CBC Chair Steven Horsford (D-NV) and AIC President & CEO Drew Maloney highlight how private equity expands access to capital and supports small business growth

• In a recent Punchbowl News event, Congressional Black Caucus (CBC) Chair Steven Horsford (D-NV) underscored private equity’s critical role in providing small businesses, particularly those that are women- and/or minority-owned, access to essential capital that facilitates growth and development.

• Noting that 85% of private equity investments go to small businesses with 500 employees or less, American Investment Council (AIC) President and CEO Drew Maloney highlighted how these investments provide critical support to workers and communities across America.

• As the U.S. Securities and Exchange Commission (SEC) pursues tighter regulations on private funds, Maloney and Rep. Horsford cautioned against overregulation and “quelching” small businesses’ much-needed access to capital.

From supporting local family businesses in Rep. Horsford’s home state of Nevada to backing the growth of now beloved national brands like Sweetgreen and CAVA, private equity provides the necessary access to capital that helps these companies thrive. Here’s some highlights from a recent Punchbowl News event spotlighting private equity’s invaluable contributions to small businesses and entrepreneurs across the country.

 Private equity enables small business growth in Nevada and beyond

Across Nevada, private-equity backed companies have invested more than $20.7 billion in 2022 alone –employing 112,00 workers statewide and more than 8,400 of these jobs in Rep. Horsford’s district. Ranging from small businesses to major Las Vegas hotels, Rep. Horsford underscored how Nevada’s businesses have benefitted from private equity:

“Private firms, small business firms, major companies, like our hotels, have relied on the opportunities that private equity provides to help both sustain and grow our businesses in Nevada. I recognize the role that private equity and private capital plays in this moment, particularly with the tightening of access to credit with the increase of interest rates that is a hardship, particularly for small business owners.”

 Private equity is a champion for all American small businesses, not just in Nevada – making investments that bring better-paying jobs to communities across the country. In fact, as Maloney noted:

“The actual median size of a private equity investment is a small business with 69 employees… The other advantage is the average wage for a private equity backed portfolio company is $80,000 a year. So, they’re well-paid jobs. They’re investing in communities across America…”

 Highlighting the success stories of Sweetgreen and CAVA, popular spots for a convenient salad or Mediterranean bowl, Maloney emphasized how private equity’s support and expertise can catapult companies from local businesses into beloved national brands:

 “[Sweetgreen] invested in a little storefront and they converted it into Sweetgreen…now at some point they wanted to grow that business, and they knew that they couldn’t do it with their own capital, so they partnered with private capital in order to do that…it’s now publicly traded and it’s more than a billion-dollar company…It’s not only the access to capital but it’s also the access to people who have the experience building a business.”

 Read more: Private Equity Investment: Helping America’s Small Businesses Weather Any Storm

Overregulation of private funds harms “minority” and “mom and pop businesses”

Rep. Horsford also drove home how new SEC regulations will have unintended consequences on “minority” and “mom and pop businesses” that rely on access to capital provided by private equity – despite the industry already being thoroughly regulated:

“[The SEC] may be thinking they’re going after this level of an industry, but meanwhile, they’re impacting the mom and pop in my district, the business in rural Nevada that’s just trying to get $100,000 to payroll, and a new startup that has a dream and an idea and an opportunity but can’t do it without access to capital.”

As small businesses search for opportunities to increase their access to capital, private equity often offers the most viable path forward. Maloney underscored this point, indicating private credit gives small businesses a valuable alternative to traditional bank lending:

“People still needed access to capital. People still needed mortgages. People still needed car loans. So, [the Dodd-Frank Act] created an environment where you had to go outside of the normal accesses to capital to get it and that’s what we do is we provide a lot of these businesses that may be too risky for a bank to take on with capital…”

Contrary to this reality, the SEC’s new private funds rules, Rep. Horsford notes, are “quelching” efforts to expand the access to capital private equity and private credit can provide – hitting minority- and women-owned firms the hardest:

“I talked to the White House, to the President, to the Vice President, to their economic advisers, to explain that we cannot achieve economic mobility and wealth and legacy and close the wealth gap if we have policy or regulations that are quelching our ability to do that, and in my view, the regulation in this case, is a quelching effect on access to capital…”

 Read more: Make No Mistake: Private Credit’s Regulated Market Role Supports Small Business, Generates Growth

The bottom line

Private equity provides American small businesses with opportunities to grow and scale their companies – from increasing access to capital to providing industry expertise, private equity investment helps Americans’ entrepreneurs achieve their dreams.