Small businesses are a vital feature of the economic fabric of the United States and have demonstrated remarkable resilience in the face of persistent challenges. Much of this resilience has been facilitated by local small business ecosystems in combination with federal resources. However, as economic conditions become more challenging and pressure builds on the federal budget, small businesses will undoubtedly face new hurdles.

Are the tools available at all levels of government not only able to protect small businesses from impending economic uncertainties but also encourage them to thrive? Where are there opportunities for the federal government to bolster the resources it currently provides, and what new resources are needed?

Our work on the future of Small Business Administration and federal small business programs grapples with these questions. This report aims to provide an extensive and in-depth account of how well the federal government is currently supporting small businesses and identify gaps or opportunities for reform.

Why This Matters

A thriving small business sector fosters competition in markets, creates jobs, and produces vibrant local economies. These benefits highlight the importance of advocating for federal support to small businesses. However, in the face of exceptional technological, economic, financial, business, and demographic changes over the last several decades, federal small business programs and policies have remained surprisingly unchanged. As a result, the available tools have become less effective in responding to present-day small business needs. In a challenging economic environment, federal support for small businesses must be responsive to the shifting dynamics affecting these firms. Rethinking how the federal government can support small businesses is critical to growth and longevity within the sector and will ensure that the role of small businesses within our broader economic system remains strong.

What We Found

• Access to capital is one of the most pressing challenges for small businesses, especially for entrepreneurs from low-wealth backgrounds, emerging entrepreneurs, women, and people of color.
• True equity investment and financing is limited for businesses outside of high-growth start-up industries, a trend that is also observed within existing federal programs designed to provide equity or equity-like products.
• Credit availability remains tight, and there are limited federal protections for small businesses against excessively costly or unfair lending practices. Business owners without preexisting wealth or wealthy personal networks are especially vulnerable.
• There is a vast and overwhelming range of technical assistance offerings, with varying degrees of quality and frequent overlap, making navigating them challenging for entrepreneurs. Despite the multitude of options, we identified critical substantive gaps, such as technical assistance focused on loan readiness that is integrated with lending programs and more advanced tax, legal, or marketing supports.
• The multiplicity of programs and agencies, coupled with the relatively sparse amount of federal subsidy given the scope of need, adds up to a system that is not as robust or effective as it needs to be.

How We Did It

This research report is a result of more than 150 interviews with key stakeholders and experts, extensive data analysis and literature review, and a comprehensive review of existing small business support programs across the federal government. This report provides an in-depth assessment of a vast range of financing programs, including mid-market financing, microloan programs, equity investments, and community development financial institution supports; an assessment of business development and technical assistance programs across several agencies; and a dedicated chapter on federal procurement. For each program covered, we provide detailed summaries of past and present appropriations and expenditures, key design features, and performance findings and recommendations gathered from our interviews and data analysis.