September 1, 2014

How Much Stimulus Money Have Small Businesses Received?

How Much Stimulus Money Have Small Businesses Received?When the first federal stimulus dollars were distributed last year,  small businesses, including many minority-owned businesses wondered how much of the stimulus money they would be able to capture. Now that President Obama is seeking passage of a second stimulus bill focusing on infrastructure projects, it’s reasonable to ask what kind of effect the first stimulus had. A new report from the Kirwan Institute, an organization at Ohio State University that studies race and ethnicity, has some answers.

The Kirwan Institute tracked how much money minority-owned businesses have received from the federal stimulus program. According to the data, reported in the Washington Post, 34 percent of the $39 billion in direct federal contracts awarded in 2009 went to small businesses, 7.6 percent of them women-owned, 3.5 percent Hispanic-owned and 2.5 percent African-American owned.

The executive director of the Kirwan Institute, John Powell, says direct federal spending is still [too] low and contends that the stimulus money should be helping overcome shortfalls in how much contracting minority businesses receive.

Minority Business Development Agency director David Hinson says the agency spent $1 million last year and organized more than 100 events nationwide to provide minority-owned firms with information about getting stimulus-related contracts. Hinson says equitable distribution of contracts to minority-owned companies is a priority for President Obama.

Because of the rush to get stimulus money flowing, no “set-asides” (specific goals for what percentage of contracts should go to minority-owned businesses) were created for the stimulus money.

In addition, some 80 percent of the stimulus money has not been awarded directly by the federal government but has been distributed through state and local governments, which makes it more difficult to track. And different state and local governments have different minority set-asides.

The Kirwan Institute is working with the Miami Workers Center to track stimulus dollars in Florida, using that state as a case study. Later this month the Institute will release a report on how many jobs were created and how many contracts went to small and minority-owned businesses in Florida. Robert M. Spooney, president of the African American Chamber of Commerce of Central Florida, said the organization’s members have found it hard to get stimulus contracts and that the only company that has done so is one that already had worked with the government.

As an entrepreneur, I’ve learned that getting government contracts is more difficult than you might think if you’ve never done so. What have you found to be the case? Has your business benefited from stimulus money, either on the federal or local level? I would love to hear from you.

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Rieva Lesonsky


Rieva Lesonsky Rieva Lesonsky is a staff writer for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Follow her on Google+ and visit her blog, SmallBizDaily, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports.

10 Reactions

  1. Hi Rieva,
    I would sure like to see the state level data reported into these results. One would think they report in to the feds with how it gets spent or where it is in whatever holding bucket. I would think real-time calculators, given our goals for transparency, showing progress forward or backward… I know it is not an easy thing to do or solve. Maybe that should be one of the contracts awarded — to a small biz that can do the tracking and analytics. Come on, SmallBizTrends readers, one of us must be able to get a contract from the government and crunch these numbers…

  2. I think the fact that we’re in need of “stimulus money” shows how useless the money that’s given out is in the first place. Doesn’t anyone realize that that money is pointless and only further throws our economy into the turmoil that it’s currently in?

    A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned – this is the sum of good government.
    -Thomas Jefferson

    I’m a firm believer in this quote. Our government has their hands in too many company pockets, and vice-versa. It’s ridiculous.

  3. Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.

  4. Charliq makes a good point, but my initial question for Rieva centers on the idea of set-asides. Are these being set up demographically or arbitrarily? Shouldn’t the government just be able to choose the best contractor independent of race?

  5. I have been researching how to access stimulus contracts and am getting no where. I would appreciate any advice you may have to offer.

    Thanks,
    Andrea

  6. Andrea, Contact your local SBDC office. Some are offering seminars and workshops about how small business owners can access stimulus funding.

  7. Robert,
    It would be foolish of me to get into a discussion here about set-asides. Not enough space and not the proper forum. But I will tell you I don’t think there’s yet a level playing field for women and minorities.

  8. It’s important to highlight two things here:

    1) When the report says 34% of the stimulus money went to small businesses this is a meaningless statistic, because it is based on the SBA definition of “small”, which is all businesses with less than 500 employees. This includes 99.7% of all businesses. 99.7% of all people are under 7′ tall, too, but that doesn’t make them small.

    So when the report says 34% went to small businesses, what it is really reporting is that 34% of the money went to businesses under 7′ tall (99.7%) and a disgraceful 66% went to just 3/10th of one percent of all businesses over 7′ tall – mega-businesses. And if the report was broken down accurately, you would find that almost none of it went to businesses with under 20 employees, which is still 90% of all businesses.

    2) As Rieva pointed out, almost none of this money actually went directly to private enterprise to create jobs, but was sent from one mega-government (federal) to another large government (states), who then decided what to do with it. A large portion of it never left the state coffers but went to fund state and local government departments and projects.

    So let’s not be too thankful that 34% of this went to businesses under 7′ tall. That’s not a very high bar. We should however be quite upset that big government is once again funding it’s donor partner, big business, and once again, they are passing money, favors, and even people back and forth like a 1960s hippie commune.

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