Michael S Barr: Helping small businesses reach their potential

Speech by Mr Michael S Barr, Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, at the Aspen Institute, Washington DC, 24 March 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you for the opportunity to speak to you today. The United States has an enviable entrepreneurial culture and a strong track record of building new companies. Yet, new and small business owners often navigate significant challenges from establishment to growth. These challenges typically include limitations in accessing capital, in developing robust business and professional networks for peer support and opportunities, and in building the comprehensive skills, resources, and social connections that contribute greatly to business resiliency and sustainability. Women and minority entrepreneurs may face even greater obstacles. While business formation is, of course, primarily a matter for the private sector, public policy can and should encourage increased rates of entrepreneurship and business formation-and the capital, networks, and skills essential for success for all business owners.

Today, I want to highlight the vital role that small businesses play in driving the U.S. economy, consider the challenges in accessing credit that some small business owners face, and offer some practical solutions to help small businesses thrive.

Small Businesses and Their Role in the Economy

Small businesses are the heart of the U.S. economy. They produce nearly half of the country's gross domestic product and employ just under half of all private sector workers.

Small businesses have created more than 60 percent of net new jobs since 1995, and business applications have remained consistently elevated at around 5 million annually since mid-2020. In recent years, women-owned businesses and minority-owned businesses were two of the fastest-growing segments of businesses. The number of small businesses owned by minorities increased by almost 60 percent and the growth rate for women-owned businesses was not far behind at 50 percent during this time period. We should all be encouraged by these statistics, as several studies suggest that improving business ownership and entrepreneurship across demographic groups would help grow our economy faster.