Small Business, Big Impact: The Force of Small Businesses in Todays World

**Michael Mendenhall: **What a day. Welcome back. It's good to see you all came back and enjoying the first part of the morning. We've heard some amazing insights on growth opportunities in small businesses, very optimistic, but also some of the challenges. And I really can't think of anyone more in tune with the needs of small to medium-size businesses than our next speaker.

Isabella Casillas Guzman was sworn in as the 27th administrator of the U. S. Small Business Administration on March 17th, 2021 and she serves in President Biden's cabinet as a leading advocate for all of us, for America's 33 million small businesses and startups. She has made in her life's work supporting businesses a passion that was developed at a very, very young age. We're going to hear a lot about that. Working beside her father in veterinary hospitals in Southern California, she gained a deep appreciation of the small business owners in the cities and the communities, which are really driving the economy and innovative global solutions.

As head of the SBA, she serves as the voice for America's small businesses and startups. Managing over $500 billion portfolio and deploys $40 billion in funding—we want to hear more about that—annually to these businesses. We are honored to have her here from Washington, DC. Please welcome Administrator Guzman. Awesome having you.

So here we are. New York City, not DC. Right? So, are you surprised at how you got here? Here you are on the cabinet, working in administration and I'm sure that journey was long and probably had a bunch of twists and turns. Are you surprised you're here in this role?

**Isabella Casillas Guzman: **I think President Biden always talks about America as possibilities, you know, defined by one word, possibilities, and I do really feel that's been my life path. There's no way I expected to be on the president's cabinet, being in the room advising him and the administration on small business issues. It's beyond my wildest dreams, but I'm so glad I'm here. I love small businesses. I love this space and to be able to serve at a time when small businesses have been so critical to our recovery and are a key part of our future is exciting.

**Michael: **That's so exciting because I think it's over 50% of the GDP is associated with all the small businesses that you represent. They really are over 90% of the workforce. So, very important to the economy. What do you see? You travel quite a bit. You should talk about that. I think you're on a plane a lot. You're back there texting your son to hold on. "I'm done. I'm in the middle of something." How do you balance all of that—do all that traveling—and what have you learned in all of the travels? Various industries—you see probably a lot more than most of us. We see a lot, but you probably see more. What would you share? What are you seeing today in this environment for small business?

**Isabella: **Well, what a remarkable time we've come out of. Small businesses have really proven that they are giants in this economy. Now more than ever before, it's been a recognition of the fact that we need to make sure that they have the success factors that they need to help us be more competitive globally as a nation. They are, as everyone says, the backbone of our economy, but they also are what spur innovation and competitiveness. And so, I do get to travel extensively because our small businesses are not just in DC, they're on main streets, they're in manufacturing centers and innovation centers. And I get to hear from them, obviously how critical programs that the SBA were to their survival during the pandemic—the PPP, Paycheck Protection Program, or COVID EIDL, Economic Injury—those things helped save millions of businesses.

**Michael: **You sort of took that over, right?

**Isabella: **I took that over midway.

**Michael: **And you had to then implement what was put in place. Talk a little bit about that.

**Isabella:** Focusing on improving it and trying to make sure that those who were left out of early rounds of relief would be able to get support. And so that was President Biden's focus is, "Let's go to the smallest of the small. Let's go to those underrepresented communities that may need assistance and going through the process." So, that was our priority is making sure we didn't leave anybody behind. That's been a great pleasure to be able to see that pivot in the programs, but not only that. Implement controls so that there was speed and certainty is what we focus on at the SBA to deploy capital. Do it so it gets into the hands of those it was intended to serve, but still spurs economic activity.

**Michael: **During the pandemic, did that process speed up? There was such a sense of urgency that these businesses could fold. And some of these businesses were working on really critical pieces of infrastructure, technology, healthcare. Did you have to make any changes relative to the processes to say, "We've got to accelerate now, at like, in seconds"?

**Isabella: **When we stepped in where businesses were still reeling from the pandemic, they needed additional support. Many of them had gone through to PPPs. So we looked at how we could expand access to capital and increase the loan limits on our COVID EIDL program, those economic injury disaster loans so that businesses could continue to get the cash flow that they needed to survive. All that was critical, but I think that what was so important about that moment is leveraging the moment to be able to scale the SBA because our core programs are really helpful to small businesses on an everyday basis, but how do we get that out to more small businesses and make sure the programs work for them.

**Michael: **I want to get into the tools because you have an amazing website. We'll talk about what are some of those tools that people may not know about that you actually do provide because a lot of people don't get in and go deeper into the site and understand what is available. We did a poll and the poll says, "Did you participate in the Paycheck Protection Program?" Now, these are the people that are online that are watching us live. 56% said "no, they did not." 44% said "yes, they did." What did you see in terms of volume when you think about the 33 million? Around what percent, you may not have the exact number, participated?

**Isabella: **We supported 12 million unique small businesses with the COVID relief programs. A sizable amount of businesses were in industries highly impacted during the pandemic and there were specialized funds for some of those, like restaurants and venues, theaters, entertainment, travel and tourism overall. So, we really saw high activity within those sectors, but overall, small businesses all faced some sort of uncertainty at the moment.

I would say that 12 million was across multiple sectors. Now as we've focused on the president's Invest in America agenda, it's about making sure that they're positioned to take advantage of the opportunities and the investments in our country from manufacturing and reshoring and building supply chains here in America to innovation and technology investments in the future and clean tech, as well as, how we're going to make sure that we reduce costs and level the playing field for small businesses.

**Michael:**Well, it's interesting because I think it's something like 15 times more patents are created by small businesses than big enterprise. How much do you pay attention to the global competitive nature of some of these industries and small businesses? Do you actually look for and ensure that we have the right resources going into these industries, so we have the tech advantage that we have some of these advantages and in health care, et cetera. Do you pay attention to that as well in your group?

**Isabella: **We do, because the SBA helps all businesses at every stage and size and industry but we are trying to incentivize innovation. We have programs that the SBA focused on technology and science, giving innovation grants to businesses, to help them commercialize products that that will lead to the future sectors. Some people know about our small business innovation research grants, but this is what we call America's seed fund, making sure that we're competitive and critical technologies, everything from AI to national defense to make sure that we are positioned globally to strengthen our economy with innovation through small businesses.

**Michael:**You bring up AI. So I'm going to jump to that, but I'm going to come back to some of these other topics. So AI, it's prevalent. It's out there. We've had machine learning and AI for well over a decade. We're now seeing it really progress into the consumer space. People are seeing huge advantages. We've seen that really most recently in health care. We're certainly seeing it within companies’ firewalls, even certainly ours in TriNet, where we're exploring, you know, how do we use this and make it much better for our customers and use the technology? There are some downsides to this.

What are you doing and who then do you collaborate with in the administration? What other groups do you collaborate with to really figure out how to help companies deploy AI in the right way and in an ethical way?

**Isabella: **Well, just backing up, we saw small businesses adopt technology at high rates. Three out of four said that technology tools helped them survive the pandemic. So that adoption really leads us to think holistically about how small businesses are using technology to grow their business to improve operations. And so we launched the Small Business Digital Alliance with great partners like TriNet to ensure that we were getting free tools and resources out to small businesses to make sure that, as they adopt technology, they're doing it with protections and smartly. The Biden-Harris Administration has been focused on AI specifically and how we can ensure that the future takes advantage of the innovations but also protects consumers and protects businesses and small businesses in particular.

**Michael: **So, some of that we hear, you'd have to do it globally because, would China? Would some of these other countries take advantage if we pull too many regulations into this environment to where we can't move with the speed we need yet? Then do you leave yourself open to nefarious activities that could happen with AI? Do you and the administration give consideration to what these other countries are doing and how are you collaborating so that we're not left behind, but we don't expose ourselves?

**Isabella: **Yeah, we have deployed a whole government approach. The president talks about this quite a bit, but, clearly there are advantages to engaging all agencies to think about these complex issues. Also with our private sector partners, so we are thinking globally, engaging with State Department and others as we talk through these complex issues but also with the private sector. And so, convening all the leaders in this space to talk about commitments and make sure that we're building responsibly the innovations for the future, and especially as we think about protecting small businesses in this space and teaching them how to use these tools responsibly.

**Michael:**That's awesome. So, a lot of this does exist within your website and a lot more than just AI. Talk a little bit about those tools that you find most interesting on your site that would help these small businesses that are listening and watching today.

**Isabella: **Well, capital is king and the SBA is definitely known for its capital programs, so we try to de-risk the financial markets so that lenders, investors, can help spur our small business community. And so, we provide guaranteed loans through lending networks to help businesses do working capital loans, to asset building, buying their property, acquiring businesses.

We also provide investment capital. We have over 300 licensed small business investment companies who access capital from the federal government to deploy to growth-oriented firms. Between these loans and these investments, as well as the America's Seed Fund that I talked about earlier, SBA deploys over $40 billion in capital every year. That's where we power up the future that is happening right now. There's a small business boom in this country right now, with over 13. 1 million new business applications filed, where some of our global partners around the world are seeing flat startup rates since the pandemic occurred, we're seeing a startup boom, and that's a tremendous amount of hope and opportunity as we invest in America.

**Michael: **That goes back to what Burton said earlier about it's a perfect time to start a business. You're certainly seeing it. We have another poll here that is, what are your concerns about AI? And one is the accuracy of results and the ethical behavior, and then the third is protecting your business and its security. So do you guys help when you think about some of that?

We're going back, this poll was a little delayed, but do you think about that when you're talking to small business about security? Do you have protection of your IP, protection of your company's brand?

**Isabella:**A hundred percent. We want to arm small businesses with the tools to protect their businesses, but build resilient businesses. A lot of times that means analyzing the risks and fortifying your company from threats. Whether they're natural threats, natural disasters to potential threats in cyber. So, that is what the SBA tries to do. We've expanded our network of advisors that provide knowledge networks and counseling to help small businesses.

**Michael: **All of these things, they're accessible, right? So, where do they go? Do they just go to your website? Is that where they would find all this information? Not only about some things you're providing, guidance you're providing, but like opportunities for capital. Is that all consolidated so that they know where to go?

**Isabella:**Yes, at [sba.gov](https://www.sba.gov/) we have all of our content there. More importantly, in trying to navigate, even us, as a federal agency, that's what we have these centers for, our local district offices, sba.gov, get local assistance, is how you connect with a real person for assistance. We've also been investing in technology ourselves, just like our small businesses have had to pivot and adapt and adopt technology, we have at the SBA the last couple of years. We're building more tools. We have a lender match tool to connect you to capital. We have simplified certification tools you can certify to do business with the largest buyer in the world, the federal government or take online courses to navigate all sorts of issues that businesses are facing today.

**Michael: **What are some of the specific programs around capital? Cause you have specific ones, some of them have sort of nicknames.

**Isabella: **They're not named well—7A, 504. It doesn't tell you much about what they are, but basically we work through a lending network and through investors who can help businesses figure out what's a good product for them or our advisors to get you capital ready. We do have working capital loans, cap lines to help you go after some of those contracts. We do have, and those are the 7A products and the CAPline products, but we also have 504 loans that really are about wealth building. We want businesses to be able to acquire the equipment or acquire the building that they're operating in and build wealth, that intergenerational wealth. So, those are key products that we put out in the marketplace. The investment dollars that we put through, we have licensed investors who deploy that capital that are also listed on our website.

**Michael: **So, the PPP loans, all of that happened very quickly. We had a banking crisis. Small regional banks, some of them are part of the small business administration sort of portfolio. That was something that Janet Yellen, yourself, people had to react incredibly quickly to save small businesses. Talk to us about what happened and what you had to do along with then this secretary of the treasury in trying to secure the funding and not having a run on the banks, and not having a collapse of these small businesses? Some of them were very important to the economy.

**Isabella: **Well, yeah, I'm very proud of my cabinet colleagues who reacted quickly as well as the White House, the National Economic Council to ensure that there was a quick response and Silicon Valley Bank, of course, is a giant in venture debt and really helping support startups in this country. I come from California. I'm quite familiar with that space and we know that, at that time, more than ever, our lending products became increasingly important because our banks rely on that guarantee, which a guaranteed loan doesn't sit on their books in the same way in terms of regulatory capital.

So to be able to deploy the full faith and credit of the federal government behind loans to small businesses is what helped strengthen so many of our lenders who use our programs. There's large banks, regional banks, small community banks who use our products, as well as credit unions, mission lenders, those nonprofit lenders.

**Michael: **Those companies that had the small business loans were far more secured. So that was exciting for them, correct?

**Isabella: **Well, to be able to quickly access capital and be strengthened in that, but we were focused on reforming our capital programs so that more lenders could access our products, so that more venture backed firms could access our products without affiliation and eligibility issues. And so we've streamlined, cut red tape in our lending programs so that we can continue to serve the financial sector with the government guaranteed product.

**Michael: **And now, did you put things in place, I'm sure the Secretary of Treasury did, to try to ensure that this doesn't happen again? Because a lot of people are like, when's the other shoe going to fall? When you think about commercial real estate and the regional banks participating heavily in that.

**Isabella: **Regulators, the Federal Reserve board and the members on that board did a stellar job in terms of trying to ensure that the full faith could be amongst the American people in our banking sector fortified and strengthened. And they continue to work to ensure that we are balanced in our regulation to ensure that the customers are protected.

**Michael: **So we hear a lot about regulation. We had a conversation about this—regulators, regulation thwarts new business startups. It hampers your ability to succeed. You guys have a very clear opinion about that. I thought it was important to share that.

**Isabella: **Yeah. I would say it's on both sides, right? Regulation actually sometimes spawns new industries. Look at this, look at the clean energy economy. I know that oftentimes our businesses talk about some of the local regulation that is challenging—getting your permit, getting that health certificate.

All those things can be challenging, but at the SBA, we try to help businesses navigate regulation to anticipate those challenges and those risks and use our resources to prepare your business so that you can withstand any of those issues and not face disruption. Regulation often is what protects our health and our environment and our safety in many instances, and so we want to make sure that the small businesses can comply and have the tools and knowledge to do it.

**Michael: **So we did have a poll here. If you go back one, if you don't mind. If you can go back one poll, it was very interesting about, yeah, they have one now. Were you concerned about your bank during the banking crisis? 51% said "yes." 49 said "no," so it's almost half and half.

**Isabella: **Yes.

**Michael: **So, probably not as dramatic. It was dramatic, but not as dramatic as we had thought, but that's what the folks are saying online, so…

**Isabella: **It was intense. Any uncertainty for small businesses is a big challenge, right?

**Michael: **Well, that's what I wanted to go into now, because what we've seen is there's great optimism, right? Over 70% are very optimistic about where they are and what the future holds. There's still 60 some percent that are concerned that there's some uncertainty in the economy, not sure. And so, you do have a sense of optimism? Many are hiring. So over 60% are hiring. What do you see being out in the field that these companies are saying to you throughout the U. S. about that space and where their feelings are about the economy?

**Isabella: **Well, we've seen such a historic economic recovery with strong job creation, still low unemployment, inflationary pressures are still a challenge, but stabilizing. And I know that as I travel with small businesses, now, more than ever, workforce issues seem to be dominating.

Of course, always capital, because I'm the SBA, I have capital, so it's oftentimes flagged, but still inflationary pressures, it's just managing that bottom line. We're not seeing as much of the vendor disruptions, supply chain disruptions, but these are big issues that small businesses have to deal with wear that HR hat and try to manage some of those hiring and retention challenges that small businesses face.

And so, for us at the SBA, it's about making sure that those issues don't thwart them from taking advantage of opportunities because we're investing billions of dollars. There's been over $300 billion invested in infrastructure. Those are contracts for small businesses. Those are opportunities. As the CHIPS and Science Act is deploying and building up our supply chains and manufacturing—those are opportunities. 70% of manufacturers are 20 employees and under. So very small businesses. The Inflation Reduction Act, as we look at those tax credits, those are trades small businesses that are going to be delivering those improvements.

**Michael: **So many small businesses don't take advantage of tax credits, even the R&D sort of tax credits. How do you support that and promote that? Is that through the website as well? Or do you have a group that looks at that and really tries to educate small businesses on that program?

**Isabella: **We have information on our website, but what we really try to do is put boots on the ground through the now over 1,600 centers who provide advice to small businesses and can direct them to resources. We encourage small businesses to build their teams and know how to navigate the accounting issues and the tax issues so that their model is resilient and that they can continue to grow and deploy tax credits wherever it's an advantage to their business.

**Michael: **And that sort of gives us a competitive advantage as well, as a nation.

**Isabella: **Right. And especially as we're trying to incentivize sustainability. The Inflation Reduction Act had credits in there for clean energy technology of the future, but fortifying HVAC systems and windows, et cetera. There's some great tax credits that people should explore and they're available on our website, the IRS.

**Michael: **We have several small businesses that are here and that are probably watching that are in, what they believe is, clean tech, which is electric vehicles and is that something that falls within those sort of tax credits? Is that something they can take advantage of? Whether it's autonomous vehicles, autonomous that is, there's a big push from the administration in that space. Is there some involvement there with that program?

**Isabella: **Yeah. Well, I have a good friend who always talks about it like going on a hunt. You gotta hunt for these opportunities, but also hunt for these tax credits that are available or good funding solutions for your businesses.

I think, that's what small business owners have to go at, roll up their sleeves and try to do, and we just try to help direct them. But yes, there are tax credits for EVs across the board that we want to make sure we're transitioning to a cleaner energy economy. I see it every day because the SBA does disaster assistance. We give out disaster loans to communities impacted by natural disasters.

**Michael: **Oh, that's something people probably don't know.

**Isabella: **Yeah. So it's the businesses who sustain economic injury and disruption. And we help them either recover physically or economically.

**Michael: **Is this something if we took the Maui fire?

**Isabella: **We're in Hawaii, we're in Florida, we're in 25 different disaster areas around the country helping people recover from storms, flooding, fires, you name it. It's not only the businesses and the nonprofits, but it's also their customers, their employees, because we give loans for renters and homeowners as well. We try to holistically help communities recover quickly from disasters, but you see the increase in impact of natural disasters. We've put out over $5 billion so far in the Biden administration and disasters. We're just entering hurricane season and businesses need to ready.

**Michael: **It started to get a little scary there for a while. That's interesting. What other things have you heard about employees? So more particularly, these companies need skilled workers that have certain disciplines and experience. Are we educating our youth in a way that will supply that void we're going to have? When you think about aging populations, certainly we've seen that in Japan where it really affected the economy and inflation, where you have a shrinking labor force and yet you have more jobs that need to be filled, and we talked about that earlier. What are you hearing relative to that? Do we have the right talent, I guess is what I would ask.

**Isabella:**And as we're trying to build skilled workforce to fill those manufacturing jobs or there's been over 800,000 manufacturing jobs created, for example, or fill those jobs of the future, we obviously have to invest in apprenticeships and education. Small business owners will always tell me that the training their workforce is a challenge and expensive and the retention on the other end is probably even more critical because you invest so much to train them. But there are core skills that we need to increase at the high school level and college level to make sure that workforce comes out prepared with some natural skills that businesses can layer on with more subject matter specific expertise.

**Michael: **Yeah, we said it's interesting that we teach languages like Latin, German, et cetera, but should they all be taught coding and at a very young age?

**Isabella: **Digital skills, just some of those soft human skills that are increasingly important as well.

**Michael: **So, to wrap up the conversation, what would you say to all these small businesses that they should be thinking about? How should they be using you? I think it would be important for you to talk about how many employees you have. Where they're all located so that there's access, so it's not just the web. Now, that's always important. We tend to lose the human interaction, which is still important, to find certain pieces of information. AI may solve some of those solutions. But, what would you say to them about where we are, what the future looks like? And how should they work with your organization?

**Isabella: **Right. I know small businesses and I heard it in the video, so I heard myself, but I do like to say this, that small businesses do the hard work. They come up with the idea, they're leading their business every day. We really want to just be there to provide information, knowledge networks, affordable capital—support your business in any way that we can—so that you can continue to work on your business, not just in your businesses, create jobs and really have the impact that we know you can, but you have to know what you don't know, and I think that's where we try to fill gaps. We have thousands of employees and partners around the country who are on the ground, live people who could help support small businesses with everything from doing their first strategic plan to navigating local workforce opportunities and trainings. We just want to be the navigator and help businesses develop those plans to take advantage of opportunities in this country and help us compete globally because small businesses are the competition.

They are the innovators. They are the backbone in so many ways of being the job creators, and we want to make sure that they can grow and sustain these resilient businesses to withstand any disruption in the marketplace.

**Michael: **Well, I think I want you to just brag a little bit about what you've achieved because the media always tends to look at what sort of negative that's going on. And there's actually really great optimistic numbers and a great optimistic future that you have created in this administration and I want you to brag a little bit about that.

**Isabella: **Well, we've really turned the ship around when it came to the COVID relief programs in the president's first year, putting out that $500 billion, focusing on filling gaps in the marketplace and as a result of what SBA did, scaled from $40 billion, to like I said, over $500 billion a year, that was remarkable in saving businesses. And now in modernizing our systems at the SBA and expanding our distribution networks, we've been able to help support this small business boom of 13. 1 million new business applications. This has been the top one, two and going on the three year in terms of small business starts ever on record. So these are historic numbers. And you know, that's exciting when you see what's happening around the globe and it, I think, it reflects this optimism. It reflects this commitment to invest in America and it also reflects that people are trying to jump in, take those risks, and finally create that small business. We are about the American dream of business ownership and creating more pathways to achieve that success.

By growing our networks, by expanding the capital that we put out the door, simplifying things, increasing federal spending to small businesses, all those things add up to help power our strong base of small businesses in this country.

**Michael: **Well, this has been awesome. You've heard it here. You need to use the Small Business Administration. They have not only capital, but a lot of resources that I think are incredibly important. You've done an amazing job, that's why I wanted her to say this, because we're in such a good place, and TriNet is very proud to be partnering with you in certain aspects of what you do.

It is so important, and we are honored that you came up here to spend some time with us.

**Isabella: **It's been my pleasure, thank you.

**Michael: **Yeah, thank you very much.