– George A. Cloutier, a graduate of Harvard Business School, is the founder and CEO of American Management Services, one of the nation’s largest turnaround and management services firms specializing in small and mid-size companies. The opinions of George Cloutier are his own and do not represent those of the United States Conference of Mayors or Partner America. –

President Obama gets an “F” for his small business program. The SBA has guaranteed a paltry 50,000 loans  to the nation’s 29 million small businesses – that’s .0017. Loan volume is down 36 percent from 2008 and 50 percent from 2007. Obama and his advisers have actually done the unimaginable; they have reduced the flow of aid to small businesses in the face of a deep recession. The program’s bank lenders have left $15 billion on the table due to “regulatory problems.” Even an administration plan to provide lending to 70,000 vehicle dealers has no takers and failed.

Administration “experts” allocated less than 1 percent of the stimulus bill to small business. It’s mind-boggling that Washington ignores the biggest economic sector in the country employing 60 million people, producing 50 percent of GDP, and creating 70 percent of new jobs.

In the past several weeks, I have had the honor to lead events for small businesses in 15 cities (including Philadelphia,  Kansas City, Missouri and Baton Rouge, Louisiana) directly engaging with 2500 small business owners (employers only). Ninety-five percent of these business owners feel the administration’s stimulus plan and program has badly mistreated small businesses compared to Wall Street and Detroit.

On October 21st, President Obama announced a second stimulus for small business. His new plan must have been a political speech since it lacked specifics as to how many businesses would be helped, how much money would be allocated and distributed, and when the money would actually start flowing.

Recently, the House passed a bill that purports to offer $40 billion to small businesses. The banks, having left billions of dollars on the table, astoundingly were selected again as the prime source of lending.

The bill mentions authorizing the SBA as a lender of “last resort” if certain loans are not funded by the banks, with a complicated process yet to be determined. No amount of authorization is mentioned and the process to achieve “last resort” status has no definition or timeframe. Much of the lending purported in the $40 billion will be achieved by raising the limit on certain types of loans; this way more money can be loaned to fewer businesses providing political cover for Congress and the president.

Here’s a program the president should mandate.

Create a $50 billion pool for direct loans. Mandate that it should be working within 60 days. Make sure everyone understands that you need to go down the “risk curve” just as the administration did for Wall Street and Detroit.

Select a George Patton-like leader to organize a 24-7 program starting now.

Let’s move small business from the “kid’s table” to the Cabinet. Create a full Cabinet post for small business and entrepreneurship.

Let’s get some real accountability on the success of these programs into the public domain. Your administration should publish a weekly report with the number of loans made, the banks providing the loans, the amounts of those loans and where the banks are located. It’s time to hold the bureaucrats’ feet to the fire.

Energize the SBA’s current outreach and guarantee program. The SBA Administrator should be on the road 5 days a week promoting the “Get-A-Loan” program across the country with the SBA’s public relations operatives to promote it. SBA employee and office hours should be reconfigured to include after hours and Saturday hours when small business owner have the time to apply and discuss lending. Make sure the participating banks are present. Telemarketing centers should be set up to contact small businesses directly to discuss new lending programs since most are simply not aware. A large number of SBA employees should be put on cold calling programs to introduce lending programs to small businesses. Have “Get-A-Loan” days twice a week with open houses. Forget direct mail, fancy brochures, and ill-attended conferences that usually write only a few loans if that. Forget websites directed toward emergency preparedness and focus on more immediate loan priorities.  Make sure that calls looking for help do not disappear into voicemail hell.

On October 10, 2008, you stated, “Main Street needs relief and you need it now.” It’s time to stop sending breadcrumbs and deliver the beef.

– Joan Wasser Gish is a consultant in the Boston area. A former senior policy adviser to Senator John Kerry, she recently testified before the U.S. Senate Committee on Small Business & Entrepreneurship. The views expressed are her own. –

When the toys are put away and the last youngster is picked up for the day, early childhood education providers like all other entrepreneurs sit down to assess their revenues, account for expenses and make difficult business decisions. And though their services are rife with hugs and games and songs, their work has serious implications for the economy. The child-care sector is a critical driver of economic growth and workforce development. That is why financial leaders and policymakers should do more to support providers as both educators and small-business entrepreneurs.

There are more than 400,000 licensed child-care facilities across the country. They span the economic sectors, with the majority run as sole proprietorship home-based businesses, and the rest split between for-profit and non-profit centers offering early education and care. Most are run by women, and a significant proportion are owned and operated by members of minority groups. Because of the early education and care services they provide, they contribute to both short- and long-term economic growth.

Quality early childhood education is associated with improved worker availability and productivity. Early childhood education enables parents to participate in the labor force. Studies have shown that availability of good early childhood education can reduce employee turnover by 37 to 60 percent.

Conversely, breakdowns in child-care availability are associated with absenteeism, tardiness, and reduced concentration at work. One study estimates that unstable care arrangements leading to absences cost American businesses $3 billion annually.

Early childhood education establishments also contribute to the economy as employers and catalysts of community development. The Oakland-based Insight Center for Community Economic Development estimates that the child-care industry generates more than $50.6 billion in annual gross receipts and 1.85 million full-time equivalent jobs nationwide. When centers locate in low-income urban and rural communities, which many non-profits and some for-profits do, they hire from the local community, enable low- and moderate-income families to participate in the labor force, and purchase and renovate facilities.

But the greatest economic impact of high-quality early childhood education is its beneficial effect on enrolled children. Nobel Laureate economist James Heckman argues that high-quality early education provides “the advantage of an early start to their skill development improving their chances of successfully participating in the job market in later years.”

Longitudinal studies have demonstrated that children who attend first-class early education and care programs are 40 percent less likely to repeat a grade, 30 percent more likely to graduate from high school, and more than twice as likely to go to college. It is estimated that universal access to voluntary, quality early education would add 3 million jobs and almost $1 trillion annually to U.S. GDP over the long term.

In short, investing in high-quality early childhood education is an efficient way to build human capital and strengthen the overall economy.

Few of these economic benefits, however, are achieved by warehousing children in sub-standard programs so that parents can work. The key is quality. To realize the positive economic impacts of early childhood education providers must offer first-rate services, and that means that they have to succeed as both educators and small-business operators.

Legislation pending in Congress and supported by the Obama administration would incentivize states with eligibility for grant funds if they improve educational standards, raise teacher qualifications, and develop a rating system that would provide parents a tool for selecting quality early childhood education programs. These policies would build upon existing state-level initiatives designed to strengthen the educational quality of early learning programs, and present important changes and promising investments.

Economists at the Minneapolis Federal Reserve estimate that there is a 16 percent return on every public dollar invested in high quality early childhood education.

Yet scant attention is being paid by state and federal policymakers to strengthening early childhood education through the existing network of entrepreneurial supports. The U.S. Small Business Administration works with lenders to provide $28 billion in loan guarantees to small businesses, has a robust network of technical assistance and business development supports, and is dedicated to fostering women and minority entrepreneurship. Relatively few early education providers, however, are aware of these small business supports. The SBA should do more to reach early childhood education providers with these resources.

Today, solitary initiatives to forge connections between the vast network of small-business resources and child-care providers are sprouting up from California to Massachusetts and many places in between.

Congress is beginning to address the capital needs of early childhood education providers with proposed legislation from my old boss, Senator John Kerry of Massachusetts, and a separate bill from Senator Robert Casey of Pennsylvania and Representative Carolyn McCarthy of New York. These initiatives are designed to help early childhood programs purchase and renovate facilities, an important contributor to program safety and quality.

But if this is all policymakers do, the nation is missing an opportunity.

Coordinated outreach to early education providers by those with entrepreneurial expertise would have compound benefits to the economy and prove to be an efficient use of public funds. For example, Small Business Development Centers could collaborate with Child Care Resource and Referral Agencies and Family Child Care Systems to reach providers with technical assistance.

The federal government spends billions of dollars each year to both improve access to high-quality early childhood education and to support small businesses as engines of economic development.

Private-sector early childhood education providers are positioned to help our nation realize these goals simultaneously. If these providers are properly supported, the positive effects of early childhood education would grow, benefiting both our kids and our economy.

– Nancy Duff Campbell is a founder and co-president of the National Women’s Law Center, one of the nation’s pre-eminent women’s rights organizations. A recognized expert on women’s law and public policy issues, for over thirty-five years Ms. Campbell has participated in the development and implementation of key legislative initiatives and litigation protecting women’s rights, with a particular emphasis on issues affecting low income women and their families. The views expressed are her own. —

Insurance companies and others who profit from our broken health care system are mobilizing to defeat comprehensive reform by using misinformation and scare tactics. A prime example is the allegation that healthcare legislation – specifically the plan being considered by the House of Representatives – will hurt small businesses.

The fact is that small business owners, especially women, are already hurting under our current healthcare system. Leah Daniels, 29, is the owner of Hill’s Kitchen – a gourmet kitchenware store that opened last May not far from the U.S. Capitol. Daniels can’t afford to offer health insurance to her three employees. She purchased her own bare-bones plan on the individual market for protection “in case I get hit by a car,” but not much else. It costs her just under $200 a month and doesn’t cover such services as routine doctor’s visits or maternity care. Daniels, who often works 7 days a week, says that she is constantly worried about getting sick.

Daniels’ problems are, unfortunately, all too typical. A new report by the Council of Economic Advisers (CEA) found that small businesses pay up to 18 percent more than large firms for the same health insurance policy. These higher costs mean that small businesses are considerably less likely than larger businesses to provide health insurance to their employees, and those that do tend to have less comprehensive plans. And Census data show that women-owned businesses are generally smaller than male-owned businesses.

Small business owners and employees who don’t get coverage at work or through a spouse’s plan may shop for insurance individually. But if they are women – and small businesses that don’t offer health coverage tend to have large proportions of female workers – they are likely to face discrimination in the individual health insurance market. A study by the National Women’s Law Center found that insurance companies routinely charge women higher rates than men for individual policies and offer policies that exclude health needs specific to women, such as maternity care.

Women who own a small business know that the current health care system is failing them. At a meeting of women small business owners in May, Daniels says, “We went around the room and everyone either had health insurance through their spouse or didn’t have coverage at all. Women talked about being afraid to go to the doctor because they didn’t want to find out that they might be sick. It was really striking.”

The healthcare reform plans that have begun moving through Congress would help make it possible for small business owners to offer comprehensive, affordable health insurance. The House plan would make insurance more affordable by prohibiting insurance companies from discriminating on the basis of health status or gender and by allowing small businesses to purchase coverage through a new Health Insurance Exchange. The Exchange would reduce administrative costs and offer a choice of plans meeting minimum benefit standards. New tax credits would be available to help some small businesses pay for employee health coverage; the credit would be worth 50 percent of the cost of qualified health coverage expenses for businesses with 10 or fewer employees and average wages of $20,000 or less. It would gradually be reduced until firms reached 25 or more employees or average wages of $40,000 or more.

If some employers still can’t provide coverage, their employees could purchase insurance directly from the Exchange. Sliding scale subsidies would help make it affordable, and they couldn’t be turned down because of pre-existing conditions or charged more because of their gender or health history. Larger employers who fail to offer health care coverage would be required to pay an additional payroll tax, but under the plan being developed by the House, businesses below a certain size would be exempt. One version would exempt businesses with payrolls of $500,000 or less. Another would set the exemption at $250,000 – but even at this level, 76 percent of all firms would be exempt.

Opponents of healthcare reform have claimed that small businesses would be hurt by another provision: a graduated surcharge on the very wealthy to help finance health care reform. But the surcharge would only apply to households with adjusted gross income above $350,000 ($280,000 for an individual). As a result, only the wealthiest 1.2 percent of taxpayers – and only 4 to 5 percent of all tax payers with business income – would be subject to the surcharge. Women-owned businesses are especially unlikely to be affected by the surcharge. According to the latest Census data, 96.3 percent of women-owned businesses, compared to 88.9 percent of male-owned businesses, had total receipts below $500,000 – meaning that profits would be well below that level.

Those who claim that healthcare reform will hurt small businesses should re-examine their facts – and the rest of us should examine who they’re really speaking for. We can’t afford to wait any longer for meaningful reform that will bring a guarantee of quality, affordable comprehensive health care for us all.

- Lesia Bates Moss is president of Seedco Financial, a subsidiary of Seedco, a national nonprofit organization that helps low-income people and communities move toward economic prosperity. Any opinions are her own. -

As policymakers in Washington work to unfreeze the credit market and reinvigorate lending activity, much of the attention has fallen on the biggest lenders and the needs of major companies.

But on Main Streets across the nation, small businesses have also been hit hard by the recession and credit crunch. Unable to obtain affordable capital – and often in need of technical assistance to help them survive the financial tumult – many small businesses are closing their doors and laying off workers.

President Obama has proposed some important steps to address the small business credit crisis. His plan creates incentives for banks to lend to small businesses by expanding loan guarantees and purchasing up to $15 billion of Small Business Administration-backed loans through the Troubled Assets Relief Program.

But a small business rescue package should include a large infusion of capital that puts money directly into the hands of small businesses. In addition, resources should support the activities of community development financial institutions (CDFIs) and other alternative lenders who provide a range of financial and technical assistance services to small employers left reeling by the downturn.

“Crisis on Main Street,” a new report by Seedco Financial, the New York-based, nonprofit CDFI, summarizes the small business credit problem. The report notes that 75 percent of domestic banks have imposed tighter restrictions for loans to small businesses; and the SBA backed 68 percent fewer loans last October than it did in October 2007. Overall, only 28 percent of small businesses are using bank loans, the lowest rate since 1993.

Even in the best of times, the capital market available to small businesses is insufficient. Banks depend on rigid formulas to assess the risk of potential borrowers, considering measures such as number of employees, financial performance records, and credit histories. Most small businesses, and especially the smallest ones, are deemed too risky under these criteria.

These small businesses are shut out of bank lending and have limited options. Many owners end up borrowing funds from family and friends. This works for many businesses, but such loans are not consistently available to all entrepreneurs, especially low-income and minority business owners.

Most businesses unable to qualify for prime capital market loans turn instead to high-cost products offered by credit card companies and “predatory” lenders of the sub-prime capital market. In 2002, small firms borrowed $140 billion from credit card companies to meet their capital needs; that amount was expected to grow to $350 billion in 2008. And it is estimated that all types of borrowers – small businesses and individuals – annually incur $4.2 billion in fees on payday loans. Such fees help trap many small businesses in a cycle of debt that too often leads to layoffs and, eventually, bankruptcy.

A third option is the alternative sub-prime capital market that seeks to serve small businesses unable to access the prime capital market, offering rates and terms similar to those of banks.

But even before the recession hit, this alternative market failed to meet the full capital needs of small businesses, issuing an estimated $1.6 billion small business loans in 2006. With banks and other prime lenders now focused on making only the least-risky loans, more and more small businesses are being shut out and left to rely on the inadequately funded alternative market.

The market, which includes a well-established network of CDFIs and community development corporations, must be bolstered with new capital.

A small-business relief package must also include funding that allows alternative lenders to actually deliver capital to more small businesses. New funding is needed to cover administrative and loan-servicing costs, which will allow high-quality lenders to offer more affordable financing to small businesses.

Finally, we have to do more to provide small businesses with comprehensive business services customized to their individual needs, including help with financial planning, debt management, and loan restructuring services for businesses with loans with unfavorable terms.

Utilizing capital effectively takes skill and savvy and technical assistance should be offered in tandem with loan services as an integral part of a small-business recovery plan. These services could be provided by a range of organizations, including CDFIs and credit unions. The president’s small business package includes modest funding for such technical assistance; much more is needed.

Small businesses across the country need a response that is equal to the current crisis. In New York after 9/11 and in New Orleans after Hurricane Katrina, government support helped to expand the alternative lending market’s capacity to serve small businesses in need. Seedco Financial and other CDFIs played a major role in assisting small businesses in the aftermath of both of these regional crises, helping thousands of small firms and saving thousands of jobs.

Today, we’re facing a national crisis, and the federal government must mount a similarly aggressive effort to help small businesses grappling with the economic crisis. A bold, yet flexible response that meets the individual needs of small businesses is our best hope for helping these firms recover, allowing them to preserve the jobs they provide to their employees and the stability they provide to their communities.

– George A. Cloutier, a graduate of Harvard Business School, is the founder and CEO of American Management Services, one of the nation’s largest turnaround and management services firms specializing in small and mid-size companies. He is also the author of the upcoming book, “Profits aren’t Everything, They’re the Only Thing.” The views expressed are his own. –

Why are the Obama Administration, Congress, and the Senate marginalizing the nation’s largest industry in the new stimulus plan?

Small Business Inc. employs about 60 million people, accounts for 70 percent of new jobs each year, and clearly represents the backbone of almost every regional and local economy. For this vital industry, the administration has allocated less than 1 percent ($700 million earmarked vs. $1 trillion in proposals). The nation’s leaders continue the small business program of the Bush years: talk a lot and do practically nothing.

The sponsors of the bill, most likely to succeed, say that small business will benefit indirectly from the spending programs. This is the same discredited thinking of Reagan’s “trickle-down” economics.

Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke and Lawrence Summers, director of the Economic Policy Council, have absolutely no experience with small business.

They have no idea what it’s like to not meet a payroll, have no money because collections are slow, and to be able to only pay a fraction of their bills to stay in business.

Approximately 12,000 small businesses will close their doors every week this year. The Obama administration says it cares about the little guy, but what they should say is that they care about the little guy except for those who own small businesses.

The current proposed stimulus bill offers $630 million to support the loan guarantee program of the SBA, although the SBA’s two largest business loan programs were down 40 percent so far this year and over 30 percent last year. The proposed bill fantasizes that by cutting the loan fees to small business, volume will skyrocket. Loans are down because banks don’t want to take the risk on marginal credit with only a 75 percent guarantee from the government.

The stimulus bill includes various minor tax cuts for small business, as well as additional depreciation and write-off incentives. Of course, these benefits can’t be collected until at least 12-15 months from now in 2010, when small businesses file these tax returns – assuming of course that they made any money in a widely-acknowledged terrible year for small business. Stimulative effect here is, in fact, probably near zero.

And what about the approximately 600,000 plus small businesses that will fail this year, and the millions of businesses that won’t make a profit?

President Obama has continually said he and his administration wants new ideas so let’s see if they are listening. Here are some honest proposals that bear consideration:

1. The stimulus package should immediately allow $25 billion in direct loans to small business, bypassing the recent history of declining bank-guaranteed loans to make sure that the money gets quickly and efficiently to small businesses. Small Business Inc. will never be a gold-plated borrower and the bill must make allowances for this, by broadening the loan criterion ensure the great majority of small businesses are eligible.

Small business loans are no less risky, when we look at the current situation, than those that have already been given by the government and Federal Reserve to the likes of Citibank, Bank of America, AIG, the auto industry, etc.

2. The current SBA bank loan guarantee program should be altered to a 100 percent guarantee by the government rather than the current 75-85 percent allowed. This guarantee program is down 40 percent not because of the fees involved but because the banks are risk averse to losing 25 percent on marginal loans that are costly to collect anyway.

If you and I were running a bank we would not like this program and we would attempt to marginalize it, which is what is actually happening in the marketplace. Actually, the government should pay increased loan fees to ensure that the banks get solidly behind the program.

Small businesses would willingly pay the bank’s fees if they could secure the money they need. For example: right now the fastest growing service offered to small businesses is “merchant advances.” These are small loans made at interest rates of anywhere from 30 percent to 250 percent by legally organized companies. These companies make payday lenders look benign.

3. The SBA budget should be increased fivefold to $3 billion and emphasize management assistance and serious outreach to small business. In surveys we have conducted recently, less than 10 percent of small business owners understood the loan programs offered by the government.

4. There are many other stimulative programs that can be offered including technical assistance, a Small Business Peace Corps, broader and better enforcement of set aside programs.

5. The Federal Reserve should be directed and empowered to make loans to small businesses at 2 percent to 3 percent, which is currently being charged to the mismanaged Wall Street companies.

The Obama Administration repeatedly asks for proposals. They say, “Yes we can!” Small Business Inc. asks, “But will you?”

Pamela Redmond Satran is a developer of baby-naming site nameberry.com, based on the name guides she coauthored with Linda Rosenkrantz. The opinions expressed are her own.

Dear President-Elect Obama,

In the final days leading up to your election, we heard a lot about what you were going to do to help small-business owners. Now it’s time to pony up. Not sure where to start? As someone with the audaciously bad timing to launch my website, nameberry.com, on October 14, I have some ideas:

Start a web-based work initiative
Taking a cue from FDR’s bold work initiatives in his first 100 days, you might train people to work on small web businesses like mine. Instead of the CCC (Civilian Conservation Corps), call it the WWW Camp, where laid-off mortgage brokers and moms craving flexible hours can learn software coding and database management and website design. The result: More jobs in northern Vermont and southern Virginia; more accessible and affordable help for the new generation of small web-based business owners like me.

And while you’re at it, improve the Internet infrastructure
You’re planning to spend billions on highway improvements, but what about the Internet infrastructure? Spending money on roads promotes more driving, which uses fuel and increases our carbon footprint, while investing in the next generation of technology encourages people to stay home and spend more time on the web. That’s good for me and all the other web startups.

Bring the Small Business Association into the 21st century
I’d love it if the SBA was dealing with 2009 businesses like mine along with coffee shops and dry cleaning stores. The kinds of issues I faced starting my business – finding a talented and affordable designer, figuring out search engine optimization, driving traffic to my site – aren’t even addressed at sba.gov.

Help the midcareer worker retool
My degree in journalism helped me launch a career as a magazine editor and writer and book author, but I wasn’t sure where to turn for my new educational needs in this economy. Who was going to teach me how to embed video on my blog – and then how to get out there and promote the thing? Where was someone accustomed to working alone going to learn how to motivate and manage a team – especially without money in the picture? I figured it out myself, but education and training efforts aimed at the midcareer worker looking to launch or renovate a small business, or stay vital in a larger corporation, would be wonderful.

Challenge Google
At the risk of angering the Great God Google, I think you should look into wresting back control of the Internet and putting the public interest above secret algorithms or pay-for-play. There are thousands of newly-unemployed journalists ready and able to make editorial judgments on the value of websites based on quality and not on the number of times they can cram certain keywords into their copy. Bring back real intelligence and expertise to everyday research.

Champion more entrepreneurs
You got a lot of political mileage out of Joe the Plumber, and made him famous in the process. But how many sinks can one plumber plunge? Referring to me as “Pam the Baby Namer” would drive millions of parents in search of excellent names for their babies – Barack, anyone? – to my small business.

Make government relevant to small business owners again
I’m not worried about my taxes; I’m worried that my business won’t make any money at all and, even with minimal expenses, we’ll have to close shop. I’m worried that, even if we can afford to pay a salary, the cost and trouble of paying social security and medical insurance will mean we can’t hire someone. I’m worried that, without affordable sources of money – including my diminishing home equity and my own IRA – my business will stay small forever.