The IRS on Thursday temporarily halted processing for amended payroll tax returns claiming the so-called employee retention tax credit, or ERC, which was enacted during the Covid-19 pandemic.
Worth thousands per eligible employee, the IRS said the program has triggered a flood of “questionable claims,” as a cottage industry of specialist firms has popped up and pressured small businesses to wrongly claim the tax relief.
“Businesses that receive ERC payments improperly face the daunting prospect of paying those back, so we urge the utmost caution,” IRS Commissioner Danny Werfel said on Thursday, urging small businesses to review claims with a qualified tax professional.
In the meantime, the IRS is working on further guidance on how to withdraw unprocessed ERC claims, along with a settlement program for small businesses who wrongly received the credit and want to pay it back.
While affected small businesses may be concerned, “there’s no need to panic here,” said Jennifer Rohen, a principal atCliftonLarsonAllen with expertise in claiming the ERC.
If you claimed the credit and are worried about eligibility, it’s an excellent time to review your filing with a qualified tax professional, she said.
The IRS has released a detailed ERC eligibility checklist to assist filers. The credit was designed for small businesses and tax-exempt organizations that paid employees during government-mandated shutdowns or experienced a “significant decline in gross receipts” during certain periods in 2020 and 2021.
“My blanket advice is always to talk to a qualified tax professional who has filed [ERC claims] before,” said certified financial planner Craig Hausz, CEO and managing partner at CMH Advisors in Dallas. He is also a certified public accountant.
If you received the credit and know you don’t qualify, Hausz said you should start the process of paying the money back. “I think the IRS is going to be a lot more lenient on abating penalties and interest if someone proactively sends money back,” he added.
IRS targets top earners with AI and machine learning
While the deadline for 2020 amended returns is approaching, there’s still time for legitimate ERC claims, said Kristin Esposito, director for tax policy and advocacy for the American Institute of CPAs. Small businesses have until the tax deadline in 2024 to amend 2020 returns.
While the price tag of any single stolen package isn’t extreme — a study by Security.org found that the median value of stolen merchandise was $50 in 2022 — the absolute level of package theft is high and rising. In 2022, 260 million delivered packages were stolen, according to home security consultant SafeWise, up from 210 million packages the year before. All in all, it estimated that 79% of Americans were victims of porch pirates last year.
“If we have a score of 1,000 to an address that means that we’re highly confident that that package is going to get delivered,” said Mark Robinson, president of UPS Capital. “At the other end of the scale, like 100 … would be one of those addresses where it would be most likely to happen, some sort of loss at the delivery point,” Robinson said.
Powered by artificial intelligence, UPS Capital’s DeliveryDefense analyzes address characteristics and generates a ‘Delivery Confidence Score’ for each address. If the address produced a low score, then a package recipient can then recommend in-store collection or a UPS pick-up point.
The initial version was designed to integrate with the existing software of major retailers through the API —a beta test has been run with Costco Wholesale in Colorado. The company declined to provide information related to the Costco collaboration. Costco did not return a request for comment.
DeliveryDefense, said Robinson, is “a decent way for merchants to help make better decisions about how to ship packages to their recipients.”
To meet the needs of more merchants, a web-based version is being launched for small- and medium-sized businesses on Oct. 18, just in time for peak holiday shipping season.
UPS says the decision about delivery options made to mitigate potential issues and enhance the customer experience will ultimately rest with the individual merchant, who will decide whether and how to address any delivery risk, including, for example, insuring the shipment or shipping to a store location for pickup.
UPS already offers its Access Points program, which lets consumers have packages shipped to Michaels and CVS locations to ensure safe deliveries.
Among logistics competitors, DHL relies on one of the oldest methods of all — a “signature first” approach to deliveries in which delivery personnel are required to knock on the recipient’s door or ring the doorbell to obtain a signature to deliver a package. DHL customers can opt to have shipments left at their door without a signature, and in such cases, the deliverer takes a photo of the shipment to provide proof for delivery. A FedEx rep said that the company offers its own picture proof of delivery and FedEx Delivery Manager, which lets customers customize their delivery preferences, manage delivery times and locations, redirect packages to a retail location and place holds on packages.
Amazon has several features to help ensure that packages arrive safely, such as its two- to four-hour estimated delivery window “to help customers plan their day,” said an Amazon spokesperson. Amazon also offers photo-on delivery, which offers visual delivery confirmation and key-in-garage Delivery, which lets eligible Amazon Prime members receive deliveries in their garage.
Amazon has also been known for its attempts to use new technology to help prevent piracy, including its Ring doorbell cameras — the gadget maker’s parent company was acquired by the retail giant in 2018 for a reported $1 billion.
Camera images can be important when filing police reports, according to Courtney Klosterman, director of communications for insurer Hippo. But the technology has done little to slow porch piracy, according to some experts who have studied its usage.
“I don’t personally think it really prevents a lot of porch piracy,” said Ben Stickle, a professor at Middle Tennessee State University and an expert on package theft.
Recent consumer experiences, including the iPad theft example in Virginia, suggest criminals may not fear the camera. Last month, Julie Litvin, a pregnant woman in Central Islip, N.Y., watched thieves make off with more than 10 packages, so she installed a doorbell camera. She quickly got footage of a woman stealing a package from her doorway after that. She filed a police report, but said her building’s management company didn’t seem interested in providing much help.
Stickle cited a study he conducted in 2018 that showed that only about 5% of thieves made an effort to hide their identity from the cameras. “A lot of thieves, when they walked up and saw the camera, would simply look at it, take the package and walk away anyway,” he said.
SafeWise data shows that six in 10 people said they’d had packages stolen in 2022. Rebecca Edwards, security expert for SafeWise, said this reality reinforces the view that cameras don’t stop theft. “I don’t think that cameras in general are a deterrent anymore,” Edwards said.
The increase in packages being delivered has made them more enticing to thieves. “I think it’s been on the rise since the pandemic, because we all got a lot more packages,” she said. “It’s a crime of opportunity, the opportunity has become so much bigger.”
Edwards said that the two most-effective measures consumers can take to thwart theft are requiring a signature to leave a package and dropping the package in a secure location, like a locker.
Large lockboxes start at around $70 and for the most sophisticated can run into the thousands of dollars.
Stickle recommends a lockbox to protect your packages. “Sometimes people will call and say ’Well, could someone break in the box? Well, yeah, potentially,” Stickle said. “But if they don’t see the item, they’re probably not going to walk up to your house to try and steal it.”
UPS says that DeliveryDefense relies on a dataset derived from two years’ worth of domestic UPS data, encompassing an extensive sample of billions of delivery data points. Data fairness, a UPS spokeswoman said, was built into the model, with a focus “exclusively on delivery characteristics,” rather than on any individual data. For example, in a given area, one apartment complex has a secure mailroom with a lockbox and chain of custody, while a neighboring complex lacks such safeguards, making it more prone to package loss.
But the UPS AI is not free. The API starts at $3,000 per month. For the broader universe of small businesses that are being offered the web version in October, a subscription service will be charged monthly starting at $99, with a variety of other pricing options for larger customers
The project, which begins in the spring of 2024, will increase the tolls drivers pay to enter points of Manhattan south of 60th Street.
The final price of the toll is not yet determined. People close to the process believe it ultimately may cost between $9 and $23 to enter or exit the central business district by personal car. By law, passenger vehicles are taxed once a day. Commercial and ride-share vehicles will be tolled per trip.
The toll may produce up to $15 billion for investment within the aging MTA system. Much of the cash will go toward the MTA’s 2020-24 Capital Program. For example, some of the proceeds will finance four new Metro-North stations for communities in the Bronx.
“Expansion tends to be the sexy and fun thing, which we’ve done. But the kind of stuff that our customers don’t see is power upgrades, track upgrades and signal upgrades,” said Richard Davey, president of New York City’s Transit Authority.
The MTA is also speeding up investment in clean bus technology. The agency expects to begin experimenting with hydrogen fuel cell bus technology in 2025.
Regional planners expect to see environmental benefits with the new toll in place. For example, particulate matter emissions from stop-and-go traffic can stoke diseases such as asthma.
The MTA study of the toll cites the experiences in other global cities including Milan, London, Singapore and Stockholm. “In London, they’ve had a reduction of nearly 20% in particulate matter pollution,” said Julie Tighe, president of the New York League of Conservation Voters. “There’s a 15% reduction in particulate matter in Stockholm, which resulted in a 50% reduction in asthma.”
“In Stockholm, it was very unpopular,” said Mollie Cohen D’Agostino, a researcher at the University of California, Davis campus. “It just narrowly got enough support to get past that first trial period vote. Then it got significantly more support in the second vote … people actually liked it.“
The FUBU CEO’s Black Entrepreneurs Day, billed as a celebration of Black business, will return Nov. 1. The event will feature a lineup of celebrity guests such as Whoopi Goldberg and Shaquille O’Neal and insights from top Black business leaders.
Eight winners of a $25,000 entrepreneurship grant will also get the opportunity to appear alongside John during the event. The event will take place at the Apollo Theater in Manhattan and will also be broadcast online via livestream.
As the event enters its fourth year, enthusiasm among corporate sponsors has not matched what it was in 2020, when it launched on the heels of the Covid-19 pandemic and widespread Black Lives Matter protests pushing for racial equity.
“It was very easy [to get corporations on board] the first year,” John said. “I said, ‘Will you stand by me and say that you are on the right side of this discussion?’”
Many of the companies standing behind Black Entrepreneurs Day have launched initiatives to support the Black community. Chase allocated $30 billion as part of a racial equity commitment in 2020, which has since been used to deploy 15,000 small business loans, among other initiatives.
“If you don’t have people in your organization that look like the ones you are serving, then you’re going to chase what’s shinier every day,” John said. “You may think that the systemic issues were solved” by the donation you gave.
John lauded brands including Chase, T-Mobile, The General Insurance and Shopify, which he said have stayed on the “right side” of the issue. He said the companies don’t just hand over money, but also go the extra mile to invest in the Black community.
This year, Black Entrepreneurs Day will feature a star-studded guest list including Goldberg, O’Neal, Cedric the Entertainer, Anthony Anderson and Rick Ross, to discuss their journey as Black entertainers and entrepreneurs.
“People want to know what they did at their lowest point and how they got out of circumstances that many of us have been in or are currently in,” John said.
Black Entrepreneurs Day will partner with the NAACP to give eight entrepreneurs $25,000 issued through the NAACP Powershift Entrepreneur Grant. Business owners who apply and win one of the eight grants will be able to get mentorship from John and join him during the event broadcast.
The grant gets tens of thousands of applications, even outpacing the entries submitted to “Shark Tank,” a globally recognized show, John told CNBC.
The Shopify Pitch Competition will return to this year’s Black Entrepreneurs Day.Current Shopify merchants will have the chance to pitch to three judges live during the broadcast. Winners will be awarded $25,000 and mentorship from John.
Black-owned businesses were hit especially hard by the Covid-19 pandemic, and when federal assistance became available, Black business owners saw less of that money than their white counterparts.
“When the money was issued throughout Covid, a lot of Black farmers and African American businesses got a very small percentage of it and it took them much longer to get it,” John said.
Paycheck Protection Program loans largely failed to reach areas with the highest concentrations of Black-owned businesses, CNBC reported in 2020.
Several businesses have flourished with the money and mentorship provided by the grant, John said, and some business owners are now able to keep their businesses open due in part to the grant funds.
Amazon said Prime members bought more than 150 million items from third-party sellers. It didn’t release much more data on the big retail event, and among the things we can’t know for sure is how much generative AI programs may have helped sellers do an even better job of pitching their products than in previous years.
We do know for sure that getting a leg up on the competition is getting easier for e-commerce platform sellers through the latest AI.
Generative AI tools — offered by e-commerce platforms, marketplaces and private companies — can help with some of the more labor-intensive, time-consuming and mundane tasks that sellers tend to hate. The goal of using these tools is to drive more sales with less effort — and angst — on the part of sellers.
AI can be used for many things, from writing impactful product listings to data analytics, but more of the focus of late has been on the product listing side. Amazon, for example, recently rolled out a generative AI tool to help sellers write more robust and effective product descriptions.
These tools can “spit out the perfect product listing for you that is optimized to your customer base,” says Chris Jones, chief executive and co-founder of AMNI, an AI-powered platform that streamlines procurement, manufacturing and distribution.
It’s obviously early days in the use of AI for e-commerce, and there will be some big hits and misses — as well as risks for any seller than blindly relies on AI. Here’s what sellers need to know about using AI to sell more effectively.
Creating high-quality e-commerce content often doesn’t come naturally to sellers. There’s a need to create compelling product titles, bullet points and descriptions, which can be time-consuming and frustrating for sellers who don’t have a natural writing ability or the time to devote to these efforts. It can be daunting for sellers to sit in front of a blank screen and figure out what to write.
Beyond just describing they product, they need to create one that’s also well-optimized for Amazon search algorithms so it gets good exposure, said Greg Mercer, chief executive and founder of Jungle Scout, a platform that helps sellers start and scale their e-commerce business.
AI can reduce — to seconds or minutes — these mundane listing tasks that might have taken some sellers three-to-five hours to complete, Mercer said.
Sellers on Amazon’s competitive third-party marketplace need to provide a brief description of their product in order to allow its new AI tool to generate high-quality content for them to review. For example, they can plug in the item name and whether the product has variations and a brand name. Amazon’s models learn to infer product information from various sources. For example, they can infer a table is round if specifications list a diameter. The models can also infer the collar style of a shirt from its image, the company noted in a blog post about the AI launch.
“In addition to saving sellers time, a more thorough product description also helps improve the shopping experience. Customers will find more complete product information, as the new technology will help sellers provide richer information with less effort,” the company stated.
Starting in 2024, Amazon will require suppliers to share their emissions data, set emissions goals, and report on their progress, the e-commerce giant said in its recently released sustainability report. With that move, it joins Microsoft, Walmart, Apple, and others in saying that suppliers must step up decarbonization efforts.
The mandates come as big businesses face more demand than ever to adopt eco-friendly practices. Consumers, investors, regulators, and governments are pushing firms for more progress and transparency.
“The pressure is coming at companies, who are then putting pressure on suppliers,” said Bob Willard, a corporate consultant and author of six books on sustainability.
Businesses typically track three levels of emissions. Scope 1 come directly from operations. Scope 2 are from purchased energy such as electricity. And scope 3 relate to a company’s activities but come from indirect sources such as supplier emissions and emissions from customers using their products.An analysis of major industries by the non-profit CDP found that, on average, scope 3 accounts for about 75% of all emissions.
Companies have much more control over their suppliers than many other areas of indirect emissions, says Andrew Winston, author of several sustainability-related business strategy books.
For instance, while a consumer goods company can’t force a detergent buyer to wash in cold water, it can be selective in working with eco-conscious suppliers.
Salesforce now requires suppliers to disclose scope 1, 2, and 3 emissions, deliver products and services on a carbon-neutral basis, and fill out a supply scorecard each year. AstraZeneca suppliers are expected to annually report emissions data to the CDP and set science-based goals.
While Amazon doesn’t include suppliers in its scope 3 accounting, it’s effectively dealing with this in the way many other firms have started doing, by forcing suppliers to report emissions to them and set goals which emissions levels can then be tracked against. “We know that to further drive down emissions, we must ensure those in our supply chain make the operational changes necessary to decarbonize their businesses,” Amazon said in the sustainability report.
Third-party sellers and suppliers — especially smaller ones — face a paradox as the climate mandates arise and become increasingly tougher. Even if they’re eco-conscious, many say they don’t have the resources to meet the tracking and reporting demands.
Eight in ten small and medium-sized business owners say reducing emissions is a high priority, yet 63% also say they don’t have the right skills, and 43% say they lack the funds, according to a survey from the non-profit SME Climate Hub. In a survey from Intuit QuickBooks, two-thirds of small business owners said they were taking steps to reduce their environmental impact, such as recycling and using renewable materials. Businesses that weren’t acting cited a lack of money, time, and resources.
She says compliance costs can vary, but upfront expenses can be considerable, which is challenging for the many firms with a tight cash flow.
The information is out there to start getting a handle on the task. Yet, one of the first things that business owners will learn is that it is going to be time consuming, says small-business owner Chaitali Patel, who founded the sustainability advisory firm Evergood. She points to a 152-page document on scope 3 supply chain accounting and reporting from the Greenhouse Gas Protocol, which provides standards for measuring and managing emissions.
“If you look at the process of data collection and recordkeeping alone to comply with these requirements, it will take up significant resources,” Patel said.
Amid ongoing fears of recession, higher interest rates cutting into sources of capital, signs of weaker consumer demand, and labor market challenges, small businesses have focused more on employees and their bottom line than sustainability. When asked what issues matter most to them, nearly 40% said jobs and the economy, while 10% said the environment, according to the CNBC|SurveyMonkey Small Business Survey for the third quarter.
Yet ready or not, suppliers big and small will have to step up soon. “This is coming,” he said. “The procurement arm of the business community is reaching into their supply chains and is starting to ask more pointed questions.”
In addition to the pressure from investors and politicians, another reason big companies will be looking farther down the supply chain is because they are currently coming up short in their emissions reduction goals. Amid the boom in consumer demand and global growth post-pandemic, many of the world’s largest corporations are producing more carbon emissions than they can reduce.
A recent review by the New York Times of climate documents for 20 major food and restaurant companies found that over half have made no progress in reducing emissions or are increasing emissions. The report found, as previous climate accounting has typically shown, that the majority of emissions come from suppliers.
A recent Just Capital report found that more companies than ever before are making carbon reduction commitments, but the results aren’t there yet in the disclosures. Of companies with existing science-based targets, only 26 out of 123 in the Russell 1000 disclosed emissions reductions. Meanwhile, among companies without specific targets — just general net zero targets — emissions have gone up.
In McDonald’s case, the change from 4% to 5%, starting Jan. 1 — which applies to franchisees in U.S. and Canada who add new restaurants, buyers of company-owned restaurants, relocated restaurants and other scenarios that involve the franchisor, but not existing franchisees — brought the fast-food giant more in-line with other restaurant franchises, many of whom already charge royalty fees in the 5% to 6% range, said Kenny Rose, chief executive of franchise investing platform FranShares.
Outside fast food, franchise royalty fees can be even higher, up to 12% or more based on the type of franchise business, according to the International Franchise Professionals Group, a membership-based organization.
Here’s what franchisees need to know about the changing landscape:
While industry participants said they don’t expect franchisors to raise royalty fees en masse, there could be some franchisors that follow McDonald’s lead, especially if they are below industry norms, said Keith Miller, a principal at Franchisee Advocacy Consulting and spokesman for the American Association of Franchisees and Dealers, a trade association.
In fact, the McDonald’s increase is right on the industry average, according to the International Franchise Association. In the quick-service restaurant space, 62% of brands changed royalties over a 30-year period by an average of 1.3%, according to its data.
For comparison, Wendy’s charges royalty fees in the 4% to 6% range; Burger King charges 4.5% and Subway has a royalty fee of 8% of gross sales, according to information they disclose on their respective websites.
Franchisors are in a race to stay ahead of their own corporate rivals and there is significant value associated with a brand like McDonald’s.
“Franchisors compete against each other for quality franchisees,” said Robert Branca Jr., who owns several Dunkin’ franchises and serves on both the Coalition of Franchisee Associations and the International Franchise Association boards. “Everybody knows who and what McDonald’s is. They have the clout to get a higher royalty fee than a lesser brand.”
In a letter from a McDonald’s franchisee-owner group shared with CNBC, they noted that their restaurants are generating less cash flow today than they were in 2010 despite what they described as record revenue for McDonald’s Corporation. The owners’ group warned that reinvestment decisions should be reconsidered as it will not provide a historic return and “it’s time for every owner-franchisee to begin focusing on protecting their business, employees and family.”
The agency paused processing new claims for the employee retention credit, or ERC, in September following a surge of questionable filings. Worth thousands per eligible employee, the ERC attracted a cottage industry of companies pressuring small businesses to amend payroll tax returns and wrongly claim the credit.
The IRS on Thursday unveiled a withdrawal option for small businesses with pending ERC claims before facing repayment, interest and penalties.
“This is a game-changer,” said Eric Hylton, national director of compliance for Alliantgroup, a firm that has been reviewing ERC claims for other tax professionals.
“I’m actually shocked at some of the horror stories we’ve been seeing,” said Hylton, who is a former IRS commissioner for the agency’s small business and self-employed division.
If you’ve neither received an ERC refund nor cashed your ERC refund check, there’s still time to withdraw your filing, according to the agency. You may qualify if you meet three conditions: you made the claim on an adjusted employment tax return, only changed your filing for the ERC and want to withdraw the entire claim.
“It’s a mulligan moment,” said Dean Zerbe, national managing director at Alliantgroup. He said the withdrawal option is an opportunity to fix mistakes before the IRS catches them.
Americans overdue on car payments at highest level in nearly 30 years
Currently, there’s an IRS backlog of unprocessed ERC filings. As of Oct. 11, the agency estimated a backlog of 849,000 Forms 941-X, which includes ERC claims.
Small businesses should take the opportunity to “sharpen their pencil” and review their pending ERC filings with a tax professional, Zerbe said, pointing to the strict eligibility requirements. “Business owners can’t just whistle by the graveyard.”
“Think long and hard about what you’re doing here because the IRS is going to be all over this,” he added.
If the IRS already processed your ERC claim and you cashed the refund check, Hylton still recommends reviewing the filing with a tax professional to see if an amendment is necessary.
For example, it’s possible you only qualified to receive the ERC for two quarters but claimed the credit for four or six quarters, he said. Whether you need to make a minor change or major correction, it’s critical to “address the issue as soon as possible,” Hylton said. “You want to be ahead of them.“
Judge Corker’s ruling underscores the far reach of the U.S. Supreme Court decision which continues to have a ripple effect on corporate America and the business world.
In September, to comply with Judge Corker’s ruling, the SBA changed certain parts of the application process for a subset of small businesses to qualify for federal contract work. However, the plaintiff in the case — a white woman who owns Ultima Services Corporation and who doesn’t qualify for the 8(a) program — has additional pending challenges and litigation is ongoing.
The 8(a) program is designed to help socially and economically disadvantaged small business owners expand their footprint in the federal marketplace through training and contract support. Before Judge Corker’s ruling, individual Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans applying for the program could establish that they were socially disadvantaged by demonstrating that they held themselves out as a member of one of those designated groups. To qualify, owners must also meet certain other ownership and economic qualifications outlined by the SBA.
The federal government awarded $69.9 billion, or 11.38%, of federal prime contracting dollars to small disadvantaged businesses in fiscal year 2022. The 8(a) program represents a portion of these awards, with $21.7 billion being awarded through set-aside contracts for participants in the 8(a) program.
The SBA initially suspended new applications for the 8(a) program in response to the court ruling. It reopened the application portal in late September, with guidance for small businesses on how to apply and update their application, if necessary.
At issue was the SBA’s long-standing approach that presumed an owner was socially disadvantaged if he or she belonged to certain racial groups. Relying in part on Supreme Court precedent, the judge found the SBA hadn’t narrowly tailored its approach and thus violated Ultima’s Fifth Amendment right to equal protection of the law. To comply with the ruling, the SBA now requires owners to describe in some detail their social disadvantage, instead of relying on the race-based presumption. The hope is that this narrowly tailored approach will pass legal muster.
The application now includes a plain language, fillable questionnaire that offers owners the opportunity to describe their social disadvantage. There are a handful or so of questions to guide owners, prompting them to describe what happened and how it affected their ability to start or expand their business, among other things.
Alternatively, businesses can prepare what’s known as a “social disadvantage narrative” and upload it directly to the application platform. The SBA says in its guide to preparing a social narrative that an individual should typically provide two incidents of bias to establish chronic and substantial social disadvantage. One incident may be enough “if it is pervasive or recurring,” the guide says. The SBA also recommends owners provide no more than two examples “to avoid unnecessary delays during the review process.”
The questionnaire pathway might be simpler for people and the SBA encourages people to use it. But if a new applicant already prepared a narrative, they don’t have to convert it to the questionnaire format — the applicant can upload the narrative document and skip those questions, according to an SBA spokesperson.
To receive new 8(a) contracts, small businesses that previously relied on the presumption of social disadvantage to support eligibility will need to submit to re-establish eligibility through the new process.
Owners who submitted a narrative as part of their original application willnot need to submit a new narrative, according to the SBA.
The extra time for the application will depend on the individual, but the guided questionnaire format can help people without the need to write their own narrative, attorneys said.
Aside from the social disadvantage aspect, businesses applying for the first time to the program have to show their economic disadvantage through personal net worth, adjusted gross income and assets, said Jayna Marie Rust, a partner with Thompson Coburn who regularly works with 8(a) program participants. This remains a condition to be approved for the program. There are also annual review requirements for ongoing eligibility purposes.
“If you thought it was going to be valuable before, and you were willing to go through the application process, the same value is there, and the application process is not that much different,” Rust said.
Last year, women-founded companies received less than 3% of the total capital invested in venture-backed startups in the U.S. Globally, the situation is even more severe, with a gender credit gap faced by women-owned small and medium sized enterprises estimated at $1.5 trillion, according to Goldman Sachs.
That makes the latest data from the Small Business Administration’s fiscal 2023 year an important milestone to track for the U.S. business ecosystem: Loans to women-owned small businesses topped the $5 billion mark in fiscal 2023 and now represent 1 in 5 loans (21.3%) made to small businesses. According to the Census Bureau’s most recent Annual Business Survey, around 1.24 million (21.4%) of employer-owned businesses are women-owned.
The $5 billion figure for fiscal 2023 isn’t a peak — loan volume reached $5.7 billion in 2021 — but the Biden administration is touting the data for the 2020-2023 period as part of its “Bidenomics” push ahead of next year’s election. And the 21% mark for share of loan volume was a record.
“Women-owned small businesses are helping to power America’s historic small business boom, and the Biden-Harris Administration remains committed to ensuring women receive the capital and resources they need to build resilient businesses and create jobs to fuel our economy,” said SBA Administrator Isabel Guzman in a release on Wednesday afternoon timed to the 35th anniversary of the Women’s Business Ownership Act (H.R. 5050), which among other things, made lending directly available to female entrepreneurs. “Bidenomics is about growing our economy equitably,” she added.
According to the SBA, there were over 13,059 SBA 7(a) and 504 loans to women-owned small businesses during fiscal year 2023, up from 7,715 in 2020. The $5.18 billion in total loans was up 61% from 2020′s $3.2 billion.
While the scope of influence of women entrepreneurs’ in the economy is difficult to track in real time, women-owned businesses have an estimated $1.9 trillion in receipts, 10.9 million employees, and $432.1 billion in annual payroll, according to Census, whose annual data is available through calendar year 2020.
The SBA loan numbers come amid one of the most difficult credit environments in recent history, with the Federal Reserve pushing up interest rates by more than 5% in a year, sending small business loan rates into the double-digit percentages. A survey released by Goldman Sachs 10,000 Small Businesses Voices on Wednesday reported that 78% of small business owners worried about access to capital and over half (53%) said they cannot afford a loan at current rates.
