Supply chain disruptions have left businesses reeling. As the holidays approach, U.S. small businesses are in desperate need of assistance.

Global supply chain disruptions were up 638% in just the first half of 2021, stifling access to goods.
Global supply chain disruptions were up 638% in just the first half of 2021, stifling access to goods.

By: Rick Lazio

Whether or not Santa comes in a timely manner to deliver gifts this year remains to be seen.

Inflation rates are currently at a 30-year high as U.S. businesses continue to fight tooth and nail against supply chain disruptions that have stifled the ability access necessary goods. According to recent reports, global supply chain disruptions due to shortages were up by 638% in just the first half of 2021, and things are not looking better.

These delays have been brought on as demand from an increasingly active public collides with industrial production held back by government orders in response to the COVID-19 pandemic. 

Particularly affected by the pandemic are America’s small and medium sized businesses. Statistics show that an estimated 800,000 small businesses permanently closed their doors in year one of the pandemic.

Those businesses that remain are struggling to compete with larger businesses in the U.S., such as Amazon or Wal-Mart, that have the ability to shell out millions of dollars in order to hire freights and expedite the delivery of product.

In order to help lift these smaller businesses out of the difficult situation they are in, Congress must strongly consider revitalizing (or reinventing) one of the most powerful government incentives that, unfortunately, saw an early sunset with the passage of the Infrastructure Investment and Jobs Act.

The Employee Retention Credit is a tax credit that eligible businesses can claim against payroll expenses if they were impacted by COVID-19 disruptions. Before the passage of the infrastructure bill, eligibility for the incentive was intended to sunset at the end of 2021. However, eligibility now is cut short at the end of the third quarter of this year.

This move leaves thousands of dollars of capital on the table for businesses that could use the funds to combat the negative effects of the struggling supply chain.

Congress still has the opportunity to put forward legislation that will revive the eligibility for the credit back to its intended timeframe, but one could argue that eligibility for the incentive should be extended even further.

The pandemic is not over and the impact of COVID-19 is still taking its toll on American businesses of all sizes, which was the original reason for Congress’s creation of the credit in the first place.

At a minimum, the Employee Retention Credit should be brought back for smaller businesses, which again have been disproportionately impacted by the pandemic. Eligibility for this credit could be open for companies who employ 500 workers or less and have experienced a full or partial disruption as a direct result of either the pandemic or current supply chain issues.

The government should also consider other alternatives for lending aid to small and medium sized businesses that have been adversely affected by supply chain interruptions. For example, a general business credit to offset verifiable costs of anticipating or working around these interruptions.

Again, larger businesses in the U.S. most often are able to front these costs and push through these difficult times, but the same can’t be said for the remaining businesses. Giving small businesses access to capital in this manner will allow them the opportunity to maintain payroll, invest in new automation technologies that can help to offset, predict, or maneuver supply chain disruptions, or buy product in bulk at lower prices.

With a windfall such as capital provided by a newfound business incentive, small businesses can also invest in risk evaluation tools, technology to optimize warehouse management, as well as turn toward more expensive suppliers for the time being so as to not lose a loyal client or customer base.

Approximately one-half of the U.S. workforce is employed by smaller businesses. Further, more than 30 percent of small businesses have reported that supply chain interruptions have had a “significant” impact on their company this year. We cannot leave these critical businesses behind as supply chain issues remain a factor.

Ignoring the issue will bring economic consequences that far outweigh the costs of any business incentive we can provide to lend assistance until we see this pandemic through.

rick lazio alliantgroup
Rick Lazio

Rick Lazio is currently a Senior Vice President at alliantgroup, and is a former U.S. Representative from New York. Lazio served in Congress from 1993-2001. After Congress, Rick moved to the private sector working for JP Morgan Chase as an Executive Vice President and then Managing Director.