Tuesday, August 31, 2010

Small Business & the Next Governor

The South Carolina Small Business Chamber of Commerce (SCSBCC) today released an assessment of the three candidates running for Governor—Rep. Nikki Haley, Sen. Vincent Sheheen and Dr. Morgan Reeves. The assessment was based both on specific critical legislative votes and a questionnaire sent to each candidate on July 7, 2010. The questionnaire can be found at http://www.scsbc.org/issues.aspx?article_id=883.

While the SCSBCC does not endorse candidates for any office, it is educating the small business owners in the state as to how small business-friendly each candidate has been to date and might be in the future if elected.

“It is important that small businesses have a good understanding of how the election of the next Governor might affect them,” said Frank Knapp, Jr, president and CEO of the SCSBCC. “In 2002 we were in our infancy as an organization and thus not in a good position to evaluate Gubernatorial candidates. As a result, what many small business owners thought they were getting with Mark Sanford did not pan out.” Mr. Knapp’s blog on this issue can be read at http://www.unconflictedsc.com/2010/06/sheheen-haley-sanford-endorsement.html.

Summary and Assessment

Below are the detailed results of our questionnaire and review of critical legislative votes.

Because both Rep. Haley and Dr. Reeves failed to respond to our questionnaire, they have deprived small businesses the opportunity to compare the candidate’s positions on extremely important small business issues. Dr. Reeves, the candidate of the Green and United Citizens Parties, might receive a pass on this matter due to lack of resources. However, there is no excuse for Rep. Haley’s unresponsiveness to a questionnaire from a statewide small business advocacy organization with thousands of members that has successfully represented the interests of small business in the Legislature and in regulatory matters for over 10 years.

Sheheen @ Wateree River Sweep
Sen. Sheheen should be applauded not only for responding but also because his comments reflected an appreciation for not increasing health care costs to small business, projecting leadership in creating alternative energy jobs, and promoting comprehensive tax reform and reducing small business property taxes. Most importantly, Sen. Sheheen recognizes the importance of small business growth and development and proposes a Division of Small Business and Entrepreneurship within the Department of Commerce.

A review of critical small business votes indicates that both Rep. Haley and Sen. Sheheen have casts numerous votes in support of matters strongly favored by the SCSBCC.

However, Rep. Haley has demonstrated that she has been willing to forgo supporting small business in the case of affordable health care insurance when it was tied to a tax increase on cigarettes. Since 2006 she has voted multiple times against such legislation that was specifically targeted to help small businesses. Confusing the understanding of her votes is Rep. Haley’s apparent recent endorsement of increasing the sales tax on groceries thus indicating that she is not universally opposed to raising taxes.

One of the most important questions Rep. Haley did not respond to was our inquiry of her support for establishing a small business division within the Department of Commerce not only to give Commerce a small business development focus it has never had but also to provide assistance to local communities to help make them more small business friendly.

Sen. Sheheen strongly endorsed such an initiative. Rep. Haley’s silence causes great concern given her public statements about economic development. These statements appear to completely ignore the important role of small business and possibly demonstrate a lack of knowledge about small business.

Rep. Haley’s primary economic development campaign promise is to eliminate the corporate income tax. She no longer talks about her earlier promise to reduce small business income taxes.

Image: Haley's Facebook page
Growing our small businesses and encouraging entrepreneurship apparently are no longer an important part of Rep. Haley’s economic development plan, even though over 60% of all new jobs come from small businesses. Instead, she promises only more of the traditional, and not very successful, economic development strategy of recruiting big business.

That is the essence of her “elimination of corporate income tax” pledge. For the uniformed, and possibly this might apply to Rep. Haley, very few small businesses pay corporate income taxes because they are not C-corporations. The elimination of corporate income taxes will not help our small businesses. Instead, it would create an unlevel playing field between big and small businesses on income taxes.

In 2005, after a major legislative battle with Governor Sanford, the SCSBCC scored one of its most significant victories in having the income tax paid by small businesses reduced from 7% to 5% primarily to achieve parity with big business C-corporations.

There is an underlying problem with Rep. Haley’s unresponsiveness to the questionnaire and her campaign’s lack of courtesy in failing to even notify the SCSBCC that they would not be responding. In the past, Rep. Haley has demonstrated this same lack of respect for the SCSBCC in her refusal to meet with the SCSBCC to discuss legislation. This is the same path Mark Sanford took with the SCSBCC, refusing every request for a personal meeting.

It is possible that Governor Sanford and Rep. Haley both believed that they already had the answers to all the state’s problems and didn’t need to listen to alternative opinions. Unfortunately, we know that this gubernatorial attitude failed our state over and over during the last 8 years.

Questionnaire Response

Haley: Unfortunately, Rep. Haley did not return the questionnaire. To insure that her campaign received it, the questionnaire was hand delivered to her campaign communication director, Mr. Rob Godfrey, on July 27, 2010. The SCSBCC did not receive a response by the due date of August 2, 2010, or a request for an extension. No contact from the Haley campaign has been received by the date of this release.

Sheheen: Senator Sheheen did respond to the questionnaire but requested an extension to do so. His response was received on August 17, 2010. Senator Sheheen addressed each of the areas of interest—healthcare, energy, taxation, and economic development. Although some specific questions within these areas might not have been addressed, his answers did sufficiently address the issues to allow for analysis.

Senator Sheheen’s response can be read at http://www.scsbc.org/issues.aspx?article_id=882.

Image: Reeves' website
Reeves: Dr. Reeves called our office immediately upon receiving the questionnaire promising to provide a response. A series of e-mails were received with responses but subsequently, Dr. Reeves contacted our office again to ask us to disregard those responses that were prepared by a volunteer consultant no longer with his campaign. No further communications or response to the questionnaire was received. Consequently, we must consider Dr. Reeves not to have responded.

Critical Legislative Votes

Since 2005, Rep. Haley and Sen. Sheheen haves taken votes on certain legislation of extreme importance to South Carolina small businesses. Dr. Reeves has not served in the South Carolina Legislature and thus is not included in this analysis. Below is an explanation of these critical votes and whether the candidates supported these bills.

2005—The SCSBCC supported job tax credits for small businesses so that the hiring of as few as two new employees would qualify many of the state’s small businesses for this economic development incentive. These job tax credits had never before been available to small business. Both Rep. Haley and Sen. Sheheen supported this bill that passed both chambers.

2006—The SCSBCC was the primary business organization supporting an amendment to the state budget that would have increased the cigarette tax from 7-cents per pack to 39-cents. The additional revenue would have been used as a Medicaid match to give premium assistance for small businesses providing health insurance to employees with family incomes of up to 200% of poverty. This effort to reduce the cost of small business health insurance failed. Rep. Haley voted against the budget amendment. Because the budget amendment failed in the House, it did not come up for a vote in the Senate.

2007—The SCSBCC was the primary business organization supporting the establishment of a $1000 tax credit per new employee in a Registered Apprenticeship program. Rep. Haley supported the bill. The Senate passed the bill on a voice vote.

2007—The SCSBCC proposed reform in the state’s workers’ compensation insurance law that would require the state to regulate how much an insurance company could build into the premium for profit, taxes and other expenses. The non-regulation of this Loss Cost Multiplier component of premiums had cost businesses over $200 million in excess premiums over several years. The bill that contained this reform passed with the support of both Rep. Haley and Sen. Sheheen.

2007—The SCSBCC was a strong supporter of increasing funding of the State Child Health Insurance Program to extend Medicaid to the children in families with incomes of up to 200% of poverty. This change would help make health care more affordable and reduce health insurance costs for small businesses by helping to stop health care cost shifting from the uninsured to the insured. The Legislature passed this bill but Governor Sanford vetoed it. Both Rep. Haley and Sen. Sheheen voted to override the Governor’s veto.

2007/2008—In 2007 the SCSBCC and a growing coalition of business organizations supporting an increase in the state’s cigarette tax to provide more affordable health insurance for individuals and employees. The House passed its version of the program in 2007 with Rep. Haley voting against the bill. In 2008 the Senate passed its version of the bill calling for a 50-cent increase in the cigarette tax to be used in a non-Medicaid premium assistance program for small employers offering health insurance to workers below 200% of poverty. The state’s Medicaid program would also be expanded to parents between 50% and 100% of the poverty level. Sen. Sheheen voted for this bill. Governor Sanford vetoed the bill and Rep. Haley voted not to override. The House sustained the Governor’s veto thus no Senate vote was held.

2008—The SCSBCC first identified in 2003 the problem with excessive amounts (approximately 42%) of our state procurement dollars going out of state to purchase goods, labor and services. As the primary advocate for procurement reform that would result in more procurement dollars staying in our state to benefit our small businesses, legislation was crafted for the SCSBCC by the Budget and Control Board and introduced by Republican leadership in the Senate (Leatherman) and in the House (Harrell). The Legislature passed the Senate bill but the Governor’s veto failed to be overridden in the House. Both Rep. Haley and Sen. Sheheen voted to override the Governor’s veto.

2009—The exact same procurement reform bill passed in 2008 but stopped by a gubernatorial veto was reintroduced in the Senate by Senators Knotts and McConnell and in the House by Speaker Harrell and Rep. Mac Toole. The Senate bill was passed by the Legislature and vetoed by the Governor. Both Sen. Sheheen and Rep. Haley voted to support the successful override of the veto.

2009/2010—The SCSBCC once again joined the even greater chorus of organizations supporting an increase in the cigarette tax. In 2009 the House passed a 50-cent increase in the cigarette tax with the new revenue used for a tax credit for small businesses providing health insurance to low income employees, a tax credit for low-income individuals purchasing health insurance directly and premium assistance for those wanting to enroll in the state’s high-risk health insurance pool. Rep. Haley voted against this bill. In 2010 and in recognition of the new national health care law which created a small business health insurance tax credit program, the Senate passed a 50-cent increase in the cigarette tax with most of the funds going into a Medicaid Trust Fund to make health insurance more affordable for low-income South Carolinians. Sen. Sheheen voted for the bill. Governor Sanford’s veto of the bill was overridden with Rep. Haley voting to sustain the veto and Sen. Sheheen voting to override.

Sunday, August 29, 2010

Seen that Snazzy Napper video yet?

Heard of the Snazzy Napper?

Picking up where last year's Snuggie craze left off, this product -- out of neighboring metro Atlanta, GA -- is poised to become this holiday season's white elephant Christmas party gift of choice. It's tearing up word-of-mouth channels online, particularly Facebook...

...And of course, YouTube:


Why on earth would the no-nonsense, non-profit South Carolina Small Business Chamber of Commerce post something so...well...fluffy?

Coming up on our nation's pro-labor vacation day, we just had to ask ourselves, "Why not?"

Meanwhile, for you small business owners who will most likely be putting in a few (or a lot of) hours on Labor Day, here are a few of the biggest, most influential business technology news sites on the web, just in case you haven't checked them out yet. There's always an article, round-up, top 5 list, or news piece that applies directly to the needs of the South Carolina small business.

Should the mood strike, add these to your browser bookmarks, Facebook friends, Twitter follows, and the like:

The Mashable.com business portal
Mike's List

...and take a gander at this excellent list of 2010's Top 140 tech experts to follow on Twitter:


Because small business can think big.

Friday, August 27, 2010

More on NFIB and US Chamber

Stacy Mitchell is with the Institute for Local Self-Reliance. She has an opinion editorial in the last edition of Business week dealing with an issue that I have blogged about many times. The U.S. Chamber and the National Federation of Independent Business (NFIB) are not representing the interests of small businesses on many issues.

For six years, Pennsylvania Governor Ed Rendell has tried to give a tax cut to businesses in his state. And year after year the Democratic governor's proposal has been stymied by a surprising foe: the state's business lobby.
Both the Pennsylvania Chamber of Business & Industry and the state chapter of the National Federation of Independent Business (NFIB) have opposed Rendell's plan to slash the business income-tax rate. Why? The plan would close a loophole that allows certain multi-state companies—mainly retail chains and banks—to shield profits earned in Pennsylvania from state taxes. In other words, for the Chamber and NFIB, ensuring that a handful of corporations continue to enjoy a tax break is worth denying thousands of small businesses a tax cut. (Read more)
Stacy interviewed me for her piece but she tells me that my quotes ended up on the cutting room floor as they say in the film industry.

Nevertheless, there is growing awareness in Congress and the national media that the U.S. Chamber and NFIB are not what they pretend to be when it comes to small business. On September 13 and 14 I will join 15 or more small business organizations from across the country in Washington for an American Sustainable Business Council meeting.

On our agenda will be increasing the real voice of America’s small businesses and collectively setting an agenda uncorrupted by big business interests.

Tuesday, August 24, 2010

Billboard Truth

This past weekend I was in the Pittsburgh, PA, area visiting relatives. (They’re all fine. Thanks for asking.)

On the way back to the airport a billboard caught my eye. It read:

“Imagine. A bank that actually lends money.”

What a great billboard! It resonates with the public because everybody knows that banks have almost stopped lending money for many things—especially small business loans.

image: Mansfield Tourism*
So let’s give the bank with this insightful marketing campaign some credit.

Check out Huntington Bank. They claim to be the 5th largest SBA lender in the country.

The only problem I see with this bank is that its service area is Ohio, Michigan, Indiana, Pennsylvania, West Virginia and Kentucky.

Come on down, Huntington. If you’re lending money, South Carolina has business for you.

*Fun fact: according to an Ohio tourism site, the above-pictured bank building in Ashland, Ohio was used as a filming location for the Oscar-nominated movie, The Shawshank Redemption (1994). After Tim Robbins' character escapes from Shawshank prison, he visits a number of banks, including this one, to accomplish some serious financial wizardry.

Thursday, August 19, 2010

Lending crisis over? Not for small businesses...

I received a call this week from a small business in Anderson, South Carolina.

The lady told me that their 30+ year family cabinet-making company had fallen on hard times due to the economy and needed a loan to stay alive. Their attempt to get an SBA loan from the usual banks had failed because their business was not deemed a good risk.

It might actually be too late to save this small business. Had they sought some help earlier through a Small Business Development Center and applied for a SBA loan earlier, things might be different.

However, there are thousands of other small businesses across South Carolina and hundreds of thousands across the country that need a loan or line of credit, not just to keep them going until the economy turns, but also simply to serve their existing customer base and even to expand to meet new demand.

But like this cabinet maker business, the response most are getting from local financial institutions is the same—No.

This is why the Senate vote scheduled for the week of September 14th to allow debate to begin on the Small Business Jobs Act (SBJA) is so critical. The legislation will create a $30 billion Lending Fund for community banks that economists say will turn into $300 billion in small business loans.

Sen. Landrieu (D), LA
Senate Democrats believe they have at least one or two Republicans who will vote for cloture to move the SBJA forward.

The big banks and their hired gun, the U.S. Chamber, have failed in their fear tactics to convince Senate Democrats and the public that this bill is a small bank bailout or TARP 2.

The truth is that the Lending Fund is designed to actually bring in one billion dollars to the federal government. And while big banks are viewed negatively by the public, who doesn’t want their local community banks to succeed?

So don’t be surprised if the SBJA opponents don’t have another trick up their sleeves—to convince the GOP Senators who might vote for SBJA cloture, as well as the public, that the Lending Fund isn’t necessary.

Here are some of the headlines appearing in the business and mainstream press (or the "MSM," as Columbia, SC political blogger Brad Warthen refers to the mainstream media) this week:

“Banks loosen credit to small firms, Fed survey says”
“Fed says banks easing lending standards for small business for first time since late 2006”
“Big banks loosen lending standards”
“Fed survey finds easier business lending standards”
“Green Shoots at Last: Small business lending finally starting to thaw”

Get the picture? In the mass media, the story being propagated is that the crisis is over — that big banks have come to the rescue of small business, and that loans are flowing. "Good times are here again," supposedly, and "we don’t need no stinkin' Lending Fund" for those community banks.

That's not the story we're hearing here on Main Street USA.

You can bet that this “good news for small business” Federal Reserve survey is being put in front of every Senator — and in particular, every Republican Senator — in hopes that the latter will continue to vote against cloture for the SBJA.

Now, I have no way of knowing if the big banks are telling the truth that they are easing up on lending standards for small businesses. But that’s really the only thing this “survey” is reporting — lending standards are changing, not the actual granting of small business loans.

And when the big banks do report — as they did at the end of July — that they are making more small business loans, go and ask them for their definition of a small business.

If they count businesses with up to 250 or 500 employees in their loan numbers, then they aren’t reaching the real small businesses of this country — those like our cabinet maker with 100 or fewer workers that account for about 98% of all businesses.

Tuesday, August 17, 2010

Level the sales tax playing field

One good thing about being old (ok, relatively old) is that you have institutional memory. And that comes in handy regarding policy issues, because very few issues are completely new.

Being able to recall and even document what has happened before can be quite useful in discussing the issues of today.

Such is the case of the South Carolina Tax Realignment Commission’s (TRAC) recommendations of how to make changes to our state’s tax structure in order to make it more “balanced,” resulting in a system that is “adequate, equitable, and efficient.”

TRAC held a public hearing last Friday to allow the public to weigh in on its recommendations, two dealing with the collection of sales tax on internet purchases that are tied to South Carolina businesses.

This whole problem of states collecting sales tax from purchases over the internet has been around for some time. Back in 2002 it was an issue that many states were trying to collectively address. Back then, the estimate was $13 billion in sales tax that states and local governments were not collecting from internet sales — $153 million in South Carolina. Today these numbers must he far, far greater.

By law, if you make a purchase over the internet from a business located in another state, and you don’t pay that state’s sales tax, then you are supposed to declare that purchase at tax time and pay South Carolina’s sales tax.

(I’m now waiting for you to either stop laughing or stop worrying about how much trouble you’re in.)

In a letter dated January 29, 2002, here is what The South Carolina Small Business Chamber said in a letter to the Legislature regarding a proposal to exempt internet purchases of under $10,000 from the “use tax.”

The Small Business Chamber believes that the state should not be encouraging the public to make purchases via the internet rather than buying from South Carolina brick and mortar stores. The state should not be creating an uneven playing field when it comes to “use tax” or sales tax collection. This would be unfair to the tens of thousands of small business owners in our state who collect sales tax, pay their property taxes, employ our workers and support our schools, churches and community activities.
The TRAC recommendation on trying to capture sales tax from internet sales of businesses with ties to our state makes sense. We should be pursuing all “use taxes.” The reduced price of goods purchased via the internet should be due to less marketing, personnel, overhead and inventory costs — not because sales taxes are being avoided.

Inspired by initiatives like the SCDA's "Certified SC Grown" program, the SC Small Business Chamber has launched a free online directory of SC-owned small businesses with less than 100 employees at http://www.buysc.org. Visit BuySC today to add your business to the site, and let's work together to support the success of small business in South Carolina.

Friday, August 13, 2010

Why dismiss growth potential of small business?

Leo Hindery, Jr.
Recently in a Huffington Post blog, Mr. Leo Hindery, Jr. convincingly argued for our country to pursue two courses for re-energizing our manufacturing economy -- to create the jobs we desperately need.

Value-Added Tax and Domestic Sourcing
He proposes that, “a large part or all corporate income tax” be replaced with a value-added tax and that the U.S government use its enormous purchasing power in an “all-of-government domestic sourcing” program.

I encourage you to read Mr. Hindery’s blog because it deserves serious consideration.

But if you do, skip the first four paragraphs.

No Love for Small Business
Mr. Hindery seems to have a chip on his shoulder against small businesses. He is offended that so much emphasis has been publicly placed on the proposition that small business must play at vital role in the revival of our economy. He calls it a “love affair with pumping up small businesses.”

Mr. Hindery believes that the Obama administration should be focusing on creating manufacturing jobs and stop emphasizing small business growth.

He maintains that we need 22 million new jobs and that the “simple truth is that there is no way on God’s green earth to create this many jobs without the massive – and primary – involvement of big manufacturing business.”

“Big” is the operable word in Mr. Hindery’s statement. Not any manufacturing business, only “big” manufacturers are worthy of a jobs creation effort by the U.S. government.

He concludes, “And it’s long past time for our government to stop equating a job in a sub shop selling sandwiches to a job in a manufacturing plant making real products for domestic competition and export.”

It is unfortunate that those with a big business mentality are so dismissive of small businesses in general and jobs in a small business in particularly.

Upturned Noses in Big Business?
This big-business snobbery rejects the position that a job is a job is a job. For these elitists, only jobs provided by a big business are worthy of pursuing.

Accordingly, Mr. Hindery believes that only big business can create the jobs we need to get to his goal of 22 million new jobs.

First, big businesses are important to our economy. (How else would SC have recently ranked #1 in economic growth potential? See Brad Warthen's post on the ranking published in Business Facilities magazine.) You never hear a small business person say otherwise.

So why do big business folks not want to recognize the importance of small business?

Here's Why
The reason is pretty simple. Big business types were quite satisfied with political platitudes about small business as long as this was only public relations rhetoric -- as it has been for years. But as soon as our elected leaders actually get serious about taking steps to help and protect small business (i.e. health care reform, Wall Street reform, and the Small Business Jobs Act), big business advocates show their true colors.

Such efforts represent a threat to big business' total control over Congress, and they don’t want to share any power or be subject to responsible regulation.

90 New General Motors? Not in This Lifetime
The proposition that big manufacturing alone can generate meaningful numbers of jobs is also short sighted.

Mr. Hindery calls for the creation of 22 million jobs but admits that would take either “140 new Boeing Companies or 90 new General Motors.”

What’s the likelihood of that happening any time soon, even with Mr. Hindery’s proposed reforms?

4 Million Small Businesses to the Rescue
However, there are about 4 million small businesses with 2 to 24 employees in the country.

If we stabilize the economy, start again making small business loans and take other actions to make small business more financially healthy, we could rather quickly add back half the jobs lost in the recession -- if each of these small businesses averaged adding only one new employee.

Throw in the hiring from the rest of the nation’s businesses with 100 or less employees and we could be well on our way to Mr. Hindery’s 22 million new jobs.

Small Business = The Big Reality
Finally, the real growth in the U.S. manufacturing sector is in the form of small businesses. Here in South Carolina we have over 5000 manufacturers. Eighty-four percent of these have less than 50 employees and 90% have less than 100 employees—hardly big manufacturers. But if Mr. Hindrey is looking for more Boeing and General Motors, this is where he will find them growing and providing the new jobs that he dismisses.

Tuesday, August 10, 2010

Elitist Garbage

During the debate on health care reform, a familiar theme of the opponents was that it would increase taxes on small businesses.

Of course, that was just fear mongering in an attempt to protect the insurance industry because there are no tax increases on small businesses in the new healthcare law.

There will be a small increase in Medicare rates for individuals making over $200,000 or joint filers making over $250,000. Only approximately 2% of those reporting income from small business ownership will pay more into Medicare.

But most of these folks are not your typical small business owners. Many will be high-income professionals like attorneys and physicians while others will be passive owners in LLCs. The vast majority of small business owners won’t be impacted.

Now this same scare tactic is being used to push Congress not to let the Bush tax cuts of 2001 and 2003 for the wealthiest Americans expire on schedule. President Obama is proposing to allow these tax cuts to end to help address everyone’s concern about the increasing deficit.

So how many small business owners actually are in the top 2% of earners who would see their personal income taxes increase if the tax cuts end? Apparently not that many and that’s according to the National Federation of Independent Business (NFIB), which is an opponent of ending the tax cuts for the top income brackets.

When pressed by Washington Post reporters to defend their opposition to allowing the tax cut on the wealthy to expire, Bill Rys of the NFIB, acknowledged that only a fraction of small business owners would be affected but that these were the owners of the largest small businesses—“the ones that are most likely to be hiring.”

What elitist garbage!

The NFIB wants us to believe that there is a direct correlation between the personal wealth of the small business owner and the number of employees their small business hires. There are no statistics to prove this theory only well-paid mouthpieces spouting lines fed to them by their big business allies.

The vast, vast majority of small business owners aren’t making anywhere near $200,000 from their business.

Walk down any main street and ask that income question.

The laughter you hear will tell you the answer.

Yet these same small business owners employ the vast majority of workers in small businesses. There are over 4 million small businesses with 2 to 24 employees alone.  

If each of them hired just one new employee in a revived economy, the number of unemployed due to the recession would be cut in half. The 2.5% of small business owners in the affected upper income brackets can’t match this hiring potential with such relatively little effort.

Now, I’m not thrilled with the idea of raising taxes, but I’m a big fan of how President Bill Clinton balanced the budget by increasing some taxes on the wealthiest among us and decreasing federal expenditures.

Who wouldn’t trade the resulting 90s booming economy with the one we have today?

Small business has nothing to fear from allowing the tax cuts on the top income brackets to end and Congress shouldn’t listen to elitist garbage.

Thursday, August 5, 2010

NFIB’s new “Creditworthy” crusade falls flat for small business

Jarrett and Obama (image: romanticpoet)
President Obama’s aides, Lawrence Summers and Valerie Jarrett, recently sent a letter to the national small business pretender organization, NFIB, thanking it for either its “praise” of or “support” for the Small Business Jobs Act of 2010.

The letter was intentionally vague so that the NFIB could pick which applied to it.

Actually, neither applies.

SBA Jobs Act of 2010 still awaits the Senate
The cornerstone of the bill, which is still in front of the Senate waiting on Republican Senators to put partisanship interests behind America’s interest, is the $30 billion Lending Fund to get community banks once again making small business loans. This access to capital is critical to enable small businesses to survive, grow and hire the workers we need to lead us out of this recession-like economy.

The NFIB has been siding with the GOP Senators that have called the Lending Fund “another expensive and bureaucratic government program” and “TARP II”. Actually, the Lending Fund is expected to generate $300 billion in private small business bank loans and the Feds will make $1.1 billion over ten years on the deal.

But you don’t see (at least I haven’t) the NFIB writing opinion editorials using the facts to push for passage of the Small Business Jobs Act, as they have done in opposing implementing the new health care law.

Instead the NFIB’s chief economist, William Dunkelberg, has been critical of the Lending Fund calling it “all but irrelevant” and claiming that it will lead to “bad loans”. Dunkleberg compared the small business loans and jobs that would be generated by the Lending Fund to the same scenario that led to the housing bubble.

The NFIB seems to be more concerned with protecting the assets of big banks than the plight of the small businesses that have had their loans called, lines of credit canceled, and loan applications rejected because the big bank financial meltdown eroded the value of the small business owner’s assets.

Some “thank you” to the small business owners who helped bail out the big banks.

But this irony appears to be lost on the NFIB. “Creditworthy” is the NFIB’s new rallying cry. It only supports financing of “creditworthy” businesses.

NFIB and Mr. Dunkleberg, meet Tony Corso and Joseph Jackson, two of the NFIB’s uncreditworthy businesses.

Tony Corso, owner of Mi-Box Moving & Storage, has been tripped up by the collateral gap. He wants to buy more trucks and storage containers to meet brisk customer demand, which will increase cash flow at his two-year old business, he says. But the banks that have entertained the loan applications from Mr. Corso's West Haverstraw, N.Y., firm are willing to help finance those purchases only under conditions Mr. Corso can't afford, he says.

Three banks have asked that Mr. Corso use all the assets of his business as collateral—including his accounts receivables, containers, trucks and forklifts—and sign a personal guarantee, he says. Plus, he says he would have to deposit cash into a bank account, equal to the amount of the loan, which Mr. Corso had hoped would be at least $250,000.

"The loan requirements are so onerous," says Mr. Corso, who says Mi-Box pulled in $150,000 in revenue last year and hopes to break even this year. . . .

Joseph Jackson, owner of Jackson Pianos LLC in St. Louis, also has had trouble getting a loan. The business previously grew by buying commercial spaces for repair work and for a retail showroom. The business grew 35% last year and exceeded $500,000 in revenue, he says. Now he's ready to expand into a larger building, but the banks aren't willing to help this time, despite, he says, his excellent personal credit score that's between 760 and 800. He didn't disclose the names of the banks.

When his regional bank, which has serviced his company for years, rejected the loan application without explanation, he says he turned to two larger lenders who told him that his cash flow was insufficient and that he should have more money in untouched accounts, though they stopped short of specifically saying how much he would need. Banks still said no as he dropped his request to $90,000 from $300,000.
                                                                                      The Wall Street Journal

(image: The White House)

Mr. President, if the NFIB deserves an appreciation letter for their performance on the Small Business Jobs Act and its opinion of Messrs. Corso and Jackson as being uncreditworthy, surely The South Carolina Small Business Chamber and all the other small business organizations that have supported this effort for a long time deserve an invite to the White House.

Monday, August 2, 2010

Who owns the economy?

(The following opinion editorial by Frank Knapp appeared today in The Hill.)

Who is to blame for the state of our national economy is a political football. 

No one can argue that the recession that started prior to the Obama administration was owned by the former administration.  President Bush responded with the Troubled Asset Relief Program (TARP) that was projected to be a $700 billion effort to avoid a catastrophic collapse of the banking industry.  It is now projected to have done its job for less than $100 billion, as many of the loans have and are being repaid with interest.

Then it was President Obama’s turn.  Faced with a declining GDP at a 6% annual rate and the nation losing 750,000 jobs per month, Mr. Obama pushed through his stimulus package of federal funds to rescue state budgets, keep people working and hopefully create jobs.  The state of our economy, and the fear of a jobless recovery, is now being perceived as belonging to his administration. 

So what is the state of our economy today and what would it have been without the efforts of Messrs. Bush and Obama?

According to a new study by Alan Blinder, former Vice-Chair of the Federal Reserve, and Mark Zandi, a past economic adviser to Senator John McCain, all the efforts to rescue the economy helped stave off a depression.  The study’s authors estimate that an additional 8.5 million Americans would have become unemployed if not for TARP and the stimulus.  That would have doubled the number of those who did lose their jobs due to the recession.

Our economy appears now to be stabilized and the GDP, according to recent data, is growing again at 2.4% annually.  Blinder and Zandi give credit for this turnaround to the Bush and Obama administrations’ programs. 
However, our economy is far from out of the woods could reverse course without more help.

Economists agree that small businesses must lead our recovery with hiring just as they have done in the last three recoveries.  But to do that, they need access to capital—something that is seriously lacking today.

Federal Reserve Chairman Ben Bernanke
"Making credit accessible to sound small businesses is crucial to our economic recovery and so should be front and center among our current policy challenges," Federal Reserve Chairman Ben Bernanke said recently in regard to the small business lending crisis.

A just-released survey by the National Small Business Association shows that a majority of the small businesses that needed access to capital said that they were unable to garner adequate financing.  SBA loans have also dropped dramatically this year.

The relationship between small business lending and job growth is well documented.  The NSBA report asserts:

“Since 1993, when NSBA began asking these questions, there has been a direct correlation between access to capital and job growth—when capital flows more freely, small businesses add new jobs.”

Also making this point is a report released last week by the National Community Reinvestment Coalition that found “a positive correlation between small business lending and employment; the more small business lending in a county, the higher the employment rate.”

It is clear that if we want to move our economy out of this stagnation and create more jobs, we must solve the small business lending crisis.  

That is why the Senate’s failure to evoke cloture last week on the Small Business Jobs Act was so devastating to our economic future. 

There are too many great small business provisions in this bill to detail.  No one appears to disagree that the bill will result in more small business loans being made along with other important features to promote the general fiscal health of small businesses. This is exactly what we need to allow small businesses to lead us to a better economy.

Yet, every Republican Senator out of party unity voted against even debating the legislation.

Senator George LeMieux (R-FL), who earlier had courageously voted as one of only two GOP Senators to include the crucial Lending Fund in the Small Business Jobs Act, is reported to have said, “Before I am a Republican, I am a Floridian and an American, and this bill is good for our country.”

Mr. LeMieux and the other GOP Senators may have one more chance this week to vote for America and not for party.  If none vote for cloture on the Small Business Jobs Act, the state of our economy going forward will be owned by Congressional Republicans.