Small businesses and the government shutdown
By: Kathryn Petralia, Co-Founder and COO of Kabbage
With wall-to-wall news coverage of the government shutdown this week, it would be easy to believe that 800,000 furloughed federal employees represent a massive part of the national economy. But more than 60 million Americans employed by small businesses are also facing fallout from the shutdown. The United States’ 28 million small businesses (defined as businesses employing 500 or fewer people) account for about half of the nation’s private employment, and dwarf federal employment by a ratio of 30 to 1.
Cash flow and access to capital are primary concerns for businesses of any size, but small businesses face unique challenges in this time of uncertainty. A significant percentage of small businesses borrow funds each year to grow, but rates of traditional loans to small businesses have been steadily declining since the credit crunch of 2008. Available data indicate a 20% drop in lending to small businesses since 2007, leaving many developing companies starving for capital. The recent shutdown has brought federal small businesses lending to a standstill, cutting off one more avenue to funds critical to growth and job creation.
The United States Small Business Administration reported approving $570 million in small business loans on September 30: more than six times the average volume for a single day. Even this expanded capacity is not expected to compensate for the increased applications that flooded the offices in the days approaching the Oct 1 shutdown. New loans will not be approved or issued during the shutdown, according to the SBA’s published Plan for Operating in the Event of a Lapse in Appropriations.
Since loan processing can take months, a multi-week government shutdown will result in an enormous backlog. But new options have emerged since the last shutdown in 1995: Alternative funding providers like Kabbage have stepped in to leverage the vast volumes of data produced by small businesses in order to provide them with working capital.. With a fully automated approval process and flexible access to funds, digital-age alternative funding providers can help small businesses bridge the gap left by traditional lenders.
Businesses equipped to do so will buffer valued suppliers and employees from the financial strain with cash reserves. Some will seek credit to meet expenses during the gap, forced to put money into borrowing costs that could have been invested in the company’s future. Delayed payments or stalled contracts will result in cutbacks, felt downstream by employees and consumers: reductions to existing payroll and delays in hiring or promotion; decreased availability of products due to cutbacks in production or inventory purchases; and reduced demand for equipment, supplies, and raw materials, often sourced from other small businesses.
The risks don’t mean that all small business owners are unhappy about the shutdown. A survey published last week by Pepperdine University indicated that a plurality (48%) of small business owners supported a temporary government shutdown. A similar number of small business respondents (47%) want to see a full repeal of the Affordable Care Act, debate over which was the ostensible cause of the failed negotiations precipitating shutdown. If the report (n=1,387) is an accurate representation of small business sentiments, loss of revenue from a government closure pales in comparison the devastation of the health care law’s demands on small employers.
The shutdown has also provided a showcase for small business ingenuity. In the cities hardest hit by furlough, some are taking advantage of the adaptability and agility of the small business model to make the most of a bad situation. In the heart of DC, staffer hangout Union Pub is offering “shut it down” whiskey shots at $3 to draw in federal employees with a sudden surplus of free time. A local Pilates studio and a knitting shop are each offering free drop-in classes with a government ID, building up their client lists and the city’s morale simultaneously. A barbeque joint in Alexandria, Virginia has discounts for furloughed employees, but isn’t taking the shutdown lying down. Its sandwich board warns, “Members of Congress will be charged double.”
Marketing matters: from IBM to Kyndryl
Prior to joining Kyndryl as Chief Marketing Officer, Maria had a 25-year career at IBM, most recently as the tech giant’s CMO where she oversaw all marketing professionals and activities across North America, Canada and Latin America. She has held senior global marketing positions in a variety of disciplines and business units across IBM, most notably strategic initiatives in Smarter Cities and Watson Customer Engagement, as well as leading teams in services, business analytics, and mobile and industry solutions. She is known for her work with teams to leverage data, analytics and cloud technologies to build deeper engagements with customers and partners.
With a passion for marketing, business and people, and a recognized expert in data-driven marketing and brand engagement, Maria talks to Business Chief about her new role, her leadership style and what success means to her.
You've recently moved from IBM to Kyndryl, joining as CMO. Tell us about this exciting new role?
I’m Chief Marketing Officer for Kyndryl, the independent company that will be created following the separation from IBM of its Managed Infrastructure Services business, expected to occur by the end of 2021. My role is to plan, develop, and execute Kyndryl's marketing and advertising initiatives. This includes building a company culture and brand identity on which we base our marketing and advertising strategy.
We have an amazing opportunity ahead at Kyndryl to create a company brand that will stand apart in the market by leading with our people first. Once we are an independent company, each Kyndryl employee will advance the vital systems that power human progress. Our people are devoted, restless, empathetic, and anticipatory – key qualities needed as we build on existing customer relationships and cultivate new ones. Our people are at the heart of this business and I am deeply hopeful and excited for our future.
What experiences have helped prepare you for this new opportunity?
I’ve had a very rich and diverse career history at IBM that has lasted 25+ years. I started out in sales but landed explored opportunities at IBM in different roles, business units, geographies, and functions. Marketing and business are my passions and I landed on Marketing because it allowed me to utilize both my left and right brain, bringing together art and science. In college, I was no tonly a business major, but an art major. I love marketing because I can leverage my extensive knowledge of business, while also being able to think openly and creatively.
The opportunities I was given during my time at IBM and my natural curiosity have led me to the path I’m on now and there’s no better next career step than a once-in-a-lifetime-opportunity to help launch a company. The core of my role at Kyndryl is to create a culture centered on our people and growing up in my career at IBM has allowed me to see first-hand how to prioritize people and ensure they are at the heart of progress in everything Kyndryl will do.
How would you describe your leadership style?
I believe that people aren't your greatest assets, they are your only assets. My platform and background for leadership has always been grounded in authenticity to who I am and centered on diversity and inclusion. I immigrated to the US from Chile when I was 10 years old and so I know the power and beauty that comes from leaning into what makes you different from other people, and that's what I want every person in my marketing organization to feel – the value in bringing their most authentic self to work every day. The way our employees feel when they show up for themselves authentically is how they will also show up for our customers, and strong relationships drive growth.
I think this is especially true in light of a world forever changed by the pandemic. Living through such an unprecedented time has reinforced that we are all humans. We can't lead or care for one another without empathy and I think leaders everywhere have been reminded of this.
What’s the best leadership advice you’ve received?
When I was growing up as an immigrant in North Carolina, I often wanted to be just like everyone else. But my mother always told me: Be unique, be memorable – you have an authentic view and experience of the world that no one else will ever have, so don't try to be anyone else but you.
What does success look like to you?
I think the concept of success is multi-faceted. From a career perspective, being in a job where you're respected and appreciated, and where you can see how your contributions are providing value by motivating your teams to be better – that's success! From a personal perspective, there is no greater accomplishment than investing in the next generation. I love mentoring younger professionals – they are the future. I want my legacy as a leader to include providing value in work culture, but also in leaving a personal impact on the lives of professionals who will carry the workforce forward. Finding a position in life with a job and company that offers me a chance at all of that is what success looks like to me.
What advice would you give to your younger self just starting out in the industry?
I've always been a naturally curious person and it's easy for me to over-commit to projects that pique my interest. I've learned over years of practice how to manage that, so to my younger self I’d say… prioritize the things that are most important, and then become amazing at those things.