COVID Economic Injury Disaster Loan program, because there are still billions of dollars available through this year.

FC: I was going to mention that. One early snag with EIDL was simply that the number of people trying to get the loans overwhelmed the system. But in September, you announced some changes.

Guzman: There were challenges with processing times and people getting stuck in the process. A lot of it had to do with 2020 and some of the challenges that they had in terms of fraud and implementation. But we’ve addressed all those issues. We’ve gone from processing 2,000 applications to over 37,000 a day to clear the backlog. And now we’re able to process these loan applications—or increases, because we also increased the maximum loan amount to $2 million for businesses. So they can position themselves to take advantage of some of these opportunities in the future, and recover from COVID in the process.

The fact the EIDL program still has billions of dollars untapped is a little-known fact. But what’s even less known is that the deadline for applying for them is imminent. Guzman and the SBA encourage people interested to complete their applications before December 10—and to shop small and local in the meantime.

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