September 17, 2024
Cassidy, Shaheen Introduce Legislation to Help Lower Costs for Small Businesses
WASHINGTON – U.S. Senators Bill Cassidy, M.D. (R-LA) and Jeanne Shaheen (D-NH) today introduced the Helping Small Businesses to Hedge Risk and Insure against Volatile Expenses (Helping Small Businesses THRIVE) Act. It directs the U.S. Small Business Administration (SBA) to create a program that helps small businesses lock in the cost of commodities, like gasoline or lumber, to protect against the future volatile price of energy and other expenses.
“Small businesses are particularly vulnerable to high inflation costs,” said Dr. Cassidy. “The Helping Small Businesses THRIVE Act gives small businesses in Louisiana the tools they need to create jobs, expand operations, and compete with large companies.”
“Small businesses are the backbone of our economy and deserve a level playing field. By empowering them to lock in prices for key commodities, we can help small businesses compete with larger businesses, create good-paying jobs and expand their business,” said Senator Shaheen. “I hosted a field hearing in the Granite State last week to discuss the resources available for small businesses to lower their energy costs. Today, I’m proud to introduce bipartisan legislation that proposes a new resource to help small business owners keep costs under control and secure a vibrant future for our Main Streets.”
“Businesses grow and create jobs most effectively when they can plan with certainty,” said John Dearie, president of the Center for American Entrepreneurship (CAE). “Sudden changes in business conditions -- especially unexpected increases in critical input costs -- can damage or destroy even the best-run businesses. That's why large companies commonly protect themselves from input inflation by locking in costs by way of sophisticated financial derivative instruments. But most new and small businesses lack the resources and expertise necessary to effectively protect themselves. The Helping Small Businesses THRIVE Act will address that vulnerability by establishing a new program administered by the Small Business Administration that will finally provide new and small businesses the input price protection enjoyed for years by large companies. Participating businesses will be able to recapture losses sustained from price volatility regarding critical commodities like gasoline, diesel, natural gas, lumber, and potentially other inputs, that they rely on. The legislation will provide small businesses the price security and confidence they need to plan, thrive, and continue creating jobs. CAE thanks Senators Jeanne Shaheen (D-NH) and Bill Cassidy (R-LA) for their leadership, and looks forward to working with them to ensure swift passage of the legislation.”
“With the cost of doing business rising rapidly in recent years due to inflation, small businesses have been forced to choose between raising their prices or lowering their margins. No small firm wants to be in that position, which is why we're glad to see a bipartisan solution like the Helping Small Businesses THRIVE Act that will help lower costs and ultimately allow small businesses to better compete with large corporations that are less sensitive to commodity price spikes,” said John Arensmeyer, Founder and CEO, Small Business Majority.
“It’s no surprise: small companies are inherently the most vulnerable to market fluctuations and to changes in the cost of the inputs that they need to keep their businesses running. Despite representing over 99% of all companies in the United States, and employing roughly half of all private sector workers, small businesses still struggle to leverage that market power to ensure they have a consistent, reliable cost basis for the commodities that underpin their operations. That’s why innovative proposals such as Chair Shaheen’s Helping Small Businesses to Hedge Risk and Insure against Volatile Expenses (THRIVE) Act are so important. This bill is a tremendous first step towards leveling the playing field for small companies across the country, enabling them to responsibly hedge commodity market risks—something historically only available to their largest competitors. The National Small Business Association is proud to support the Helping Small Businesses THRIVE Act, and we look forward to continuing to work with Chair Shaheen’s office to ensure small companies get a fair shake and can continue to power the U.S. economy for generations to come,” said Todd McCracken, President & CEO, National Small Business Association.
To help lower costs for small businesses, the Helping Small Businesses THRIVE Act gives small businesses the cost-certainty, time and confidence to build and grow their endeavors. It directs SBA to create a program that allows small businesses to hedge their cost exposure from commodities, like diesel or electricity. The program offers small businesses options for how to lock in their prices going forward – with a focus on inputs that already have liquid markets and technical assistance to help businesses take full advantage of the program. Along with that guidance, SBA would conduct outreach to small businesses to ensure they are aware of the program and can benefit from it.
The program would first start to lock in costs for gasoline, diesel and up to three additional commodities, with special attention given to standard utilities like natural gas or electricity. Additional commodities and utilities whose costs could be locked in could be added to the program after surveys and feedback from small businesses to assess which products would be most beneficial to them. Eligible small businesses would exclude traders and financial businesses to ensure this program focuses on small businesses and is not a tool for speculators.
For example:
Business A locks in $3.50 per gallon of gasoline for 1000 gallons six months from now, locking in their gas cost at $3,500 ($3.50/gallon x 1000 gallons).
If gas goes up to $5 per gallon, business A will still pay $5,000 ($5.00/gallon x 1000 gallons) at the gas station.
HOWEVER, because business A locked in a price of $3.50 per gallon from their hedge through the program, business A would receive a payment of $1,500 ($1.50 x 1000), leaving business A’s net cost at the $3,500 they planned for.
Large businesses already protect themselves from inflation by locking in costs through hedging transactions. The Helping Small Businesses THRIVE Act gives small businesses the ability to access those same tools to protect against the volatile price of gasoline and other expenses.
A one pager on the bill is available here.
###