Inside the Prove It Act from the National Federation of Independent Businesses

The Prove It Act from the National Federation of Independent Business (NFIB) is a legislative proposal aimed at addressing concerns related to regulations that small businesses face. More formally known as H.R. 7198, this act was introduced in early 2024 and recently passed the House. According to the NFIB’s website, “The legislation would strengthen the requirements for government agencies to analyze the impact of regulations on small businesses and increase small business engagement in the regulatory process.” Let’s dive into some of the important details of this new legislation, plus the impact it may have on small businesses.

Key Points

Economic Impact Analysis: One of the main provisions of the Prove It Act is that federal agencies would be required to conduct thorough economic impact assessments before enacting regulations. This analysis would need to show that the proposed rule is not only necessary, but that its benefits outweigh its costs—especially for small businesses, who don’t have the financial means to integrate new regulations like larger enterprises do. 

Regulatory Burden on Small Businesses: The Act responds to concerns that new regulations can disproportionately affect small businesses compared to larger firms. While big corporations often have the resources to comply with new rules, smaller enterprises might struggle (and this leads to significant financial and operational strain). By requiring agencies to prove that the benefits of new regulations justify their impact on small businesses, the Act aims to ensure fairness and protect the economic health of these SMBs.

Transparency and Accountability: The Prove It Act emphasizes transparency by mandating that agencies provide clear and public documentation of their findings, plus justifications for new rules. This helps make sure that small businesses and other stakeholders are informed and can engage in discussions or raise concerns before the regulations take effect.

Precedent and Context: The NFIB is a staunch advocate for small businesses, and it has historically focused on efforts to reduce regulatory burdens and promote policies that foster business growth. The Prove It Act aligns with the organization’s broader mission to push back against overreach and advocate for an environment where small businesses can thrive without being stifled by excessive regulations.

Importance and Impact

Supporters of the Act argue that it’s an essential step toward protecting small business interests and ensuring that federal regulations do not inadvertently hinder economic growth. They view it as a mechanism to prevent overregulation and ensure that the rules are well thought out and backed by solid evidence.

Critics, on the other hand, may raise concerns that such a requirement could delay important regulatory actions or complicate the process for enacting necessary rules to protect public health, safety, and the environment. Balancing the need for regulation with the impact on small businesses is a central tension in the ongoing debate over the Act. In fact, the Coalition for Sensible Safeguards (CSS) recently sent a letter expressing concern over the act to members of the House of Representatives. Part of the criticism is that “This bill would slow down the regulatory process and empower an office that has been neither appropriately focused on small business concerns nor adequately transparent in how it conducts its actions,” as written in the letter.

In short, the Prove It Act is a fairly significant legislative proposal from the NFIB designed to make government regulations more transparent—and to hold agencies accountable for their economic impact on small businesses. There’s a real push for responsible legislation that considers the real-world challenges faced by small business owners and maintains the public interest, and this approach reflects that. You can read the letter the NFIB sent to the House of Representatives supporting the legislation here.

There are continually new regulations, grants, and programs for small businesses, and we realize it can be tricky to keep up. Make it a point to visit the Financial Pantry regularly to stay updated on the latest news and trends for small business owners like you. And while you’re with us, check out the incredible loan solutions we offer. From Flex Pay loans to a revolving line of credit, our experts are ready to help create the best product for your small business needs.