Is President Obama Really Listening? Small Business Inc. Wants to Know

What about the nation's largest industry? Why isn't Small Business Inc., which employs 60 million people and accounts for 70% of all new jobs each year, getting help from the Obama Administration's new stimulus package? The nation's 23 million small business owners could do the most to kick start our tanking economy, but they're getting nothing but crumbs. While more than 12,000 small businesses close their doors each week, this crucial sector of the economy is getting less than 1% ($700 million earmarked vs. $1 trillion in proposals).

It's a travesty that the government isn't doing a lot more. By the Small Business Administration's own numbers, $25 billion in direct loans could mean more than 2 million jobs, created immediately. This is not some small interest group. This is the backbone of our regional and local economy. This is where help from the Obama Administration could count the most!

Once again, the nation's 23 million small business owners are the victims of benign neglect. Geithner, Summers and Bernanke, who are allegedly in charge of the nation's economic policy, have absolutely no experience with small business. They have always received their checks on time, from Harvard University, the World Bank or any of other hide-bound institutions they work for. The Three Amigos have no idea what it's like to lie awake at night wondering if they'll be able to meet payroll. When it comes to the needs of small business, they just don't get it.

The stimulus offers $630 million to support the loan guarantee program of the Small Business Administration, even though two of its largest loan programs are down 40% so far this year, and more than 30% in 2008. The stimulus 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% guarantee from the government.

The few Congressmen who acknowledge the existence of Small Business Inc. say that tax cuts are the solution. That's not even close. The stimulus bill includes various minor tax cuts for small business, as well as additional depreciation and write-off incentives, but these benefits can't be collected until at least 12-15 months from now in 2010, when small businesses file these tax returns. Of course, this is assuming they haven't foreclosed by then and that they made any money in a one of the worst years on record for small business.

Sponsors of the stimulus bill say that small business will benefit indirectly from the spending programs. This is the same discredited thinking of Reagan's "trickle-down" economics and it's a joke. What about the 600,000 plus small businesses that will fail this year, the millions of businesses that won't make a profit, and the millions more workers who will lose their jobs as a result?

The stimulative effect of these all too modest proposals is next to nil. The administration needs to do better if it wants the little guy to benefit from any real effort to revive the economy.

President Obama has continually said he and his administration wants new ideas so let's see if he's really listening. Here, Mr. President, are some honest suggestions 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 to ensure that most small businesses are eligible. These loans are no less risky 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.

The current SBA bank loan guarantee program should be altered to a 100% guarantee by the government rather than the current 75% to 85% allowed. It's understandable that the banks would be averse to losing 25% on marginal loans that are costly to collect, and that's why they are attempting to marginalize this lending program. The government should pay increased loan fees to ensure that the banks get solidly behind it.

Small businesses would willingly pay the bank's fees if they could secure the money they need. 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% to 250% by legally organized companies. These companies make payday lenders look benign.

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

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% of small business owners understood the loan programs offered by the government.

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

The Obama Administration repeatedly asks for ideas from Main Street. Barack Obama won the election in large measure because of his professed willingness to listen. But if this stimulus package is anything to go by, Small Business Inc. still isn't being heard.

George A. Cloutier -- a graduate of Harvard and 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 midsize companies. The company, founded in 1986, and its 120 full time employees have worked with over 6,000 small businesses across 400 industries. Mr. Cloutier is also the author of the upcoming book, Profits Aren't Everything, They're the Only Thing, to be published this year by Harper Collins.

Comments

[usedtowander]

The Obama administration has abandoned Small Businesses and their employees.

In favor of the biggest companies - Chrysler, Banks, etc. They continue to subsidize the profligate compensation packages and perks of the people who created this problem - and refuse to use the taxpayer money they have received to give loans to the small businesses.

The focus of Larry Summers, the former President of Harvard University, is helping his effete elite buddies at the biggest banks.
The focus of Tax Cheat Geithner is helping his former buddies at the Wall Street firms and the biggest banks. The IRS even has a new tax rule to help the biggest banks get bigger. Geithner and his former banker #2 have done not one thing to change that. Nobody really expects them to.

The Bush Administration systematically took SBA funds and gave them to the biggest companies.
The Obama Administration shows not one bit of effort to change that reality. And, they certainly have not proposed any new regulations to help small businesses or use the contracting power of the U.S. government to hire small businesses.

Not change I can believe in. I'm asking my employees to vote against Obama next time.

[Fraugher]

What I need is some tax relief. Due to the downturn we will face in 2009, and a decent 2008, my estimated taxes owed this year will exceed all of my revenues, and that's not even accounting for the fact that we have a large 2008 tax bill due soon...

[fruity]

I find it shameful, dishonest, irresponsi­ble,intole­rable that small business & working class & poor are treated like a 2nd class citizen in a 3rd world country. We subsidize everything, we contribute to everything, we stimulate the economy &if we're not making money this country is broke. We are shovel ready, we have a history of performance & viability. We meet everything they say they need to get us back on the road. Every economist sees what small business contributes, every professor,scholar brought before the committees sees it. But no, what did they do? They DISSED US, they treated us and recognized us for what they really think of us; disposable people who are not important compared. Well let me tell you Congress,you are the problem & in these 4 years,you're gonna get REFORMED. We didn't mess up the financial system,we didn't cheat & lie.We didn't exploit what was unregulate­d.We tow the line.have to pinch pennies, & I have to take it not only on the chin but in the gut, so should you. Why?Because you cannot expect the nations driver of the economy, the smallest of the small, to carry this burden on our backs. AS IF, we don't have enough problems to deal with. Our probs are not the probs of Wall Street or Congress, our problem is THEM. You are putting small business out of biz overnight, you don't even recognize the needs of micro-businesses, or emerging small biz. You will put me out of business.s­orry I'm upset

[fruity]

ALSO think there is something wrong with House & Senate LEADERSHIP. Were they not the ones who had their drafts for each side? Where were we in those drafts,what kind of leaders are they.we were IGNORED & TOSSED TO THE SIDE? It is my belief that at least when it comes to the HOUSE, Nancy Pelosi is a total liar and insincere person. also playing with American peoples way of living by not sending a message to her party that they needed to put aside the bitter history between Dems & Reps, forget about what you didn't get passed before, focus on what is important, saving our country,getting us empowered to recover from this national disaster. No, instead she basically encouraged all those people to put in earmarks, justify all they want, we know what an earmark is. They're just trying to bury us with information in that bill so we don't realize it. Isn't that what Bernie Madoff did? He BURIED THOSE SHAREHOLDERS WITH DETAILS so they couldn't figure out where the problems are. I am upset, I am ticked off. We had an opportunity to come together & they put their agenda in front of small businesses & the american people. I think that the Democrats feel because Prez Obama won that they won, but they didn't. People want him to succeed and lead us, has nothing to do with Democratic party. And I feel as though the parties are hindering my Presidents goals & commitments by even

[fruity]

I have a small business, I've run for years online. I do make money, I am a viable business, I am shovel-ready, but I am out of inventory and no means to get it. Congress knows how much small business contributes to our economy, and they also know how many of those are 1) home based businesses and 2) use credit cards as their source of cash flow or back up. I don't know why all these Senators and Congressmen and women can stand there with a straight face and talk about small businesses being the backbone of our economy and the effect on us if the financials at wall street DONT get their money or get taken care of, and then completely DISS US IN THIS STIMULUS RECOVERY PLAN. I am keeping a list of who are on these committees and who spoke about us and our needs and when they run for re-election I'm going to go blab all over the place.

[thewholesystem]

I want OBAMA'S Vision for Economic Change to shift from Consumption to Investment making US rich debt free.
1. Create a Federal Mortgage Insurance and Exchange Commission (FMIEC) to regulate housing like FDIC and SEC.
2. Change tax code so salary over $1,000,000 not deductible and R&D and Product Development are immediately deductible.
3. Eliminate the double taxation of dividends on after-tax profits .
4. Both immediately and in some cases gradually decrease the Capital Gains tax to build wealth, encourage the repatriation of trillions and quadruple the value of the US Stock Holdings -- $7 trillion to $28 trillion.
5. Give a greencard to every University graduate, provide micro-lending and micro-investing subsidies for small business entrepreneurs.
6. Change government funding from winner-take-all to a staged, purchasing competition with many contracts for small businesses .
7. Shift the focus from "shovel ready" to "entrepreneur ready" projects and make the government a customer to create 1,000,000 small businesses
8. Coordinate with the States who are cutting jobs and increasing taxes in see-saw economics where the Federal government is doing the opposite, working grassroots through Organizing for America.
9. Institute a variable national sales tax, particularly on hydrocarbon energy, and subsidize alternatives. See: http://harvard1958.com/news.php for my "Energy Crisis Solutions" recommendation of 35 years ago in January 1974.
10. Provide training tax credits and pay citizens for learning important in Obama's vision.

[QuicksilverKW]

Has anyone had their credit taken away by their bank for no valid reason. I own a retail store. I have 2 business credit cards with a fairly substantial limit. I use them to stock my store. At the end of last year the back had a "special". Any purchases made using the card before the end of Nov would have 0% interest for a year. I thought - what a relief, since sales had really taken a nose dive and I wanted to add new inventory that had a lower price tag to entice shoppers that didn't have as much to spend.Sinc­e I had a year with no interest I could then pay down other credit I had. Jan 15th I get a letter that since I didn't make big payments Dec and Jan they had to readjust my limit and with the stroke of a key eliminated $21k in credit, almost taking me down to what I owed. So now it limits how I can do business. I've never been late. I've had an acct with them for 20 years and a biz acct for 7. I asked them - why would I make big payments when I had 0 interest for a year? This has nothing to do with my credit rating - I know that.

[KeepMeLearning]

I couldn't agree more with Mr. Cloutier.

I was at a conference on Saturday in LA for women entreprene­urs...350 women (yes, 350!) who have started their own businesses were in attendance­... This was no girlie, foo-foo, soccer mom event...th­ese women are serious about their work (myself included), and the idea that individuals like us are key to improving the economy. Many of these women had grown their businesses and hired employees within the past year; one of the keynote speakers--who mentors other entreprene­urs--recen­tly sold her business for $56 million. The momentum in the room was off the hook, in spite of the limping economy.

Until my company is fully funded--which may take another 2 years because of its size (but will ultimately employ hundreds inside and outside my company)--I am going to help someone I worked for in the past (who is not American) set up a new company in the U.S. His company will employ dozens of Americans and will be ready to launch in 2009, once his Australian operation is off and running--the only difficulty right now being that the Australian economy has slowed because of what's going on here in the U.S.

It all adds up: Small Business, Inc. definitely needs more support so people like us can contribute to the U.S. economic recovery.

[CitizenFarmer]

I have a couple of small businesses; about 5 acres of Christmas trees, a couple hundred tree seedlings that I sell on-line, a small farm, some cash crops, etc. I can't afford the paperwork associated with employing people; so, a few times a year, I drive down to downtown and hire a dozen or so immigrants (my guess is that they are illegal; however, I look at them as contract workers). I pay them between $10 and $15 per hour and will pay bonuses based on trees planted or bales loaded. I treat them fair and during really heavy work days, will grill up some burgers and brats for them; there are also a few beers at the end of a hot day. If they want to become legal residents, that is fine with me. However, all the paperwork I'll have to fill out to pay them "legally" will probably result in me not hiring them; or, I'll pay them minimum wage, which I'm sure they will work for; however, I'm sure they would rather have the more than double minimum wage and a $0.50 per bale bonus. So, for me, if the economy and government wants me to hire more people and be successful, get off my back on the paperwork and regulations.

[marychs1942]

i have contacted the white house web page, and moveon.org and told them about the plight of small business but we have to keep yelling in their ear. yes it is the backbone of our country. speak out.

[TchoupitoulasCanal]

Good article. I never considered how small businesses were impacted, mainly because we hear so little about them.

Perhaps they need to be a bit more aggressive in their means of persuading Congress, because they do have some incredibly valid issues.

I would feel much more confident giving my tax money to a smaller business than the brain-trust (?) in the financial sector.

[dadw5boys]

THE BEST PART IS THESE BUILDERS WILL TRANSITION TO REPAIRING OLDER HOMES OR REMOVING UNSAFE BUILDINGS.

THEY WILL STOP BUILDING NEW HOUSING WHEN THERE IS SUCH AN OVER SUPPLY ALREADY.

[CitizenFarmer]

True that. While I'm not a builder, I've recently bid a few jobs for septic tank and field rebuild work. I had done some foundation work; but, that's gone. While septic work is not filled with glamor, it helps pay the bills.

[Dystopic]

I got a $50K lowdoc loan thru an SBA preferred lender in 1995. I used the money (i had to put up 10%) to start up an internet service provider. I hired a total of 15 people over the 1st year, and 65 people then 2nd year. I paid the loan back, with interest (not much), and 80 people were employed earning a very good salary. I sold the business in year 3. Only 8 of those positions were eliminated due to overlap. So a net creation of 72 jobs in 2 and a half years for $50K payed back with interest.

That's a great deal.

It is next to impossible to get an SBA loan right now, unless you have 2 years business records, and 25% upfront. Not all industries are fundable, and they will not fund a start up.

I bet there are literally millions of people that could create businesses that either would employ at minimum their family with a $50K or less loan and some business counseling (which the SBA is very good at providing, I learned alot from those publications and seminars, and especially the mentoring program)

Loosening up the SBA to allow for start ups in all fields (they currently do nothing with agriculture) would stimulate the economy right away, not to mention creating a class of business owners, and possibly intergenerational wealth.

[KeepMeLearning]

Not only is an SBA loan next to impossible to get now, I seem to recall that banks require collateral (such as a home) to cover the portion of the loan not guaranteed by the govt. (I used to arrange SBA financing with banks for people who wanted to buy franchise businesses and this used to be the requiremen­t.)

A lot of would-be small business owners--especially now--may not have the luxury of home ownership to use as collateral. I'm certainly one of them.

[FreedomTruth]

I'm trying to give Barack the benefit of the doubt.But i want to know,why the obsession with Republican support???­?.The Democrats are the ones who needs breast feeding,because they're SOFT!.Obam­a is beginning to resemble a Republican in Democrats clothing.

[WASanford]

Mr. Coutier, you said "By the Small Business Administration's own numbers, $25 billion in direct loans could mean more than 2 million jobs, created immediatel­y." Yes; but not without customers.

The consumers those small businesses rely on are tapped out and can no longer engage in the kind of discretionary spending they used to. I can't think of a business that can earn a profit or even manage to survive without customers; can you? So I don't think that it's unreasonable for our government's recovery plan to be aimed at getting those workers back to work and enabling their participation in our economy. After all, they are customers as well.

Many of the contractors who will be engaged in restoring our countries infrastructure ARE SMALL BUSINESSES!