How the Infrastructure Bill Could Impact Small Businesses
With Congress consistently inching closer to passing a historic infrastructure spending package that will head to President Biden’s desk for signature, the implications of the plan on the economy and especially on small businesses will last for generations. While the most obvious industries that stand to benefit will be the ones directly tied to the implementation and construction of infrastructure improvements, the program also could be a significant boon for a wide array of industries that will be touched by the administration’s far-reaching plans to upgrade many facets of the country’s infrastructure.
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Garrett Boorojian, Managing Partner of WaveCapital Partners, an investment banking consultancy that advises small and mid-sized companies who are raising capital in many of the industries impacted by the infrastructure plan, believes that a plan that’s implemented well could bring tremendous benefits for America’s small businesses. We caught up with him for insight on what the historic legislation could mean for business owners.
If the historic infrastructure bill passes, what does it mean for small business overall?
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Garrett Boorojian: It’s projected that this bill, if enacted into law, would create around 3 million new jobs over the next decade. An additional 2 million new jobs would be created annually if the $3.5 trillion reconciliation bill gets enacted as well. These legislative bills would impact America’s small businesses, directly and indirectly, for generations to come. Expansive infrastructure projects and social programs would create millions of new jobs, including for union workers, and help strengthen global competitiveness in America. Small businesses in rural populations would be more interconnected with larger population centers. With new investments in infrastructure across the spectrum, the transportation of people and goods, and provisions of services, would happen in more expeditious manners, increasing productivity and economic output for big and small businesses.
Are there particular industries where you think small and mid-size companies could see a fundraising boost thanks to infrastructure-related opportunities?
GB: In the $1.2 trillion infrastructure bill, it states there would be $550 billion of total new spending over the next five years. Small to mid-size construction and other trades’ companies would have the opportunities to compete for projects in their home states once federal money is allocated toward each state. The federal government would pay $110 billion for roads and bridges, and $40 billion of that amount would include repairing existing bridge infrastructure.
Power-grid, the EV-charging station, and broadband internet infrastructures would benefit from private capital investments in addition to the federal funding support from the infrastructure bill. The $3.5 trillion reconciliation bill, if enacted, would address more of the social programs regarding education, housing, healthcare, the environment and a few other important public policy items. The private sector plays a pivotal role in these sectors, too.
With federal funding from the infrastructure bill, transportation through roads, bridges, trains, buses, airports and seaports, and high-speed broadband internet access across rural America would directly and indirectly be the key catalysts to the increase of productivity for small and mid-size businesses. For the small business owners who need to sell their products online and deliver them on time to their customers, it’s imperative they have high-speed broadband internet to flourish.
Small business owners should be encouraged that economic output has the great potential to keep rising, given the 943,000 jobs that were created in July, which lowered the unemployment rate to 5.4%. Although it still might take months for the infrastructure bill to become law, there would be millions of new jobs that need to be filled for these projects when the law does go into effect. Small business owners shouldn’t delay their processes of thinking ahead about where and who to look for in their towns and cities to help build out these projects that will impact their respective communities. From union workers’ perspectives, they would be protected under the infrastructure bill to ensure they’re paid fair wages depending on the locations of the infrastructure projects across the country.
What impact could that have on credit markets and capital availability in the SMB market?
GB: From what we have seen in the past month, unemployment is down and job creation is up. However, inflation is still rising. The Biden Administration is keen on the continued economic recovery tackling the supply chain issues America faces at this time. Consumer and luxury goods that include food, home, appliance, car and gas prices are all up because of rising inflation. The Biden Administration and the Federal Reserve plan to monitor inflation every month. If the Federal Reserve does take quicker action to raise the interest rate, then consumers would spend less and borrowing would be more costly, which would not be a good recipe for small business owners looking to start new businesses or keep their current ones afloat. Our nation doesn’t need high inflation, but also needs to avoid a situation of deflation.
Does the proposal create any inflationary concerns that could cause headwinds for small business?
GB: The Federal Reserve doesn’t plan on increasing the interest rate until 2023, but it’s hard to predict at this point if the U.S. will experience a more near-term push for the Federal Reserve to raise the interest rate.
While America is still working overtime having to deal with the COVID-19 pandemic, and with the Delta Variant affecting mostly the unvaccinated population in the country, the Biden Administration has to work with Congress to ensure these bills in their final forms, when enacted into laws, will bring economic relief to American families and small businesses who have been affected by COVID-19. The purposes of these bills are to address aging sectors of the American economy and restore them back to new or completely modernize them. The social sectors such as energy, education, climate change and healthcare, are of great importance also in the reconciliation process. Once there’s a balance of supply and demand again, the hope is that inflation would reduce so real wages are able to go back up.
What about supply chains?
GB: The Biden Administration signed an executive order back in February for conducting a 100-day review of addressing the most critical issues that American supply chain industries have been facing in the country. This generation has seen unprecedented political gridlock and division, hence it’s a giant step forward for the U.S. Senate to have bipartisanship support with an infrastructure bill that gives the green light for the creation of millions of new jobs. These jobs would bring more efficiency and modernization in all modes of transportation and information highways. An increase of productivity would increase economic output, creating more economic competitiveness for America on a global scale.
The Biden Administration has called on top industry leaders in the manufacturing and transportation-related sectors to work together to try to perfect the imperfections of America’s supply chain networks. The pandemic has mightily disrupted the supply and demand equilibrium in our country. There are numerous backlogs of deliverables and shortages of semiconductors, lumber, steel, and other goods via cargo. Labor shortages are rampant, too. Tariffs on material goods have to be reevaluated, and reducing them would potentially ease inflation. Anti-competitive activities in multiple industries, from farming to construction, have to be stopped in order to avoid affecting small businesses.