How Elections Impact Small Business

I am indifferent to the political affiliations of my clients. Whether they are Republicans, Democrats, or Independents does not concern me. What is important to me is that my clients are prepared to leverage the opportunities presented by any elected candidate once they take office. To achieve this, it is crucial for you to be well-informed about how the incoming administration could impact your small business.

Like it or not, you and your business will be impacted, as will your business credit. To help you better understand the many factors that will influence your company going forward, I've put together a few non-partisan examples of what history has shown us over the past 40+ years.

The unexpected events of September 11, 2001 led to the introduction of policies that now impact every small business owner in America, most notably the requirement to provide a personal social security number on any business credit application. In 2001, many legislators were hesitant to mandate identity verification using a social security number, which could blur the separation of business debt from personal responsibility, not to mention the havoc that could wreak on a business owner's personal credit scores due to increased credit checks.

In response, the Bush Administration decided against enforcing the social security number mandate, allowing small business owners to obtain funding using their company's EIN and business credit scores instead. The Obama Administration agreed to pause the mandate during his two terms, as well. Under the Trump Administration, however, the Department of Treasury enforced the mandate as part of the Anti-Money Laundering Act of 2020. The main goal was to protect the U.S. financial system from illicit activities by bad actors and gather identity information for law enforcement. The Biden Administration left the mandate in place, requiring all beneficial owners with a stake of 25% or more to provide social security numbers.

The Covid-19 Pandemic inspired many heated debates about lockdowns, social distancing, facemasks, vaccinations, and school closures throughout the pandemic of 2019-2021. However, that crisis also led to financial assistance through initiatives like the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan Program (EIDL), providing crucial relief for numerous impacted families and businesses of every size.

The PPP and EIDL programs, initiated during the Trump Administration, brought an added advantage that extended into 2022 under the Biden Administration. Businesses that were screened and approved for PPP and EIDL loans and grants by the Small Business Administration (SBA) and its preferred lenders were added into the system, and that will continue to impact those small businesses into 2025 and well beyond. Many of those who received short-term relief have managed to transform these approvals into long-term financial partnerships, sustaining a consistent growth cycle in the U.S. economy that has surpassed that of many other nations globally.

FACTS ABOUT POLLING PROJECTIONS VS ACTUAL RESULTS

• Polls had Ronald Reagan and Jimmy Carter neck-and-neck. Reagan won in a landslide.

• Polls had Michael Dukakis beating George Bush Sr by 17-points.

• Polls had the elder Bush up by 9-points. Bill Clinton won by 6-points.

• Polls had George Bush Jr beating Al Gore by 7+. Bush only won by 600k votes.

• Polls showed John McCain with a 5-point lead over Barack Obama.

• Polls showed Hillary Clinton with a 4-point lead over Donald Trump.

• Polls showed Donald Trump with a 7-point lead over Joe Biden.

The stock market and interest rates are likely to experience fluctuations before and after any election period. Although mainstream media pundits may enjoy the drama, businesses and markets dislike uncertainty. This could explain why markets are usually volatile leading up to elections and tend to show stronger performance after midterm and presidential elections. Small-cap companies, like those in the Russell 2000® Index, have historically outperformed large-cap companies in the year following a presidential election.

Small-caps have historically shown better performance after a presidential election for various reasons, which could be influenced by the specific conditions of each election cycle. Investors tend to favor larger, well-established companies for safety during political uncertainty, but they may become more open to risk-taking once the election results are clear. That uncertainty could be alleviated by the election results as they reveal who will be leading the country and provide insights into the president's capacity to execute their agenda based on the party distribution in Congress. While investors should remain prepared for surprises, a post-election rally might bring relief to the markets regardless of who is elected.

From government contracts to regulatory frameworks, everything will be subject to negotiation with a new presidential administration. Small business owners should assess any potential changes that candidates might introduce, especially those affecting their specific industry. While certain sectors, such as those involved in the global supply chain, may experience a more significant impact, uncertainty will be felt across the board.

Anticipating these changes is crucial. Developing a plan in advance will enable your business to adapt smoothly, regardless of which party comes into power. Some management consultants suggest that businesses ideally have access to up to 18 months of capital. However, this may not always be feasible, so maintaining awareness and flexibility is essential, along with keeping investors, stakeholders, and employees informed when adjustments occur.

FACTS ABOUT FIRST TIME VOTERS

• First-time voters are never included in any polling numbers except exit polls.

• 41 million more Gen Z’ers became eligible to vote in 2024 alone.

• 187 million new eligible voters have been added to the rolls since 2020.

• Taylor Swift fans account for an estimated 12 million voters aged 18-26.

Are you better off now than you were four years ago? Perhaps yes, or perhaps no. However, change is unavoidable. As a business owner, you are already aware of this fact. Over the course of the past four years, we have all made sacrifices along the way. We have each carried a share of the burden of revitalizing our post-pandemic economy. While sustaining the economy has not been easy on any of us, it was not as crushing as it might have been for any one of us, or group of us, to bear alone.

Successful businesses move forward by being prepared to seize upon unexpected opportunities. A crucial aspect of your readiness strategy should involve maintaining current and precise business credit profiles, featuring comprehensive company information and robust corporate credit scores and ratings. These elements demonstrate to potential lenders that your business is competent and well-prepared for success.

If you have not reviewed or updated your business credit report in the past year, it could take 60-90 days before you are fully equipped to capitalize on the next significant opportunity that arises. By initiating your preparation plan now, you could be poised to pursue growth prospects before the next Inauguration Day.