Jump to Main Content
USA flagAn Official Website of the United States Government
SBA News and Views

Blogs.SBA News and Views

Register

A New Strategy to “Drive” Small Business Growth

Comment Count:
15

Comments welcome on this page. See Rules of Conduct.

A New Strategy to “Drive” Small Business Growth

By ngoriel, SBA Official
Published: July 11, 2014 Updated: July 14, 2014

Three years ago, entrepreneur Maurice Brewster made one of the best business decisions of his life: He signed his limousine company, Mosaic Transportation, up for IBM’s Supplier Connection – a collaboration between small businesses and the supply chains of Fortune 500 corporations

It was a wise decision because small firms that enter the supply chains of major corporations grow their revenue by an average of 250 percent and their workforce by an average of 150 percent.

In three years, Maurice has signed contracts with seven major corporations, grown Mosaic from 20 to 46 employees, and tripled his annual revenues. His company had lost half of its business during the Recession, but now it is reaping record profits. Maurice credits this remarkable turnaround to two things: he joined a corporate supply chain, and all seven of his new clients pay him up front with a corporate credit card.

Unfortunately, most Mosaic clients take far longer to pay; it took one company seven months to cut his check. Maurice says if every client paid him on time, he would expand tomorrow to New York and Los Angeles and create dozens of new jobs.

This is a common complaint from America’s small business owners. Timely payments and the cost of working capital can make or break a small business. And these ingredients are essential to job creation and economic growth.

Today, SBA Administrator Maria Contreras-Sweet joined President Obama at the White House to announce the launch of SupplierPay. It’s a new project dedicated to giving America’s entrepreneurs access to affordable, consistent working capital. It’s about paying them on time and keeping their interest rates low, so they can invest in new equipment, new products and new people.

Twenty-six major corporations have already signed up. They’ve pledged to shorten payment times or provide other creative financing solutions, so their small business suppliers have the confidence to hire more workers and expand their operations.

SBA will take the lead in recruiting additional corporations to join this endeavor.  We have a great case to make, because SupplierPay is a win-win for small businesses and their corporate partners. Supply chains are often shared across an entire industry, so there’s a positive spillover effect when capital costs are lowered. It reduces the price of goods and services. It allows investments in human capital that reduce preventable errors. It increases returns on cash and improves the overall stability of supply chains.

President Obama promised the American people he would use the power of his office to make progress on their behalf. Whether you’re a limo company, an auto parts maker or an IT services company, getting paid faster and on more favorable terms is a surefire way to drive job growth and help put America on the road to a more prosperous future.
 

About the Author:

Natale Goriel

SBA Official

Hi, my name is Natale and I'm serving as a Moderator for the SBA Community. Our goal is to continually improve this site to meet your needs, so we appreciate your feedback and participation.

Comments:

Small and local businesses must adapt to new innovative marketing strategies in order to remain relevant. It is key for business owners to share what strategies are currently working, what worked 5 years ago may be outdated and may not work today. Each week we feature such businesses who are implementing such innovative strategies worth sharing. Why reinvent the wheel or try unproven techniques? By business owners sharing winning strategies with others everyone wins.
Quick and affordable invoice factoring can accelerate business revenues and enable one to take on new clients. These benefits make factoring an effective tool to finance the growth of small businesses today.
I have my start-up growing. It is not easy actually. The things shared in this article hopefully can help small business and strat-up better.
This is a remarkable strategy to encourage small business owners while eliminating their vulnerabilities regarding timely payments. It is definitely something that would benefit small business owners.
For small bussineses not getting paid can be a killer and I know many of them who went south just beacuse of that.They relied on one big business,with mayor customer and in between lose every day small ones.It is a quiet common mistake one can make,gladly there is some progress in this respect.
If your business manages customer invoices, handling extended customer billing cycles with slow to pay and non paying customers can be a big drain on your available working capital. With invoice factoring, the factor company buys your accounts receivable, then assumes responsibility for collecting on the outstanding invoice. Your business would receive 90% or more of the total value of the outstanding receivable upfront.
I have some removals companies or man and van services that i work for,most of them are huge corporation in London and i agree with you when it comes about payment...It holds me down and takes so long to get paid that i end up forgetting about it.
I think this program is great for businesses that are in that sector. However, it doesn't do anything for companies that need to get bank financing, such as construction. Most banks have just shut down their lending to construction companies which forces us to seek lending elsewhere, such as factors at much higher interest rates and that's only if they are available. After being in business 30 years and surviving the most awful past 5 years, this is worst conditions I have ever encountered in trying to obtain bank financing. And the SBA program just takes way too long.
The banks are not lending and your industry in particular is tough as it is categorized by bankers as "high risk" which is utter non-sense. There are, as you say, alternative solutions but lot of them are wolves in sheep's clothing. The good news is that alternative lending is getting more aggressive now by lending to the construction industry and there are good products available to companies with sound cash flow management. Find a trusted advisor in the alternative lending space and determine your options as they have changed for the better.
We recommend that our clients do an internal audit to make sure they are prepared to handle the growth that comes from becoming service and product suppliers to larger businesses. Often such expansion is costly. Also, the idea that this program help's "America’s entrepreneurs access to affordable, consistent working capital," is debateable. This is a pledge to pay on time or within a span of time, not an assurance. But it is a step in the right direction.

Pages

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!