By Erik R. Peterson
Submitted by Mastercard
Two things that united us during the pandemic were the recognition that small businesses are the lifeblood of our communities, and our collective determination to keep them afloat. But small business owners need support on both sides of the checkout counter.
In our rapidly evolving world, they need better access to capital and the tools and expertise to digitize their operations and more efficiently run their businesses. Small and medium-sized enterprises (SMEs) in the business-to-business space, an often overlooked segment despite payment volumes totaling almost three times that of consumer spending, have fallen behind in digitalization and require more support to stay competitive in an increasingly global economy.
Governments can and must play a part. As part of my work with Mastercard to help identify specific ways they can help small business owners not only survive, but flourish, I sat in on focus groups with entrepreneurs across industries – and around the world – to learn more about their challenges, and one really hit home.
Sandra, a B2B entrepreneur in the cosmetics industry in Canada, has been struggling with receiving funding and managing working capital to keep her company going through the pandemic. As a female business owner in a non-tech sector, she felt that her voice was not being heard by policymakers. “I’m a mom, I run a business, I run a household — we’re the queens of systems,” she said. “Women need access to programs and education that can help them manage their businesses and also really use their expertise.”
Small businesses play an outsized role in the global economy. In fact, they represent 90% of all businesses and employ roughly 70% of all workers globally. Given their importance, entrepreneurs like Sandra should receive greater support from governments and larger private sector companies to help them make and receive payments, gain equitable access to funding that can support their longer-term growth, and join the broader ecosystem of digital businesses.
The good news is many governments are stepping up to the plate. The Business Development Bank of Canada has supported the cash flow of small businesses by not only providing them with working capital loans to bridge cash flow gaps and support operations, but also offering purchase order financing with flexible terms to help them fulfill domestic and international orders. In Chile, policymakers established the “Digitize Your SME” program, which helps small business suppliers connect with buyers, providing a tool co-created with the Inter-American Development Bank that helps business owners assess their level of digital maturity. It also offers webinars on making the best use of technology, among other initiatives.
These are just a couple examples of the roles governments can play and policy tools they can employ to support these businesses. In the new white paper, “Reimagining support for small businesses: The path to creating stronger and more resilient small businesses through and beyond COVID-19,” Mastercard’s Policy Center for the Digital Economy and Kearney’s Global Business Policy Council have identified several roles governments can play to strengthen resilience, with focus on business-to-business (B2B) small businesses.
Conduit for and enabler of working capital and funding
This role has been especially important amid COVID-19 to keep small businesses going. By easing cash flow burdens and removing barriers that hinder the ability to receive capital – particularly for women business owners and entrepreneurs of color who have been hit disproportionately hard – governments can help small businesses operate on a day-to-day basis. Many B2B businesses need support for basic digitalization efforts, or risk being shut out of the global opportunities.
As small businesses become increasingly digital – and as cybercriminals increasingly see them as targets – governments can ensure a safe and secure operating environment with regard to cybersecurity, trust and transparency. Free or subsidized cybersecurity tools, for example, would make them far less vulnerable, not to mention safeguarding the data of their own customers and consumers.
There are financial and digital tools out there, but many small business owners – already overburdened with the task of keeping their doors open – may not be aware of them. Governments can also create opportunities for connecting entrepreneurs to one another for knowledge sharing and business growth.
Convener and connector
Everyone has a stake in the vitality of small businesses. Governments can bring together – and incentivize – other players, including private companies, non-banking financial institutions, development finance institutions and non-governmental organizations, harnessing their collective expertise to support cash flow management, capital and digital services to B2B businesses.
These are just some of the ways policymakers can act – and this is just the starting point. Governments can build connections and dialogue with trade associations to understand small and medium B2B business pain points on a deeper level – and to build a broader ecosystem of support alongside trade associations, with the multilateral organizations and with other governments.
I hope we can spark a dialogue among the public and private sectors alike on policy mechanisms and action-oriented best practices that can best increase the resilience of small businesses. As the world moves out of the COVID crisis, governments and the private sector have a great opportunity to empower SMEs to not only survive, but to thrive and position themselves to better adapt to an ever-changing world.
Check out the full report and more from Mastercard.
Mastercard is a global technology company in the payments industry. Our mission is to connect and power an inclusive, digital economy that benefits everyone, everywhere by making transactions safe, simple, smart and accessible. Using secure data and networks, partnerships and passion, our innovations and solutions help individuals, financial institutions, governments and businesses realize their greatest potential. Our decency quotient, or DQ, drives our culture and everything we do inside and outside of our company. With connections across more than 210 countries and territories, we are building a sustainable world that unlocks priceless possibilities for all.
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