National Small Business Week: Who cares?
– 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:
- 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.
- Loosen the current stringent loan standards to broaden the assistance to the tens of thousands of small businesses that deserve it and need it.
- 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.
- Beef up the SBA’s paltry administrative budget to deliver a real economic program instead of a shadow one.
- 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?