Today, President Obama announced the creation of SupplierPay, a new partnership with the private sector that will strengthen America's small businesses by increasing their working capital. He's also renewing the QuickPay initiative for federal small business subcontractors, which the President launched in 2011.
If you're scratching your head and asking yourself, "What does that mean, exactly?" — don't worry. We'll do our best to break it down for you.
Why do we need to strengthen small businesses?
Small businesses are vital to our nation's economy. Not only do they employ half of America's workers, but they create almost two out of every three new American jobs, and they're often the source of great innovation.
The Great Recession disproportionately affected small businesses, as they lost 40 percent more jobs than the rest of the private sector combined. Although they're still creating most of our new jobs, 66 percent of small businesses say that they find it "difficult to raise new business financing," according to a recent Pepperdine and D&B study.
What's more, it often takes too long for small businesses to get paid for their products and services. Estimates show that the average small business invoice goes unpaid for almost two months, and "past due" payments are increasing. This causes small businesses to spend unnecessary funds in order to cover the cash flow issues caused by late payments — funds that could be spent on growing their businesses and creating new jobs instead.
How does SupplierPay help?
SupplierPay will help small businesses by increasing their working capital, so they can grow their businesses and hire more workers. In the SupplierPay initiative, companies commit to pay small suppliers faster, or help them get access to lower-cost capital.
To launch SupplierPay, the President is bringing together 26 companies that have committed to the initiative. For the larger companies, joining SupplierPay demonstrates a recognition that a healthy supply chain is good for business. And the small business suppliers will get more capital to invest in new opportunities, new equipment, and new hiring.
For example, Metal Impact, located in Elk Grove Village, Illinois, is a small supplier working with Apple — one of the companies that has signed on to SupplierPay — as part of its domestic manufacturing initiative for the Mac Pro. Metal Impact provides components for the Mac Pro's cylindrical aluminum enclosure, and is part of Apple's $100 million Mac Pro Project, which relies on component and equipment suppliers from 23 states.
To date, Metal Impact's partnership with Apple has generated millions of dollars in revenue for the small business.
And what's QuickPay?
SupplierPay is modeled after the federal government's QuickPay initiative, which requires federal agencies to speed up payments to small business contractors, with the goal of paying within 15 days.
QuickPay has expedited more than $220 billion in payments to federal contractors, and saved small businesses more than $1 billion since 2011.
The ELOCEN Group, which offers consulting services in construction management, interior design, information technology, and facilities/logistics, is one of the many companies that is benefiting from this federal initiative. "QuickPay has had an incredible impact on the ELOCEN Group," says CEO Necole Parker. "It has resulted in more working capital, a greater number of satisfied subcontractors, and a more profitable overall bottom line for the company."
Simply put, SupplierPay and QuickPay will help small businesses get paid faster. This will in turn create jobs, give these businesses more of a chance to succeed, and put America on the road to a more prosperous future.