It is often said that small businesses are the backbone of the American economy. What is not consistently recognized is that small businesses owned by women and minorities face significant barriers to long-term economic success, namely access to capital and access to capital. procurement opportunities.
White business owners were more likely to get a bank loan in their first year in business, use business credit cards in their first year, and have more capital to start a business than black business owners, according to one report published by the Stanford Institute for Economic Policy Research in 2016.
Access to capital is a significant barrier for small businesses, one that can be overcome with programs that help minimize loan risk for banks and other creditors. The Small Business Association Office of Capital Access, for example, offers microloans, surety bonds and other financing tools to small businesses owned by minorities and women. However, The data show that in 2019, only 3% of loans 7 (a), the SBA’s main small business loan program, went to black-owned small businesses. These disparities persist, including in the recently launched federal paycheck protection program to help business owners cope with the challenges of the pandemic.
Studies on disparities in the public sector, such as the published by Cuyahoga County on Nov. 4, show that minority and female entrepreneurs receive disproportionately less business from the county than majority-owned businesses. The study found that “all minority-owned construction companies have lower revenue shares than their corporate representation shares”.
These barriers exist despite the fact that programs and initiatives have long been in existence to address these gaps. We can and must do more to help minority and women owned businesses achieve fairness in procurement. The key is to create long-term partnerships between project owners and small minority and women-owned businesses that provide lasting opportunities for contracts, income and business growth.
Why is sustainability important? Consistent contracting opportunities over time help small businesses gain experience, build a skilled workforce, build credit, become more competitive, and potentially move from under- dealing with a prime contractor.
Two of the most effective tools for supporting fair and sustainable opportunities are the Small Business Administration (SBA) 8 (a) program and job order contracts.
The SBA’s Minority Small Business Development and Capital Ownership Program, known as program 8 (a), facilitates and strengthens the relationship between established SBA companies and socially and economically disadvantaged small businesses. The objective of program 8 (a) is to ensure that at least 5% of federal contracts go to disadvantaged companies. In 2019, the federal government awarded $ 18.5 billion in contracts with companies 8 (a).
Locally, Coleman Spohn and Ozanne Construction participated in 8 (a) programs leading to long term success. The first generations of these companies had to face significant challenges. Now Coleman Spohn and Ozanne Construction have seen the benefits of consistent and intentional opportunities through programs like 8 (a).
Job Order Contracting (JOC) allows a small, minority-owned business to bid on a long-term contract that covers many small construction and maintenance projects, eliminating the need to bid on each project. Although it is used in some Ohio State agencies, higher education institutions, and within the Cleveland Clinic, it is not yet standard practice.
The benefits of the JOC for institutions are clear. According to Gordian, JOC offers administrative cost savings to both owner and contractor, and projects are much more likely to be completed on time (94%) than design-build (73%) or design-bid projects. construction (63%).
Long-term partnerships benefit owners and small businesses, especially minority and women-owned businesses that too often face high barriers to business success. Creating sustainable opportunities and improving cash flow and payment terms for minority and women owned businesses is a moral and economic imperative.
We all benefit from a diverse and inclusive construction industry. The more opportunities there are for people of color to participate in the construction industry, the stronger our economy will be. More people of color will have the opportunity to train and get good paying jobs. More local and small businesses owned by minorities and women will have the opportunity to thrive, hire more people and grow. And more young people can be inspired when they see people who look like them working on construction sites in their community.
Let’s use these tools to help make all of this a reality. It is time for us as trade associations, developers, project owners and allies of small businesses to decide to ensure that the tools are used successfully.
Shumate is executive vice president of the Construction Employers Association.