A New Strategy to “Drive” Small Business Growth

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Originally posted on the SBA.gov Blog

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.

On July 11th, 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.

John Spears is the Director of Clusters and Skills Initiatives at the SBA.