Entrepreneurial

Eric Blinderman, who had to shut down his two upscale New York restaurants for a week in the aftermath of Hurricane Sandy, said the approaching fiscal cliff could mean a “double whammy” for his business heading into the busy holiday season.

With a package of $500 billion in tax increases and spending cuts set to come into effect on January 1 if President Obama and Congress fail to agree on an extension or reach an alternate deal, small business owners like Blinderman will be hit with additional costs that could seriously impact their bottom line and ability to grow.

“That uncertainty is what leaves me so nervous,” said Blinderman, who operates two restaurants, both named Mas, in Manhattan’s affluent West Village that employ about 100 people.

Blinderman relied on a pair of Small Business Administration (SBA) loans to open his restaurants and wants to launch a third location, but said some of the projected cuts to the SBA’s budget may derail that.

“If we don’t sidestep the fiscal cliff then I won’t be able to expand,” he said, referring to the $65 billion in federal spending cuts that will be automatically triggered as a result of the Budget Control Act – a last-minute deficit-reduction deal reached by Obama and the Republican-led Congress in August 2011.

With the so-called fiscal cliff looming, Reuters Small Business interviewed Jeff Stibel, chairman and CEO of small business credit rating agency Dun & Bradstreet Credibility Corp to ask him a few questions about what small businesses need to know about the government’s self-imposed tax agreement deadline and what small businesses can do in case congress fails to ink a tax agreement plan before the end of the year.  

Reuters: First off, can you define fiscal cliff for us?

Jeff Stibel: The U.S. Congress and President Obama created the “fiscal cliff” last year as they negotiated ways to lift the federal debt ceiling. The cliff causes two things to happen at midnight on December 31, 2012. First, a range of temporary tax cuts will expire as the Budget Control Act of 2011 goes into full effect. For American small businesses, this will mean the end of several key tax breaks and the imposition of new taxes. Secondly, mandatory budget cuts will be imposed at the federal level. The result has the U.S. economy – and, with it, U.S. businesses – hurdling towards its own cliff.

Reuters: I think a lot of people are aware of the fiscal cliff and its impact on taxes. What impact would it have on small businesses? And what do small businesses need to know about the fiscal cliff?