Small businesses form the backbone of America’s economy. Our nation’s economy is powered by small businesses, which represent more than nine out of every ten employers, and the fastest-growing businesses over the past two decades are businesses run by women and people of color. Yet, small businesses and entrepreneurs are clearly struggling: markets have grown increasingly tilted toward big business and the U.S. startup rate is in decline. The strength of minority owned and women owned businesses helped pull the American economy out of the Great Recession: businesses owned by people of color created nearly 1.3 million jobs during the recession, and over the past decade, women owned businesses grew nearly five times the national rate. For women of color, that number jumps to fourteen times the national rate.
Yet, these entrepreneurs are often locked out of the exact resources their businesses need to continue to support their communities and the broader American economy. White Americans and men are much more likely to own a business than people of color and women. Minority and women owned businesses are less likely to get approved for loans – and even when they do, they receive less credit and face greater obstacles than non-minority owned businesses. And a racial wealth gap rooted in this country’s legacy of slavery presents an especially steep challenge to people of color. In 2016, the median white household’s net worth was 10 times larger than that of the median black household and 8 times larger than that of the median Latino household.
These inequities are not only wrong – they’re preventing our communities and our economy from reaching its full promise and potential. As a former small business owner, Beto believes that we must confront these injustices directly and leverage the full force of our government to support the businesses we depend on to power our economy. That is why today, Beto is outlining a bold set of solutions that would:
- Root out racism and sexism in the small business lending market to translate investment into new small businesses and jobs, spurring and sustaining over 200,000 new women and minority owned small businesses by the end of Beto’s second term;
- Leverage targeted government contracting and other catalytic investments to unlock over a half a trillion dollars of economic opportunity for women and minority owned businesses; and
- Shift at least $100 billion in government contracts away from large corporations to small businesses, with half of that opportunity going to women and minority entrepreneurs
Inspired by conversations he has had with small business owners across the country and drawing from his own experience, Beto understands the unique challenges facing small business owners – and that those challenges are only heightened for women entrepreneurs and people of color. Beto’s plan to inject capital and demand into America’s small businesses, confront institutional racism and increase federal investment in minority and women owned businesses will enable small business owners to do what they do best: grow the economy and create jobs.
Beto’s ambitious plan for supporting small businesses will ensure a fair shot for minority and women owned businesses and bring more American entrepreneurs into the solutions facing our country and our economy. These actions build off of his own career in small business and his work on the El Paso City Council and in Congress to expand access to investment and resources for entrepreneurs nationwide.
Giving Women and Minority Entrepreneurs a Fair Shot
- Root out Institutional Racism and Sexism in the Small Business Lending Market. Appoint a Consumer Financial Protection (CFPB) director who will prioritize implementing regulations that will make it easier to fight discrimination against small business owners who are women and people of color. Section 1071 of Dodd Frank requires the Consumer Financial Protection Bureau (CFPB) to centralize the collection of small business lending data—including the race and gender of small business owners—and make those data public. The collection of these data would make it easier for the CFPB to enforce fair lending laws when it comes to small business loans just as the Home Mortgage Disclosure Act (HMDA) data do with mortgage fair lending cases. The CFPB has not yet implemented Section 1071 and the Trump Administration has even proposed repealing it.
- Establish a Public Credit Reporting Agency to Make Access to Credit Fairer and More Equitable. Americans who are launching a small business may rely on credit cards and mortgages to get their first loan. Lenders usually use credit reports from three major, private companies to assess the risk that a borrower will not repay their loan. A bad credit report can lead to being denied credit or paying a higher interest rate. Yet, credit reports today not only frequently contain errors, but also deepen racial disparities in credit access since people of color have worse credit scores and are more likely to not have enough credit history to generate a credit score. Beto would push for legislation that would house a public credit reporting agency in the CFPB to provide accurate credit reports to lenders while minimizing racial disparities. Its publicly available algorithms would, with consumers’ permission, draw on alternative data sources such as utility and rental payments that Americans without a credit history frequently do have. The reports would not use data from medical debt (including medical debt held by collection agencies) or predatory and deceptive financial products such as payday loans.
- Expand Resources to Ensure Women and Minority Owned Small Businesses Succeed. Triple the Minority Business Development Agency (MBDA) to $102 million in annual funding to supply diverse entrepreneurs with expanded access to critical mentorship across the country. Building inclusive and diverse entrepreneurs is more than just increasing their access to capital. By increasing the federal investment into the MBDA, Beto would work to expand their one-stop shop business centers across the country to ensure that women and small minority owned businesses have equal access to the mentorship that can provide technical assistance aimed at not only ensuring their success but helping their businesses to grow.
- Simplify Tax Rules and Requirements for America’s Small Businesses. Create a new standard deduction for small business owners allowing them to write off $50,000 in expenses — saving them money and time they can invest in growing and hiring. Beto would work to enact this tax simplification, while reforming other aspects of the tax code to make it both fairer and more supportive of small businesses and small business owners, rather than the wealthy and well-connected. In addition, Beto would establish a separate standard business expense deduction for independent workers and boost the support that start-ups receive through the tax code.
- Stand up for small businesses by preventing online platform owners from squeezing out competition. Apply the principle at the heart of net neutrality—that Internet Service Providers cannot privilege their own content over others’ content—to other online platforms such as e-commerce and search to preserve competition and protect small businesses. The Internet presents an unparalleled opportunity for small business owners to sell their products and services across the world, but they cannot get their foot in the door if the large corporations operating the major platforms driving Internet commerce can crush them by driving traffic to their own products and deploying the reams of data they collect with their platforms. Beto would champion regulations and legislation that would protect small businesses from this anti-competitive behavior.
Increase Access to Capital for Women and Minority Owned Businesses to Start and Grow
- Double the reach of the Community Development Financial Institutions Fund (CDFIs), which is a proven mechanism to increase access to capital in the places that need it most, and focus the new resources on women and minority entrepreneurs in particular. The fund provides critical resources to mission-driven financial institutions to enable them to provide affordable and flexible financing products and technical assistance to businesses in low income communities. Last year, the CDFI Fund received $250 million. Beto would increase annual funding to $500 million.
- Create an American Small Business Catalytic Credit Initiative. Beto would establish a program at the Department of Treasury designed to support state small business initiatives targeting economically distressed areas — modeled after the expired State Small Business Credit Initiative included in the 2010 Small Business Jobs Act. The program would award funding directly to states to develop and design their own small business support programs targeted to their state’s specific economic needs and based-on a competitive application process laying out their plan for supporting low-income communities, women, communities of color, and underserved communities. As under the original SSBCI, states could adopt multiple approaches to increasing access to capital, including loan guarantees, collateral support, loan participation, loan loss reserves or venture capital programs. Beto will call for a $10 billion investment combined with a 10:1 private leverage requirement, as was the case under the SSBCI, to support $100 billion in small business loans and investments.
Increased Access to Markets
- Help America’s small and medium-size manufacturers compete in global markets. Beto’s plan would triple funding for the Manufacturing Extension Partnership, a 30-year old federal-state, public-private partnership that helps small- and medium-sized manufacturers develop products and customers, expand and diversify markets, and more. Beto would increase federal funding from $140 million to $420 million for the Manufacturing Extension Partnership in order to boost the competitiveness of America’s small- and medium-sized manufacturers. Independent research indicates that the program generated a financial and economic return of 14 to 1. The Trump Administration, on the other hand, has proposed eliminating this highly effective program in the middle of its unnecessary trade war.
- Increase Small Business Procurement with Over 50 Percent Designated for Minority and Women Owned Businesses. Grow annual federal procurement from small businesses by $100 billion— and ensure at least half of that increase goes to businesses owned by women and people of color. Currently, small business procurement is roughly $105 billion annually. Beto would increase this to $205 billion, and he would use his executive authority to increase the share of these contracts awarded to women owned and minority owned small businesses.