National Small Business Week: Who cares?

May 25, 2010

– 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-sized companies. He is also the author of the bestselling book “Profits Aren’t Everything, They’re the Only Thing”. The opinions expressed are his own. –

Certainly not the Obama Administration and Congress (both Democrats and Republicans) who have repeatedly failed small business at every opportunity with soaring rhetoric, empty promises, and adopting Lilliputian aid programs.

Most of the twenty-nine million small businesses and their fifty million employees’ won’t be celebrating National Small Business Week because they’re fighting the worst economic crisis in recent history. The twenty-five thousand plus small businesses failing every week, and the owners who have lost their life savings and depleted their 401k’s, will not be celebrating either.

There will be no joy in Mudville for 90 percent of the nation’s small businesses who have received no economic stimulus funding or have been denied credit, additional or otherwise, as well as those who have received no benefit from the stimulus or bailout programs. To be fair, some 60,000 small businesses (that’s .0002 of the total) received loans from the SBA last year, leaving only 28,940,000 who have received nothing but platitudes.

The Administration’s record of failure speaks for itself:

  • Small businesses received only one percent of the bailout. ($800 million. Wow, when by recent accounts the automotive industry received $100 billion and only employs two million people.)
  • Guaranteed loans from the SBA have only reached the levels of 2006 in the face of the worst economic crisis for small business since the Depression.
  • The SBA runs out of loan guarantee authority periodically because of the Administration and Congress’s outright stinginess, while authorizing billions for their big donors on Wall Street and Big Business.
  • The recent job bill is a joke, as to assisting small businesses. Small business can receive up to $5,000 over a year for hiring an un-necessary new worker at $40,000 annually. Spending $40,000 to receive a meager $5,000 won’t motivate most owners to hire a useless non-productive employee.
  • The recently passed healthcare bill is loaded with provisions that will cost small businesses tens of thousands of dollars depending on their size. If a small business under twenty-five employees pays for insurance, it will receive back as tax credits one third of the actual cost. Unfortunately, according to the highly-touted Congressional Budget office only 11 percent of all small businesses will qualify for the program. An additional problem is small businesses which do qualify will not actually receive the tax credit until next year, while the remaining 89 percent of this category can go pound sand.

Once again the logic fails us. Why would a cash-strapped employee spend $10,000 to receive only $3,000 next year as a reimbursement a year later?

Allegedly businesses with more than 50 employees do have mandatory insurance, but the Administration’s deception here is if one employee signs up for the newly created healthcare exchanges, the employer will have to pay a penalty of $2,000 per employee. If an employer has 80 employees they will pay a penalty tax of $160,000, which apparently is Congress’s definition of free choice?

In Massachusetts, a highly touted good predecessor of the government’s program, insurers recently raised their rates thirty percent in the third year of the program. The Administration and its Congressional cronies should end the charade that this healthcare bill will save small businesses money.

In usual Washington fashion, since the small business program with big banks is failing, the Administration has proposed $30 billion in loan guarantees through community banks … more of the same failing policy.

This bill shores up the capital of small community banks but has no teeth to mandate increased lending to small businesses and few economic incentives to stimulate loans … and of course its two years after the economic depression started.

It’s always easy to criticize, but here are some implementable steps to re-establish small business as the main force in an economic recovery:

  1. Forget the current proposed loan guarantee program and allocate $50 billion for a Direct Lending Program run by a Patton-like 24/7 personality who has a directive to it running in 60-days.
  2. Loosen the current stringent loan standards to broaden the assistance to the tens of thousands of small businesses that deserve it and need it.
  3. Establish a “Get-A-Loan Today” program within the nation’s city halls working with the United States Conference of Mayors to deploy the credit. The SBA should be placed on a crisis mode with regular after-hours and Saturday work schedules to better accommodate small businesses with weekly accountability to the public.
  4. Beef up the SBA’s paltry administrative budget to deliver a real economic program instead of a shadow one.
  5. Make the SBA Director a cabinet level position, so that small business has a vocal advocate at the White House table. With 60 million employees, the nation’s small businesses deserve at least that much.

You can make all the excuses you want for failed policy, but does this administration have the will to implement a new policy to help the largest segment of our economy?

4 comments

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The engine of growth and economic stability in almost all countries is small business and unless we are able to help this sector out of the current dilemma I would submit that we will eventually see more global crisis, perhaps of even greater magnitude.

Majority of the current financial problems are rooted in lack of employment and this is precisely what small business can resolve in record time.

Consider facilitating a credit, through the unemployment office, to all small businesses so they can hire only three employees at market rates. 3 million jobs at $100k per year would require only a $300B facility. This represents only a fraction of what we have spent so far in USA for stimulus while its impact on the financial crisis would be immeasurable.

Currently credit facilities have only been made available to the largest of our large businesses while very little if any is available to small business. This in my opinion is at the root of our economic problems and hence the solution lies there as well.

Posted by 1voice | Report as abusive

I have been writing about this fall for 6 months now. There was no reason for Dow to even go higher than 7000. All this increase was false manipulation by the govt run banks and the Fed reserve bank. The democrats wanted to show that they are bringing recovery.

All indicators of employment and economy were drastically low. This hyped up euphoria of escalated stocks was just a treacherous trick by the banks to show profit by showing gains in their stock price.

This is the beginning of double dip depression. It is a depression this time, no recession.

America has to produce, manufacture and export to come out of depression. Create jobs in manufacturing and not census. Devalue dollar and stop import from illegal wage countries. Falsely escalating the stocks and glorious talks by politicians will not produce recovery.

Posted by NoImport911 | Report as abusive

I have seen hyperbole before but this is ridiculous! This guy has a MBA from Harvard?? Let’s take each proposal and see how his “plan” will work:

1. Forget the current proposed loan guarantee program and allocate $50 billion for a Direct Lending Program run by a Patton-like 24/7 personality who has a directive to it running in 60-days. WILL IT WORK? NO. If 26 million small businesses need credit (433K per day on a 60 day clock) and it takes an average bank loan officer to process/document/close and fund one business loan in 3 days then the SBA will have to hire 144,333 new loan officers and another 200K in support staff. And where do we get the money let alone the loan officers?

2. Loosen the current stringent loan standards to broaden the assistance to the tens of thousands of small businesses that deserve it and need it. WILL IT WORK? NO. This is what got us in the problem to begin with!

3. Establish a “Get-A-Loan Today” program within the nation’s city halls working with the United States Conference of Mayors to deploy the credit. The SBA should be placed on a crisis mode with regular after-hours and Saturday work schedules to better accommodate small businesses with weekly accountability to the public. WILL IT WORK? NO. Where would you get the funding or the millions of employees trained in lending to staff a call center and address their credit needs? Hello?

4. Beef up the SBA’s paltry administrative budget to deliver a real economic program instead of a shadow one. WILL IT WORK? NO. This is an excellent idea but again you fail to mention the funding source. While the Administration is a proven supporter of small business, Congress controls the purse strings and they have not helped in the past. Does deficit spending ring any bells?

5. Make the SBA Director a cabinet level position, so that small business has a vocal advocate at the White House table. With 60 million employees, the nation’s small businesses deserve at least that much. WILL IT WORK? NO. This should be a no-brainer but for whatever reason, the President has kept them in the backroom and this won’t change in the future.

If you are going to suggest something please take the time to think it through and make it possible rather than political B.S. We have way too much of this and very little common sense. Your idea of direct lending is good but it must be doable. To make it work you must pare down the amount of small businesses to something that can be managed – say 600,000 applications and not 26 million. Give SBA a year or so to build the infrastructure then direct lending might be doable at 600K.

Posted by TboneAZ | Report as abusive

As the legal adviser to over 300 small businesses, I could not agree more with the commentary and suggestions in this article. The commercial banking system (both national and community banks) has no respect for small business. Nearly all saw their credit reduced or completely shut off and had their formerly friendly bankers now demand extra security on loans in good standing. If the commercial banks cannot or will not support this essential economic pillar than it must be the SBA.

Posted by bizsmall | Report as abusive

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