New Report Demonstrates Need for the Small Business Technological Advancement Act

Intuit, which makes the small business management and marketing software tools QuickBooks and Mailchimp, recently released its 2025 QuickBooks Small Business Index Annual Report, providing both fascinating and alarming new insights into the unique employment, financial, and technological circumstances of new and small businesses.  The report’s findings make a powerful case for bipartisan legislation introduced on January 29^th by Senators Todd Young (R-IN), Jacky Rosen (D-NV), Ted Budd (R-NC), and Jeanne Shaheen (D-NH) – the Small Business Technological Advancement Act (SBTAA).  The legislation, also introduced in the House by Reps. Mark Alford (R-MO) and Susie Lee (D-NV), would make explicit that loans backed by the Small Business Administration (SBA) can be used by new and small businesses to fund the acquisition and adoption of digital tools and technology.

Key findings of the Intuit report include:

• New and small businesses continue to contribute disproportionately to new job creation.  However, between October 2023 and October 2024, small business employment declined by 51,200 jobs – the largest year-over-year decline since 2015 – continuing a two-decade trend of small businesses representing a decreasing share of U.S. employment.
• Over the same period, small business revenue declined by an average of nearly $12,000 per business – the third consecutive year-over-year decline in small business revenue.
• Credit cards remain the top source of small business financing.  Indeed, the number of small businesses using credit cards for financing doubled between July of 2023 (25 percent) and July of 2024 (50 percent).  Growing reliance on credit cards carries long-term risks, as it can significantly increase the cost of credit.
• Indeed, rising interest rates have stunted small business growth.  Small businesses with reduced access to credit card financing due to higher interest rates experienced revenue declines of up to 30 percent and lower employment growth than other small businesses.

Against this worrisome backdrop, the report includes some very encouraging and important news: digital tools significantly improve small business job creation, revenue growth, and forecasting certainty.  Specifically, of those businesses managing eight or more aspects of their enterprise with digital tools, 67 percent experienced reported gains in productivity; 45 percent reported higher revenue, compared to just 30 percent at other businesses; and 72 percent reported greater confidence in sales forecasting compared to less than half at other businesses.

These findings echo the major take-aways from roundtables with new and small businesses conducted last year by the Center for American Entrepreneurship (CAE) in Iowa City, IA, Cincinnati, OH, Minneapolis, MN, and Clearwater, FL.  The trend toward the digitalization of business has been underway for years, but the pandemic dramatically accelerated the shift – by as much as a decade according to an analysis by McKinsey & Co.  Given that acceleration, CAE wanted to better understand the extent to which new and small businesses engage in e-commerce, how they use digital platforms and tools, and any challenges they have experienced.

The major observations from our roundtables included:

• “Covid kicked e-commerce into high gear.” Small businesses now extensively rely on online platforms like Facebook, Amazon, Google, and Shopify to open digital storefronts, social media sites like Instagram and Twitter to market to customers, video conferencing platforms like Zoom and Microsoft Teams to interact with suppliers and pitch potential investors, and digital payment tools like PayPal, Venmo, and Square.
• “There’s no going back.”  Post-pandemic e-commerce capabilities are no longer novelty complements to businesses’ principal identity – they are core operations.  Digital tools facilitate product and service delivery; the processing, payment, and tracking of payroll expenses; human resources; sales and billing functions; accounting; and tracking of supplies, inventory, records, and expenses.  E-commerce sales as a percentage of total business sales jumped from 10 percent in 2019 to more than 15 percent by the summer of 2020 – and continues to head higher.
• “Immaculate inception advised.”  Several roundtable participants commented that they would now advise entrepreneurs to launch their new business digitally first, and then – depending on their online success – perhaps expand to a physical store front.  Participants agreed that “brick and mortar is still relevant, but not the future of business,” and that “if you’re still using paper to run your business, you’re doing it wrong.”  One participant explained that launching physically and then transitioning to digital is difficult, whereas a fully digital launch is “immaculate.”
• “AI will further accelerate the transition to digital business.” Participants noted that artificial intelligence will be, and already is, both an immensely important tool for new and small businesses, and a major challenge.  While AI will help automate many important but time- and energy-consumer aspects of running a business, the technology is developing so quickly that busy business owners struggle to keep up.
• “Behind the curve.”  The importance of e-commerce is so far-reaching that many business owners feel overwhelmed by “the flood” of digital tools and applications developed and marketed since the pandemic.  Businesses know they need to be more digitally active and savvy, but need help identifying, training on, and effectively incorporating digital tools.

Amid this dizzying change, government programs have yet to be updated to recognize and facilitate the economic benefits of digitization.  Specifically, many small businesses remain uncertain whether loans backed by the SBA’s flagship 7(a) program can be used to enhance their digital capabilities – and that uncertainty has slowed the adoption and integration of digital tools, to the detriment of many new and small businesses.

The results of the Intuit survey, coupled with the major take-aways from CAE’s entrepreneur roundtables, make clear that Congress should act swiftly to pass the Small Business Technological Advancement Act.   As more of America’s small businesses are able to acquire and incorporate digital tools and technology, they too will participate in the productivity, revenue, and employment gains offered by the new and permanent era of digital business.

John R. Dearie is the president of the Center for American Entrepreneurship.