The Biden-Harris Administration is taking new steps toward narrowing the racial wealth gap and reinvesting in struggling communities by expanding access to a key wealth-creator – small business ownership that may be also located in disadvantaged communities.
The administration will address racial discrimination in part by using the federal government’s purchasing power to grow federal contracting with small, disadvantaged businesses by 50 percent. That number is slated to translate to an additional $100 billion during the next five years.
An additional $31 billion is slated for small business programs to increase access to capital and provide mentoring, networking and other technical assistance to disadvantaged businesses seeking to access federal contracts, and participation in federal research and development investments.
The administration is also releasing new information regarding President Biden’s American Jobs Plan proposals to create jobs and build wealth in communities of color. They include the establishment of a new $10 billion Community Revitalization Fund to support civic infrastructure projects; $15 billion for new grants and technical assistance to support the planning, removal or retrofitting of existing transportation infrastructure that creates a barrier to community connectivity; and a new Neighborhood Homes Tax Credit to attract private investment in the development and rehabilitation of affordable homes.
There are different perspectives to understand about this approach.
First, start with the fact that the federal government is the largest consumer of goods in the world, buying everything from software to elevator services to financial and asset management. And know that federal procurement is one of the nation’s most powerful tools to advance equity and build wealth in underserved communities.
Still, less than 10 percent of federal agencies’ total eligible contracting dollars are typically funneled to small, disadvantaged businesses (SDBs), a category under federal law for which Black-owned, Latino-owned and other minority-owned businesses are presumed to qualify.
In 2019, for instance, the gap in business ownership between Black and Latino households, relative to White households, accounted for 25 percent of the overall racial wealth gap between these groups.
That’s why the Biden-Harris Administration is launching this vast effort to expand contracting opportunities for underserved small businesses.
At its center is a new goal: increasing the share of contracts going to small, disadvantaged businesses by 50 percent by 2026 – translating to an additional $100 billion to SDBs during the 5-year period.
The impact of the effort could be historic: all told, attainment of the new goal will represent the biggest increase in SDB contracting since data was first collected more than 30 years ago.
President Biden’s American Jobs Plan will invest billions in new Small Business Administration (SBA) initiatives that will increase access to capital by establishing a new direct loan program for the smallest businesses.
It will also develop new loan products to support small manufacturers and businesses that invest in clean energy and launch a new Small Business Investment Corp. that will offer more opportunity for early stage equity investments in small businesses, with priority for those owned by socially and economically disadvantaged individuals.
Gloria Larkin is President and CEO of TargetGov, American Express Procurement Advisor and a national expert in business development in the government markets. Email [email protected], visit www.targetgov.com or call toll-free 1-866-579-1346 x 325 for more information.