SupplierPay is a new partnership with the private sector that will strengthen America’s small businesses by increasing their working capital. This will allow companies to grow and provide more jobs for workers.
In the SupplierPay initiative, launched on July 11th, 2014 by President Barack Obama, Senior Advisor Valerie Jarrett, National Economic Council Director Jeff Zients and Small Business Administrator Maria Contreras-Sweet, companies are required to pay small suppliers faster- within 15 days of submitting invoices- or at least help get them access to lower-cost capital, in order to increase cash flow through the supply chain.
President Obama has also announced that he has renewed QuickPay, allowing the SupplierPay partnerships to build on its successes.
What is QuickPay?
The Federal Government’s QuickPay initiative was started by President Obama in 2011, requiring federal agencies to pay back business contractors within a goal of 15 days. As the government pays its large contractors faster, the large contractors pay their small business contractors sooner, strengthening their financial stability.
According to The U.S. Small Business Administration, since the launch of the initiative, there has been over $1 billion in cost savings for small businesses. This has increased their capital investments and job creation substantially.
Who is Participating in SupplierPay?
With its launch in July, 2014, Apple Inc., (AAPL) Coca-Cola Co. (KO) and about 24 other companies - both large and small - have committed to this partnership. Larger companies joining the initiative demonstrates that a healthy supply chain is good for business. Small business suppliers benefiting from SupplierPay means that there will be more capital to invest in more opportunities, new equipment and new employees.
To see the 26 companies that have signed on to SupplierPay, see this release from The White House.
How Will SupplierPay Help Small Businesses?
A recent Pepperdine and D&B study reported that 66 percent of small businesses have trouble raising new business financing. The challenges of attaining capital are magnified when companies have excessive waiting periods to receive funds. Small firms sometimes have to wait as long as two months on average, while “past due” payments are steadily increasing. This delay can cause trouble for small corporations when they don’t have the means to pay their own subcontractors or make capital investments.
With access to lower-cost resources and faster receipt of payments, small companies will be able to grow their enterprise faster and hire more workers.
Why is Helping Small Businesses Important?
According to the SBA, small businesses employ half of the American economy’s workforce, create nearly two out of every three new job opportunities in America and are often the source of the next great American innovation. They are critical to the strength of local economies and serve as the building blocks for America’s largest corporations.
In almost 20 years, small businesses have generated 64 percent of new job opportunities and paid 44 percent of the total United States private payroll. Small businesses bring growth and innovation to surrounding communities and tend to attract talent who design new products or apply new solutions to existing issues and ideas.
Furthermore, small businesses do not stay small. Many large corporations began small and are now industry leaders, like Nike and Microsoft. This potential growth is great for communities because the businesses tend to stay where they were first established.
Small firm capital access has been on the minds of Federal Administration since 2009, starting with the Recovery Act, the Small Business Jobs Act in 2010 and the JOBS Act in 2012. Record SBA small business lending volumes have been reached and recent Federal Reserve Small Business surveys show improved access to financing. However, many small organizations still struggle to access the resources they need.
With SupplierPay in its inaugural year, not all companies are on board yet. If businesses can’t get the steady flow of income that they need to maintain their working processes, seeking external funding is still a viable option. Companies like Business Financial Services have taken the initiative to bridge the funding gap for small businesses, providing short-term business loans and merchant cash advances which are ideal for financing business growth.
With funding options available to business owners and new initiatives being put into action, small businesses should be optimistic about the future ahead.
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