The White House Message to Small Business

Startup Sunday

Photo © 2010 Katherine Lewis

President Barack Obama last week unveiled a host of initiatives aimed at encouraging job growth in the sector most responsive to economic recovery, small business. In speeches and Congressional testimony about the package, the White House message to small business is loud and clear: lead the way out of recession.

"Over the past 15 years, small businesses have created roughly 65 percent of new jobs in America. These are companies formed around kitchen tables and family meetings; formed when an entrepreneur takes a chance on a dream; formed when a worker decides it's time she became her own boss," Obama said in remarks to Maryland small business owners on Friday. "It's worth remembering every once in a while, a small business becomes a big business, and then changes the world."

The package aims to encourage hiring with a $5,000 tax credit for each new employee, to free up capital through $17.5 billion in additional small business loan guarantees, to increase those loan limits, to let firms refinance their commercial real estate loans under the Small Business Administration and to use funds from the Wall Street bailout so community banks can make more loans to small companies.

If you're a small business owner, what are the biggest problems facing you today? What do you think about the White House message to small business, and what would your response be?

In Senate testimony last week, Treasury Secretary Timothy Geithner said the fastest way to restore some of the 8 million jobs lost since December 2007 is to support small businesses, which are nimbler in hiring and expansion, and quicker to turn around when the economy improves.

"When you talk to small businesses across the country today they tell a similar story," Geithner said. "They talk about uncertainty about demand for their products. They say that their ability to expand and hire depends on better access to credit."

As a small business owner myself, I funded startup costs out of savings and turned profitable within a month. (There's very little overhead in writing.) I would love to hire someone but I'd need greater confidence than I have now that the additional cost would bring in at least as much additional revenue. There's not much I'd need a loan for, other than a snazzy new Web site, and again, I'd need a compelling financial incentive to spend the money.

What is your experience? Could you do more with your business if you had more cash on hand? Have you been turned down for a loan or had trouble accessing capital?

One concern of policymakers is putting the funding in the wrong area. For instance, what if they provide for additional loan guarantees through the Small Business Administration but banks refuse to make small business loans?

"It's great to have more money for guarantees, but if there are no loans the guarantee is meaningless," said Sen. Robert Menendez, a New Jersey Democrat, in an interview after a Senate Finance Committee hearing on the president's budget proposal.

What's your take on the issue? What policy initiative would help your business take off?

Comments

[TP]

Dear President,
I agree that small businesses pay a big role. As they are struggling through these difficult times, one of the problems I see is the rent. I have seen 3 businesses fold in my complex as the landlord failed to give a hand in reducing the rent. If the revenues are going down, rents need to go down proportionately. I think some legislation is needed here to help small businesses. My 2 cents.

A small business owner.

[Small Business Advocate]

As an SBA lender trying to help as many small businesses as we can gain access to capital, we're receiving little to no response from leaders regarding two SBA programs, Patriot Express and Community Express! These two programs have helped more minority and veteran small business owners access capital than other SBA lending programs! Let's work together to make these programs permanent to continue the growth of ALL small businesses!

[GB]

@TP Landlords are business owners too, and in my area many are struggling to cover their expenses & mortgages during this difficult economy. Tenants contractually commit to rental payments, and the landlords depend on those promises to pay their obligations; mortgages, taxes & insurance, and covering maintenance needs. When asking a landlord to reduce rent from $1,000 to $900/month, consider the effect on your business if you reduced your prices by an equal 10%.

Frankly, if a business cannot cover their rental obligations, then they're very likely nearly gone anyway; rent is often a fraction of overall business expenses. Higher expenses are salaries, insurance, taxes, equipment, utilities, and maintaining sufficient inventories. No landlord wants a deadbeat tenant; someone seeking to continue occupying a space they'll never be able to cover the obligations on; if the 1st month is $900, 2nd is $1,800, 3rd is $2,700...how does the tenant, whom couldn't pay the $900, come up with $2,700 just three months later?

Asking landlords to cut into their often marginal profits is nothing more than seeking to fundamentally change not only the contract a tenant committed to, but it forces landlords into the difficult position of effectively subsidizing a tenant. Do you pay customers to walk out of your store with your products, or do you keep a small margin of profit to survive off?

I'm a landlord, the founder of an IT consulting business, and I too was caught in a 2009 layoff.

[Peter]

A lot of small businesses are in need of financial assistance to help maintain the business. Many small businesses are in need of new supplies, an upgrade of the old ones, and many other business expenses that pertain to the daily operations of the business. Although these may not add up to such large amounts, most small business owners don't have that extra $30,000 to $75,000 or whatever the costs may be.

[Nancy]

Small businesses are struggling to survive in this environment, causing the loss of more jobs. It is more difficult to get a small business loan today from banks and other financial institutions, leaving small business owners unable to expand, operate and even hire new help. If they cannot get a small business loan to keep their business operating and expanding, jobs will not be created. I also think that, in conjunction with the ability to obtain a small business loan, lowering taxes to business is equally important to improve our financial growth.