SFD USA faiVLive Recap

On November 19, 2025, FAI hosted a faiVLive webinar to introduce the Small Firm Diaries USA study. We shared early observations, and talked with expert panelists about how recent policy and program changes are affecting small businesses and organizations that support them.

FAI Managing Director Tim Ogden moderated our discussion with:

• Chi Mac, Executive Director of JPMorganChase Institute 

• Amy Hereford, President & CEO of LiftFund Inc., and

• Jay Nwachi, President & Ceo of Innovation Works Baltimore.

In this blog we’ve adapted and edited a few of the most interesting discussion points from our conversation. You can still watch the full webinar, here. 

Q: Small business startup rates had been declining since the 1970s but during the COVID-19 pandemic they rose sharply and have remained fairly steady since. What has changed in the overall small business ecosystem given this change in momentum?

A: [Chi Mac]

You're right—the number of new business formations since 2020 were a little bit of a surprise, but also a great source of cautious optimism for those of us working with small businesses. Those numbers may be leveling off now, but they're still higher than they were in pre-pandemic times, so that is also encouraging. It's not all good news, though. In JPMC’s research, we’ve found that a large share of those small businesses that started during the pandemic were started by what we call “necessity entrepreneurs.” These are the small business owners that were typically engaged in wage work and became unemployed before they started their business. In 2021, 21% of our sample of small businesses were started by necessity entrepreneurs, compared to 2% in 2019.

We find that businesses started by necessity entrepreneurs tend to have lower revenue than businesses started by what we call “opportunity entrepreneurs.” We also see that they don't usually catch up over time; they are more likely to exit within the first couple of years, maybe because they're waiting for the labor market conditions to change so they can transition back to wage work. This changes the way we think about the growth trajectories or aspirations for small businesses. That's one of the things that I'm really looking forward to in Small Firm Diaries USA—seeing the qualitative reasons behind why some small businesses are starting to grow and the steps that they take to get there, because it’s much harder to see that in our administrative data.

Q: Another thing that has had a significant impact on small businesses in recent years is the prevalence of emergencies and natural disasters like the wildfires in Los Angeles and more recently the hurricanes in St. Louis. LiftFund is a CDFI that provides emergency support to small firms during these kinds of events. What changes do you see in the small business ecosystem, with respect to helping firms survive and the ways they are coping with emergencies?

A: [Amy Hereford]

Unfortunately, we have had a large share of disasters we've responded to since our inception almost 32 years ago now. We’ve responded to at least 50 documented disasters, to which a third of all our funding has been directed. On the ground, we see a lot of the same conditions; when disasters happen, the impacted communities do not typically have experience dealing with an emergency of that nature or scale. 

There’s often confusion at the onset of a disaster about where to allocate funds. If you’re not working in the small business space, it can be easy to overlook their needs and misunderstand the importance of supporting them through these disasters. At LiftFund, we reach out very quickly to the local economic development groups—they understand the ripple effect that can happen if appropriate support is not given to small businesses right away. Most of these small businesses have around two weeks of cash on hand to fund their regular operations and it’s important to get them the right support. Something we hear often on the ground in these disaster areas is “If someone hands me another stick of deodorant, I’m going to scream,” so getting the right support at the right time is very important. 

Q: Many of the policies and programs applicable to small businesses are changing rapidly or are becoming increasingly uncertain. At the same time, a lot of information is no longer available or easily accessible, and in fact a lot of misinformation is being spread. Alongside this, we’ve also seen an increase in fraudulent activity targeted at small businesses. How are small business owners in Baltimore navigating these challenges and finding the right resources among the uncertainty?

A: [Jay Nwachu]

The role of intermediaries who support small businesses is very important in this context. When we think about these intermediaries, we think about a small CPA firm or a HR firm, the ones that are themselves small businesses. These are often the ones that are most affordable to small businesses in need of those services. There is an opportunity to better organize those service providers so that we can use them to ensure entrepreneurs are accessing high quality, local, and affordable service providers in their communities in a way that doesn’t require a hefty time commitment to research, identify, and engage them. 

The other way small business owners in Baltimore are navigating this is by spending more time with each other and sharing knowledge. There’s a number of groups that meet around the city every month and owners will ask each other things like “Who's your accountant?” “Who's this person that you work with?” and “Who gave this service to you?” This also helps protect against the loss of knowledge among small operators in Baltimore and surrounding areas when businesses open or close or move between locations. 

Q: With the number of new businesses remaining steady or in some states increasing, and the existing strain on small business supports that Amy and Jay have alluded to, how should we think about the utility of creating more small businesses in already-saturated markets? Is there a point at which a small business with marginal or no profits that is experiencing difficulty attracting and retaining workers, customers, or investments is no longer a viable business and instead the owner would be better off in wage-earning work?

A: [Jay Nwachu]

It’s important to address this question with nuance, looking at the circumstances of each individual business. For example, if there are 10 manufacturing businesses all making the same thing but selling their products across the country, it doesn’t really matter that there are so many of them in one community. But for other types of businesses, where the local economy is their only customer base—such as coffee shops—the answer is different. I think it’s important to ask business owners why they started the business. Was it out of necessity? Was it their dream? How likely are they to go back to wage work, if available, given the answer to that question? There is a big difference between the retiree who started a business after having a whole other career and a 21-year-old entrepreneur who got into some trouble in their youth and found it difficult to get wage work because of it.

The other part of this conversation is the recognition that the market is going to have something to say at some point, right? If a business is not bringing value or it is not being run well, it is probably going to struggle to survive. And that’s okay. People should be able to take a chance but the market will speak at some point and if the business doesn’t survive then those owners will have to go back into the labor market and find wage work. That’s just how it works. 

Q: Amy, what do you see is the role of lenders like LiftFund in small business ecosystems that may be underdeveloped? How do you balance your mission of lending to businesses that find it difficult to access financing through traditional commercial banks with the risk of lending to them in circumstances where you can’t be sure that they will survive or be able to repay the loan?

A: [Amy Hereford]

That is the $120 million question—that’s how much we’ve determined LiftFund would need to sustain our current lending operations, without the intervention of philanthropic dollars. We are a financial institution so we need things like robust fraud mitigation infrastructure which cost a lot of money. In Hill Country, Texas at the moment we are seeing fraud in 1 in 4 applications both on the loans and grants side. But the funding we need is not just for the technology to identify fraud, it’s for the intelligent people behind the technology that are also detecting the fraud. Fraud technology is so advanced now that most people don’t even recognize it. They believe they are talking to their teacher or their neighbor and it takes a team like ours that is skilled and experienced in detecting these things to identify them and protect our clients against them. Despite its importance, we are still so underfunded in this work which really hinders our ability to meet the demand and serve these communities.

Q: Intuit just announced today a new partnership with OpenAI to introduce agents and other AI features into Quickbooks applications. We see these kinds of partnerships proliferating in the market as AI continues to expand its reach. Jay, how worried are you about access to tools that are trustworthy and people’s ability to determine what is trustworthy and what isn’t?

A: [Jay Nwachu]

I’m incredibly concerned. We see it in our coaching, training work, and our investment side of the house so folks that are applying for capital. In one sense, there isn’t enough use of the available technology and resources but on the other hand, there can also be an over-reliance on technology and small business owners may not understand the risks involved. I had a conversation with one business owner the other day where I had to explain that they should not be uploading their entire financial model into an AI model and that at the very least they should scrub personally identifying information first. 

Beyond the technology, there’s also too much data floating around that is not properly vetted or well-constructed and entrepreneurs are relying on it to make everyday decisions about their business. Unfortunately, the train is already out of the gate on this, but we can do our best to educate people on how to use them safely and productively.

Q: What is the most important thing that we should be paying attention to in the small business ecosystem at the current moment?

Chi: The thing I’m focused on right now is ensuring small business owners and their employees have access to affordable healthcare, given the lack of subsidies that are now available.

Amy: We need a ready-to-deploy fund that can be used whenever there are business disruptions whether they are caused by natural disasters, cyberattacks, or something else. Along with this we need support for first responders so they can help impacted communities.

Jay: Small business owners need access to affordable back-office support and access to affordable childcare.

To stay up to date with the study, and hear about future faiVLive webinars, you can:

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You can also reach out to the SFD USA Project Manager, Tracy Cole, at tracy.cole@nyu.edu