In 2021, the US was home to 603,348 small business manufacturers, representing 3.7% of all employers — but more than 98% of manufacturing firms, according to the US Census Bureau. Small manufacturers employed 4.8MM workers and paid more than $277B in payroll. However, while large manufacturers have enjoyed a rebound in employment starting in 2010, the growth in employment by small manufacturers has been stymied by limited access to capital and burdensome government regulations.In March, the US Small Business Administration launched its Made in America Manufacturing Initiative, which aims to increase small manufacturers’ access to capital, improve opportunities for public and private investments in support of manufacturing in America, and help small businesses export their products on a global scale. “By prioritizing American-made products, we’re not just securing our economic dominance — we’re protecting our national security by ensuring the essential goods we rely on are produced right here at home,” says SBA Administrator Kelly Loeffler.While the agency’s initiative focuses on the US manufacturing industry, small businesses in any industry across the country can benefit from the SBA’s actions. Indeed, access to capital and reduction in regulations can help small businesses of all stripes hire more employees.
Here are some of the main goals of the Made in America Manufacturing Initiative that would be of particular interest to community financial institutions (CFIs):
Here are some of the main goals of the Made in America Manufacturing Initiative that would be of particular interest to community financial institutions (CFIs):
- Reduce regulation. One of the initiative’s biggest goals is to cut $100B in regulations that disproportionately burden small businesses and manufacturers through the SBA’s Office of Advocacy. The Office conducts outreach and listens to the concerns of small businesses and then advocates for the sector before Congress, the White House, federal agencies, federal courts, and state policymakers. According to the National Association of Manufacturers, the cost of regulations per employee is, on average, 2.3x higher in manufacturing than for all business sectors. For manufacturers with fewer than 50 employees, that cost jumps to 3.4x the average for all sectors, reaching about $50K per employee. In fact, 94% of manufacturers reported difficulty creating jobs, purchasing equipment, and expanding, due to regulatory burdens.
- Increase participation in the SBA’s 504 loan program. The agency is finding ways to reduce barriers to access for the 504 loan program, which provides long-term, fixed-rate financing up to $5.5MM for major fixed assets such as existing buildings, machinery, and equipment. Eligible businesses must have a net worth of less than $20MM and an average annual net income of less than $6.5MM.
- Expand the use of the 7(a) Working Capital Pilot program. Launched last summer, the pilot loan program offers monitored lines of credit within the 7(a) loan program. Using a unique financing method, the 7(a) Working Capital Pilot program can enable a borrower to access funding earlier in their sales cycle. Small businesses can also leverage the program to more efficiently borrow against their accounts receivable and inventory. The 7(a) Working Capital Pilot program will also help transition borrowers from SBA Express loans into a larger working capital facility.
Officials from the newly formed Office of Manufacturing and Trade have been traveling across the country as part of a Made in America Roadshow, holding roundtables to glean insights from small manufacturers about how exactly the federal government can better help them. As a community financial institution, this initiative can also be a great opportunity for you to provide your expertise on how small manufacturers can improve their chances of obtaining capital. As they follow your advice, they may choose your institution to help them grow and prosper.
