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SBA Creates New Path for Scaling Small Businesses

Written by Matt Camp, ICIC

Small businesses are driving the American economy forward. There are more than 23 million small businesses across the U.S. that have accounted for 66% of all net new job growth since the 1970s (U.S. Small Business Administration).

It’s no wonder, then, that more and more efforts to grow small businesses are taking root. Just last month, the SBA announced a new program called ScaleUp America, which targets high-potential small businesses and provides resources to help them grow beyond the startup stage.

The SBA is asking small business support organizations to submit proposals with a plan for scaling up innovation, impact and economic inclusion in their communities. The SBA will then award up to 14 communities anywhere from $150,000 to $500,000 during a base year (with the option to extend for four years). Winning bidders will be expected to provide a cohort of small businesses (10-25) in their communities with the four distinct services: Entrepreneurship Education; Management Assistance & Support; Access to Capital; and Connections.

The focus on these target areas is especially important for inner city small businesses, which ICIC research finds struggle to access the capital and business support that would allow them to take their firms to the next level of growth.

For instance, 71% of inner city companies are dramatically undercapitalized, operating with only one-quarter of the capital compared to their industry peers. In a survey of inner city business owners, one-fifth cited access to capital as the number on obstacle blocking company growth. Often perceived as high-risk businesses, inner city firms are left to rely on personal credit and friends and family to help support their businesses. The ScaleUp program will provide small firms with assistance and connections to growth capital, including assistance with loan package preparations and matchmaking events with local lenders.

Similarly, ICIC has found that inner city businesses need management education. Often, CEOs get caught up in the day-to-day activities of the company. Sometimes, they just need to step back and focus on their business rather than in their businesses. Over 63% of the firms that participated in Goldman Sachs’ 10,000 Small Businesses, a 20-week program that includes classes from accounting to negotiations, realized an increase in revenues upon program completion, and 44% have hired new employees within six months of graduation.

ScaleUp is similar in that winning bidders must provide a multi-week curriculum for growth-oriented entrepreneurs. This curriculum must teach CEOs how to build a growth strategy, including topics like process, strategy, financing, marketing, human resources, leadership, contracting and market/product development plans. It is expected that each community will graduate two cohorts from their program within a 12-month period, tracking statistics to identify success metrics.

Bringing federal dollars to local organizations also makes sense; the on-the-ground practitioners have the best understanding of what supports local firms in their community need. In some cities, small businesses might struggle to find affordable office space. In others, companies might have a difficult time finding skilled workers.  In either case, the local business organizations—from chambers of commerce to community development corporations—are best equipped to address these challenges. Moreover, local support organizations are in a position to identify and then connect small firms to the resources available through ScaleUp and other training programs. When resources are steered locally, it helps the small business ecosystem flourish.

Small businesses, especially early-stage startup companies, already face a disproportionately high failure rate compared to their more established peers. Yet these small businesses represent the majority of new jobs created across the U.S.  Providing them with the tools to help them incrementally expand offers the greatest potential to grow jobs across a range of industries.

Learn more about the ScaleUp America today. Applications are due August 14th!

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