Tuesday, May 31, 2011

Small business access to capital

The country’s biggest banks have taken a lot of criticism about small business lending since the great recession began. Obviously, they don’t agree with their critics.

In a recent interview with Robb Mandelbaum of The New York Times, Marc Bernstein, one of the top two small business lending executives at Wells Fargo addressed the issue of small-business owners feeling that big banks with bailouts have done nothing to help small businesses.

A lot of people who frankly are not very good credit risks and who want a loan, I can understand their frustration. But Wells Fargo has been committed to small-business lending for a quite a while now, and we know here that we don’t help our customers, our communities or shareholders by declining a good loan.
What Mr. Bernstein doesn’t say is that the “not very good credit risks” of today were acceptable loans before the recession.

This Thursday I will be in a meeting at the White House organized by the American Sustainable Business Council. In preparation for the meeting with numerous Administration economic development officials, I was asked to develop a background piece with recommendations for addressing access to capital by small businesses. Check it out below.

I’ll let you know how the meeting goes.

Small Business Access to Capital

In early May, Small Business Administration Administrator Karen Mills spoke to the Greater Miami Chamber of Commerce. She had good news for many businesses seeking credit. “Lending is back to 2008 levels,” Mills said.

But the news wasn’t so good for the small businesses in geographically challenged areas and our smallest of small businesses. According to Mills, “we are not back in underserved communities and we are not back when it comes to small loans.”

The truth is that lending hasn’t been good in underserved communities and for our very small businesses for a very long, long time.

The demand for small business loans is picking up. For those with between one and 10 million dollars of revenue, Greenwich Associates has found that small businesses increased their seeking of loans in the first quarter of this year by 100 percent over the previous quarter. According to Greenwich, on average about 60% of the small businesses they surveyed received the credit they sought between March 2010 and March 2011. And the majority of these loans came from smaller, community banks. Unfortunately no one is measuring demand for loans and loans made to our microenterprises (businesses with fewer than 5 employees and capitalized with less than $35,000).

Late last year, with the support of ASBC, Congress passed the Small Business Jobs Act which included a $30 billion lending fund to encourage community banks to make small business loans. Unfortunately comparatively few eligible community banks have indicated that they want to participate in this program.

The reason given by some banks is that there is little loan demand from small businesses. That’s simply not true. The demand is there. More likely the answer lies in federal regulator pressure on community banks to avoid “risky” loans, the same small business loans that were more acceptable prior to the great recession.

There are some possible solutions to this lending dilemma for small business if community banks refuse the allure of the Small Business Lending Fund and big financial institutions still are only interested in the cream of small business loans.

1. Put credit unions more in the lending game by raising the cap on their lending ability.

2. Dramatically (!!!) increase funding for small business loans under the USDA, CDFI and SBA (microloans) programs. In addition to lending resources the non-profits using these funds also need a big boost in funding for technical assistance to help guarantee the success of the loans.

3. Allow the SBA to bypass the financial institutions and start making loans directly to small businesses. The federal government now makes direct loans to students through Stafford and other student loans. The SBA already can make direct business loans on its own in some cases.

4. Create a new capital-raising strategy for small business such as “crowdfunding”. The Security Exchange Commission is reviewing a proposal to allow small businesses and microenterprises to solicit investments of $100 or less while avoiding much of today’s regulations.
If the traditional financial institutions will not provide the capital access small business and microbusinesses need and credit unions cannot make up the difference between demand and access, then we should empower non-profit organizations to take on more of the lending responsibility, make direct government loans as we did in our automotive sector and dramatically reduce the regulatory burden on small investment strategies.

It is time to make significant changes to our country’s small business lending and financing system. Conventional practices are not generating the small business access to capital our economy desperately needs to grow

Friday, May 27, 2011

Amazon customers: Start paying your sales tax because now there is a record

Around midnight last night in Senate, Amazon finally overcame strong opposition to win an exemption from collecting sales tax on in-state purchases. Only the House agreeing to some Senate amendments stands in the way of the retail giant building a new distribution center in Lexington County.

While we were on the losing side, the team of lobbyists fighting the principled fight to stop the unfair sales tax exemption was still able to smile. We had fought the good battle along with some staunch support from Senators Lee Bright, Kevin Bryant, Chip Campsen, Tom Davis, Mike Fair, Greg Gregory, Larry Grooms, Billy O’Dell, Mike Rose, Greg Ryberg and Phillip Shoopman.

Because of our opposition in defense of all other retailers in the state that compete with Amazon.com, the state now has a much better return on its give-aways to Amazon—60% more jobs and 39% more investment in the state.

The Senate also made the online giant guarantee that after they meet their 2000 new jobs goal they also have to maintain that at 1500 to keep the deal (the House had allowed Amazon to only maintain 1000 of the jobs long-term).

The loyal Senate opponents also tried to pass an amendment that would have required all the 2000 new jobs be South Carolina residents but Amazon refused and the vote was lost.

But Amazon did agree to one more important change—they now will tell their South Carolina customers twice that their purchase in most cases does require them to pay sales tax to the state. This message will come with confirmation of their purchase and on February first of the following year. The latter message will tell the customer exactly the total sales price of all their purchases with Amazon that occurred in the previous year. If the sales tax had not already been remitted to the SC Dept. of Revenue, it should be reported on their income tax filing.

Now there will no longer be any excuse that South Carolinians will not know that they owe the state sales tax and are legally bound to personally pay it. Plus, this record would presumably be available to tax auditors if requested from Amazon.

This final “Scared Straight” amendment doesn’t correct the unfair competitive advantage Amazon.com will have over our other brick-and-mortar/online South Carolina retailers, but it will help.

Thursday, May 26, 2011

Growing the economy bottom up

Over 50 people, providers of services to microbusinesses and legislators, listened with great attention to presentations for 1 ½ hours yesterday in the Blatt Office Building on the State Capital grounds. It wasn’t because we fed them into a sedated state (although the food from @116 on State Street in West Columbia was very good).

No, they were there on a mission—to hear about the great potential of microenterprises (businesses with less than 5 employees and started with less than $35,000), the need for more technical assistance and lending resources, and the potential benefits of forming a state organization to advance enterprise development in the state.

Representative Kenneth Hodges’ leadership and passion was evident. His legislative resolutions to establish a microenterprise development study committee and name June as South Carolina’s microenterprise development month have been very important in moving the agenda forward.

The highlight of the afternoon was hearing from Connie Evans, President and CEO of the Association for Enterprise Opportunity (AEO), the national nonprofit organization and business trade association representing the U.S. microenterprise development industry. What Connie gives up in height she more than makes up for in a dynamic, inspiring presentation that had the audience fixated on her words.

Left to Right: Haidee Stith, Representative Kenneth Hodges, Connie Evans and Frank Knapp, Jr..
 The overwhelming response from those at the meeting was to pursue a state microenterprise association. With some vital support from AEO, we have an opportunity to lift the state’s economy from the bottom up by growing our most abundant category of businesses in the state, microenterprises.

Tuesday, May 24, 2011

Ben, we almost never knew you

I met Ben in a meeting last week in DC. We were asked to speak on behalf of the American Sustainable Business Council in a conference room full of foundation representatives. Ben went first and shared a little about his past.

He told of meeting his best friend in 7th grade. Ben knew it was meant to be when his similarly chubby buddy and he found themselves lagging behind their fellow classmates running around a track.

“If you don’t run the mile in 10 minutes you’ll have to run it again,” yelled the phys ed teacher. “If we can’t run it in 10 minutes the first time, we’re not going to able to do it the second time,” yelled back Ben’s friend.

The two stayed close through the years but professional aspirations seemed to take them in separate ways. Ben wanted to be an artist and make pottery while his friend had his dreams set on being a doctor. But fate had other plans. No one would buy Ben’s pottery and his friend couldn’t get into medical school.

So the two best friends went a different direction together this time and decided to open a business. They agreed to open a restaurant in their college town and those with experience told them to keep it simple.

Ben and his friend studied some SBA brochures for advice and settled on bringing a food trend at major universities to their Vermont town. One small homemade ice cream shop is all they wanted.

Today Ben and Jerry’s is anything but a one-store shop and Ben Cohen is widely known for infusing his social consciousness into his business practices. Ben and Jerry’s is the poster child for why we need to put more financial support into microenterprises—the farm team for all the small, medium and big businesses we want to grow our economy.

This Wednesday we’re bringing that message to the State House. Check out the information below and join us.

What: Microenterprise Development Day at the Capital
When: Wednesday, May 25th, 2011
      9:45AM Press Conference, First Floor Lobby of State House
      12:30PM – 2PM Forum (lunch provided), 321 Blatt Building
Who: The South Carolina Small Business Chamber of Commerce, Association for Enterprise Opportunity and S.C. Microenterprise Development Organizations

-Representative Kenneth Hodges
-Connie Evans, Executive Director of the Association for Enterprise Opportunity (AEO), The AEO is a national membership organization and voice of microenterprise development in the United States.
-Frank Knapp, President & CEO, The South Carolina Small Business Chamber of Commerce
-Michelle Abraham, State Director, SC Small Business Development Centers
-Doug Dunkelberg, United States Department of Agriculture, Rural Development
-D’J Moore, President & COO, Lowcountry Small Business Hub
-Dave Mueller, Executive Director and COO, Appalachian Development Corporation (ADC)

87% of South Carolina businesses have fewer than 5 employees and are classified as microenterprises. If just one in three of microbusinesses across the country hired one new employee, the nation would be at full employment. Hear what South Carolina is doing to help develop and grow microenterprises and what more is needed to create a sustainable and vibrant state economy!

For more information call (803) 252-5733.

Monday, May 23, 2011

Amazon and Mitt

Below are two must-read editorials from this weekend. The first by Cindi Scoppe, Associate Editor of The State, accurately analyzes the meaning of the recent House vote to give Amazon.com an exemption from collecting sales tax.

But most legislators acknowledge that there was a serious question of fairness in this case. So what’s the cost of fairness? Where, between 1,249 and 2,000 jobs, does unfairness become a reasonable price to pay? Would we sacrifice fairness for 1,800 jobs? For 1,500? And where will the line be drawn next time? If Amazon decides to hold up its end of the bargain, what will legislators do if it threatens to leave in five years unless it gets another five-year exemption? What about the next company that comes looking for extra incentives, whether they involve unfair competitive subsidies or just bigger tax breaks?
She concludes in her editorial, as I did in last Friday's blog, that at least the state now has a better deal with Amazon because of the political fight and she was kind enough to recognize the South Carolina Small Business Chamber’s efforts.

Even the head of the state small business chamber of commerce — who has been nearly as outspoken in his opposition as the people on WalMart’s payroll — acknowledged that “the principled opposition has at least translated to a better deal.”
The second editorial below is in honor of Mitt Romney’s visit to the Midlands this weekend. Mitt is still trying to explain why his “RomneyCare” in Massachusetts is not the same thing as “ObamaCare” for the rest of us. It is and if he weren’t ready to announce his candidacy for President, Mitt would probably be very happy with this New York Times editorial.

Despite all of the bashing by conservative commentators and politicians — and the predictions of doom for national health care reform — the program he signed into law as governor has been a success. The real lesson from Massachusetts is that health care reform can work, and the national law should work as well or even better.



May 22, 2011
The State

The Amazon turn-around

Associate Editor

ON A spreadsheet, with nothing to consider but dollars and cents, the Amazon sales tax exemption always made sense: Give the online retail giant a pass on collecting sales taxes that it’s not currently collecting from S.C. residents, and the state gets $10 million in annual payroll taxes, and Lexington County gets $1 million a year in property taxes. Refuse, and we get no payroll taxes, no property taxes, no sales taxes, nothing.

Throw in 1,249 jobs — now bid up to 2,000 — and all the income, sales and other taxes the newly employed would be paying and the unemployment checks they wouldn’t be drawing, and it looked like a no-brainer.

It would be nice to think that the reason the deal initially ran into trouble was the almost embarrassingly wonkish concern about the degradation of our state tax policy. The fundamental problem with the Amazon exemption is the same as the problem with all tax breaks: It gets piled on top of hundreds of other tax incentives that already have pushed our tax system to the breaking point, making it a Swiss cheese monument to special-interest influence that is more holes than cheese.

This new hole is more worrisome than most because e-commerce is the big problem facing state tax systems — particularly those that are as obscenely reliant on sales tax collections as ours. And by exempting the rare company that actually meets the Supreme Court requirement that businesses have a physical presence in a state in order to be required to collect sales taxes, the Amazon incentive gives away what tiny bit of leverage our state has.

Unfortunately, that wasn’t the hang-up. What made those pretty numbers insufficient on first glance was a very human complication: local merchants who had the moral high ground when they argued that it was unfair for their state to subsidize a competitor intent on running them out of business.

Last month, the House said overwhelmingly that giving an unfair advantage to their competition was not a reasonable price to pay for 1,249 jobs. On Wednesday, representatives said even more overwhelmingly that it is a reasonable price to pay for 2,000 jobs. I realize that the decision wasn’t nearly so rational. It also turned on belatedly smart lobbying by Amazon backers, and resentment among House Republicans over what they saw as Gov. Nikki Haley putting them in a no-win position and then belittling their concerns. But we should be able to assume that it involved some degree of rationality.

Even those of us who worry about tax policy understand that big corporations are highly skilled at playing the incentives game — pitting state against state in a race to the bottom — and so sometimes we just have to give in and let them have their way with us. The question is where to draw the line. How much is a job worth?

That’s not a terribly difficult question when the job-purchasing currency is only money — or at least it wouldn’t be if recruiters were required to give the public more details about the deals they cut: Just pull out your spreadsheet, and you’ve got an answer. Of course when you accept the idea that there’s no cost to the state because a company won’t pay any taxes anyway if we can’t entice it to come here, you run the risk of the eventual spiral down to the elimination of all taxes — or even paying companies to move here. But that just gets us back to bad tax policy, and not enough money to pay for the services that those companies require, which most legislators don’t lose any sleep over.

But most legislators acknowledge that there was a serious question of fairness in this case. So what’s the cost of fairness? Where, between 1,249 and 2,000 jobs, does unfairness become a reasonable price to pay? Would we sacrifice fairness for 1,800 jobs? For 1,500? And where will the line be drawn next time? If Amazon decides to hold up its end of the bargain, what will legislators do if it threatens to leave in five years unless it gets another five-year exemption? What about the next company that comes looking for extra incentives, whether they involve unfair competitive subsidies or just bigger tax breaks?

What’s surprising isn’t that the House agreed to the deal — the Legislature signs off on almost any tax give-away that’s labeled economic development; and the bar gets lower every time. What’s surprising is that it didn’t swallow automatically, but instead held out for a better deal than the Commerce Department negotiated.

The bill the House passed Wednesday is clearly an improvement over the original proposal and over most incentives legislation: It expires in five years. The specific time and job requirements make it unlikely that any other company could use it. And it requires Amazon to stick to its latest oral promises in order to cash in: If it doesn’t employ 2,000 full-time workers with “a comprehensive health plan” and spend $125 million by the end of 2013, it loses the exemption; if employment drops below 1,000 before the 2016 expiration date, it loses the exemption. Even the head of the state small business chamber of commerce — who has been nearly as outspoken in his opposition as the people on WalMart’s payroll — acknowledged that “the principled opposition has at least translated to a better deal.”

And maybe, given the complete disinterest that most legislators have in smart, or even fair, tax policy, that’s the best we can hope for.

Ms. Scoppe can be reached at cscoppe@thestate.com or at (803) 771-8571.



May 21, 2011
The New York Times

Health Reform in Massachusetts

Mitt Romney’s defense of the Massachusetts health care reforms was politically self-serving. It was also true.

Despite all of the bashing by conservative commentators and politicians — and the predictions of doom for national health care reform — the program he signed into law as governor has been a success. The real lesson from Massachusetts is that health care reform can work, and the national law should work as well or even better.

Like the federal reform law, Massachusetts’s plan required people to buy insurance and employers to offer it or pay a fee. It expanded Medicaid for the poor and set up insurance exchanges where people could buy individual policies, with subsidies for those with modest incomes.

Since reform was enacted, the state has achieved its goal of providing near-universal coverage: 98 percent of all residents were insured last year. That has come with minimal fiscal strain. The Massachusetts Taxpayers Foundation, a nonpartisan fiscal monitoring group, estimated that the reforms cost the state $350 million in fiscal year 2010, a little more than 1 percent of the state budget.

Other significant accomplishments:

The percentage of employers offering insurance has increased, probably because more workers are demanding coverage and businesses are required to offer it.

The state has used managed-care plans to hold down the costs of subsidies: per capita payments for low-income enrollees rose an average of 5 percent a year over the first four years, well below recent 7 percent annual increases in per capita health care spending in Massachusetts. The payments are unlikely to rise at all in the current year, in large part because of a competitive bidding process and pressure from the officials supervising it.

The average premiums paid by individuals who purchase unsubsidized insurance have dropped substantially, 20 percent to 40 percent by some estimates, mostly because reform has brought in younger and healthier people to offset the cost of covering the older and sicker.

Residents of Massachusetts have clearly chosen to tune out the national chatter and look at their own experience. Most polls show that the state reforms are strongly supported by the public, business leaders and doctors, often by 60 percent or more.

There are still real problems that need to be solved. Small businesses are complaining that their premiums are rising faster than before, although how much of that is because of the reform law is not clear.

Insuring more people was expected to reduce the use of emergency rooms for routine care but has not done so to any significant degree. There is no evidence to support critics’ claims that the addition of 400,000 people to the insurance rolls is the cause of long waits to see a doctor.

What reform has not done is slow the rise in health care costs. Massachusetts put off addressing that until it had achieved universal coverage. No one should minimize the challenge, but serious efforts are now being weighed.

Gov. Deval Patrick has submitted a bill to the Legislature that would enhance the state’s powers to reject premium increases, allow the state to limit what hospitals and other providers can be paid by insurers, and promote alternatives to costly fee-for-service medicine. The governor’s goal is to make efficient integrated care organizations the predominant health care provider by 2015.

The national reform law has provisions designed to reduce spending in Medicare and Medicaid and, through force of example, the rest of the health care system. Those efforts will barely get started by the time Massachusetts hopes to have transformed its entire system. Washington and other states will need to keep a close watch.


Friday, May 20, 2011

What’s the value of our advocacy? How about $35 million and 751 jobs!

According to newspaper accounts, this past Tuesday night Amazon executive Paul Misener called Representative Kenny Bingham to say that the retail giant was willing to increase the number of jobs and investment in the state to help win House approval of the Amazon.com sales tax deal. This came after over a month of intense lobbying by The South Carolina Small Business Chamber and other opponents of the unique sales tax collection exemption the state had offered (among many other incentives) Amazon in exchange for building a distribution center in Lexington County

Earlier that same day, I and others opposed to the Amazon sales tax deal had held a press conference on the front steps of the State House pledging to keep up the fight that earlier had resulted in a House vote victory.

Mr. Bingham, who had been encouraging Amazon for weeks to sweeten its offer, was ready to give the sales tax deal one more shot in the House. Tuesday night Amazon conceded to Bingham’s request in hopes of turning the vote in its favor.

It worked and the House voted overwhelmingly this time in favor of the Amazon deal.

What had been an Amazon promise of 1249 jobs and $90 investment now is written in the bill as a guaranteed 2000 new jobs and $125 million investment.

While we still oppose the sales tax exemption that will put all other retailers in the state at a competitive disadvantage with Amazon, the value of advocacy against the deal can now be measured….

751 more jobs and $35 million more in investment!

That’s 60% more jobs and 39% more investment in the state thanks to our and others’ advocacy for small business if the bill should be approved by the Senate .

Our opposition to the Amazon sales tax deal goes on.  But even if it is not ultimately successful, our advocacy does work to the benefit of small businesses and the state--and now we have the numbers to prove it.

Wednesday, May 18, 2011

Self-Employed Favor Taxing the Rich

from Portfolio.com
May 17, 2011
Self-Employed Favor Taxing the Rich

by Kent Hoover

Most self-employed Americans aren’t rich—maybe that’s why they don’t have a problem with raising taxes on people who are.

A survey of National Association for the Self-Employed members found that 55 percent favored increasing income tax rates for households making more than $250,000 as a way to reduce the federal budget deficit. That’s noteworthy because most groups representing small businesses in Washington, D.C., contend that such a tax hike would hurt small-business owners, most of whom pay taxes on their profits at the individual level. The exceptions on this issue so far have been relatively new small-business groups, such as Small Business Majority and Main Street Alliance, which are more liberal than traditional business groups.

NASE, which was founded in 1981, represents self-employed individuals and microbusinesses. Its members have lost confidence in both President Barack Obama and Congress when it comes to dealing with the federal government’s huge budget deficits. Two thirds of the 500 NASE members who took the survey have no confidence that Congress will make the right decisions on the deficit, and 60 percent have no confidence in the president.

More than 74 percent of NASE members think the deficit needs to be addressed immediately. More than 63 percent think cutting federal spending is the best way to reduce the deficit, while 32 percent think both spending cuts and tax increases are needed. The remaining 5 percent favor tax increases alone.

But when asked about specific recommendations to address the deficit, 55 percent favored phasing out the Bush-era tax cuts for wealthy Americans and 60 percent favored increasing the cap on wages subject to Social Security taxes above the current cap of $106,800. Another 65 percent favored minimizing Social Security benefits for upper-income recipients.

Nearly 60 percent of NASE members opposed the House Republican Medicare reform proposal, which would require senior citizens to purchase private health insurance with premiums subsidized by the federal government.

Sizable majorities opposed raising the federal gasoline tax or imposing a national sales tax.

More than 57 percent supported cutting defense spending, and 56 percent supported cutting all discretionary spending in areas such as the arts, education, and foreign aid.
Nearly 60 percent favor repealing or defunding health care reform.

NASE executive director Kristie Arslan said the survey shows that self-employed Americans aren’t confident that policymakers will “step up and make the political sacrifices necessary to get the job done” when it comes to reducing deficits.

“Day in and day out, the self-employed are required to manage their budget and balance their books,” she said. “It is irresponsible and puts our economy at future risk for our federal government not to do the same.”

Kent Hoover is the Washington bureau chief for bizjournals.

Read more: http://www.portfolio.com/views/blogs/capital/2011/05/17/self-employed-favor-tax-hike-for-rich#ixzz1Mi5zhct4

Tuesday, May 17, 2011

More reasons to oppose Amazon sales tax deal

Several weeks ago the S.C. House voted overwhelmingly against throwing small retailers across the state under the bus in order for Amazon.com to build a distribution center in Lexington County. The rejection of giving the retail giant the unique exemption from collecting sales tax on in-state sales led to Amazon declaring that they would not build the distribution center sending local economic development folks into a panic.

So this week we expect that there will be a second vote on the Amazon sales tax deal.

But now new revelations have come to light further demonstrating why the House should not change its collective mind. These are laid out today in a letter to House members signed by the SC Association of Taxpayers, the SC Small Business Chamber of Commerce, SC Campaign for Liberty and the SC Alliance for Main Street Fairness.

To answer the question of whether Amazon absolutely will not locate in a state if it has to collect sales tax, our letter gives the real facts:

(S)ince the initial vote was taken we have learned that over 50% of Amazon’s revenue comes from locations in which they collect the sales tax. A recent Seattle Times article regarding an SEC inquiry into the company stated, “In an earnings conference call this week, Amazon Chief Financial Officer Tom Szkutak sought to downplay the potential impact if more states put an end to tax-free online sales. He said Amazon generates more than half of its revenue in places where it already collects sales or consumption taxes, including markets outside the U.S.” If that’s the case, why are they so opposed to collecting the sales tax in SC when they have already received such a generous incentive package?
And to the argument that turning Amazon down will hurt recruitment of other businesses, the letter addresses the state’s efforts to lure Sears to the Palmetto State:

(W)hen the potential impact on the recruitment of Sears was offered as evidence, one of Sears’ representatives stated “Sears Holdings Corporation strongly supports the decision by the South Carolina House to stand up for local businesses and not give in to pressure from Amazon who consistently puts protecting its unfair competitive advantage before investing and creating jobs in communities around the country. Any comments that suggest anything other than full support for this effort to level the sales tax collection playing field, regardless of the context, are patently inaccurate.” Clearly, the House denying this special deal has had no adverse impact on recruitment efforts.
Contact your House member and ask him or her to continue to stand with the state’s small retailers by voting NO on the Amazon.com sales tax deal.

Friday, May 13, 2011

Transparency needed in government procurement

Two U.S. House Committees held a joint hearing yesterday on a potential executive order from the Obama Administration that will try to make sure government contracts are not being awarded because of campaign contributions.

This is a seriously important issue for every small business that would like to provide goods or services to the Federal government. Unfortunately, leading the charge against this transparency is the U.S. Chamber of Commerce.

Before the hearing, I participated in a press conference call sponsored by the Main Street Alliance, American Independent Business Alliance and American Sustainable Business Council. I serve on the steering committee for the latter. These organizations also sent a letter of support to the President.

Reporters on the call included the National Journal, NPR, Bloomberg, Roll Call and the Wall Street Journal. You can listen to the entire press conference call here , read the press release here, read some press reports herehere and here and read my opening remarks on the press call below.

May 12, 2011 press conference call opening statement by Frank Knapp, Jr.

I’m Frank Knapp, President and CEO of the 5000+ member South Carolina Small Business Chamber of Commerce.

Today I am also representing the American Sustainable Business Council, a growing coalition of business networks and businesses committed to advancing a new vision, framework and policies that support a vibrant, equitable and sustainable economy. The Council brings together the business perspective, experience and political will and strength to stimulate our economy, benefit our communities, and preserve our environment. Today, the organizations that have joined in this partnership represent over 100,000 businesses and more than 200,000 entrepreneurs, owners, executives, investors and business professionals and other individuals.

Clearly an important issue in last November’s election was government accountability. And an extremely important tool for achieving that goal is transparency. The public and business community want, no, we demand to know that government decisions are being made in our best interest not for the benefit of deep-pocketed special interests. Transparency is a uniquely American ideal and is at the heart of every campaign finance disclosure and economic interest law in this country.

That’s the reason the groups here today support President Obama’s proposed executive order on disclosure of government contractors’ political spending. Because the Federal Government is the country’s largest purchaser of goods and services, small businesses demand a level playing field so that we can have the confidence that federal contracts are going to the businesses that can deliver the best products at the lowest cost. That’s a Main Street value and disclosure helps get us closer to that transparency goal.

This afternoon two House committees will hold a hearing on the proposed executive order. The title given to the hearing is, “Politicizing Procurement: Would president Obama’s Proposal Curb Free Speech and Hurt Small Businesses”

That certainly sounds like small businesses were invited to the party but reading the witness list it is clear that the hosts don’t intend to let us in the door.

Now small business organizations like ours are use to having our name used as a front for big business interests. The U.S. Chamber particularly likes to drape its big business agenda in a faux small business cloak.

About this executive order, the U.S. Chamber warns that disclosure will have a chilling effect on free speech. But we can’t ascribe a lofty principle to the motives of that organization when the real intention is to protect the ability of its big, dues-paying members to use their campaign checks to influence the procurement process.

The U.S. Chamber’s Board of Directors includes representatives of more than 50 companies that compiled over $44 billion in contracts with the government in 2010. “Free speech” for these corporations and the U.S. Chamber is just a code phrase for maintaining the influence big campaign money has over our democracy and government.

If a new disclosure rule is enacted, it won’t be small businesses that will be burdened. We are not writing big campaign checks so disclosure won’t be hard. The only contractors who oppose disclosure are the ones with something to hide from the sunlight. The ones that don’t believe in the Main Street value of fair competition. The ones that shudder at the thought of transparency because they know that Americans won’t like what they see and will demand even more reform.

Today you will hear from two small businesses that aspire to do business with government. And you will hear first hand why transparency through disclosure is badly needed.

Thursday, May 12, 2011

Better use for Amazon’s incentive dollars

The opinion editorial below by Frank Knapp ran today in The State.
Better use for Amazon’s incentive dollars

When the S.C. House voted to support our state’s small retailers by not giving in to Amazon.com’s incentive demands to build a distribution center, predictions of doom erupted. One Lexington County councilman said of the House vote not to give Amazon an exemption from collecting sales tax on in-state sales, “it’s like no one will even look at coming here for 10 years.”

Giving the retail giant an unfair competitive advantage over every other retailer was the price that Amazon supporters wanted the entire state to pay for their new local jobs. They warned that our Commerce Department would never be trusted again if the state didn’t keep a promise that was not actually part of the written agreement with Amazon. They even blamed the Amazon vote for two other potential businesses crossing Lexington County off their consideration list.

But instead of impotence, Commerce reeled off impressive announcements of new manufacturing jobs starting the day of the House vote: 100 in Union County, 150 in Marlboro County, 270 in Lexington County and 700 in Greenville County. These investments totaled nearly $267 million (more than twice as much as Amazon promised) and, unlike the Amzon.com sales tax deal, not one of them threatened the profitability of locally owned businesses.

Now Amazon.com’s team of lobbyists will try one more time in the House to secure the sales tax deal. That vote could happen today or next week and, just as before, without a public hearing that is required on most bills.

Amazon supporters will argue that Wal-Mart’s announcement last week to open, relocate and expand stores in South Carolina creating 4,000 new jobs will do more damage to locally owned small retailers than the Amazon distribution center. But there are some clear differences.

There is no indication that any state incentives have been offered to Wal-Mart — only local government incentives, and nothing involving the sales tax. If that were the case with Amazon, this would not have been so controversial.

While small retailers would prefer that Wal-Mart and other big-box stores not come to their communities, that train left the station a long time ago. Some small retailers do not survive, but most learn to compete with big-box stores by improving their marketing and offering customers more personal service, convenient locations and parking, niche products and services and a friendlier buying experience.

Small businesses are also learning to educate their communities on the economic power of buying locally. Studies have found that every consumer dollar spent with a locally owned business yields three times the economic benefit to the community of spending it in a big-box store.

The larger issue with state and local incentives to entice big businesses to our state is that the same money might be better used to help locally owned small businesses start or expand. Eighty-seven percent of South Carolina’s businesses and 88 percent of the nation’s businesses have fewer than five employees and were started with less than $35,000 in capital. According to the Association for Enterprise Opportunity, if just one in three of these microbusinesses hired a single employee, the country would be at full employment.

Yet we in South Carolina and the nation fail to invest sufficiently in technical assistance and lending to these microenterprises, even though they are the essence of sustainable local economies, offer the best opportunity for economic growth and are the farm team for future larger employers. We allow the S.C. Women’s Business Center to go under, we cut back state appropriations to our Small Business Development Centers, forcing them to forgo services for start-ups, and there are only very rare loans to microbusinesses.

The General Assembly should continue to say “no” to Amazon’s sales tax deal, as other states are beginning to do. And it should take the same amount of incentive money and put it to better use helping to grow our locally owned small businesses.

Mr. Knapp is the president and CEO of the S.C. Small Business Chamber of Commerce. Reach him at sbchamber@scsbc.org.

Wednesday, May 11, 2011

Free speech that will cost all of us

Transparency in government. That was probably the issue that helped Nikki Haley the most in winning the South Carolina Governor’s election last November.

Who could be against transparency? Who doesn’t want to make sure that government decisions are being made for the good of the taxpayers and not for the good of a deep-pocketed special interest? That is why we have campaign finance disclosure laws and require statements of economic interests for elected officials. It’s all about transparency. Who could be against it?

That would be the U.S. Chamber of Commerce that is opposing a draft executive order that would shine sunlight on the big campaign donations of more than 50 of its members that have received over $44 BILLION in Federal contracts.

The public deserves to know that these corporations aren’t involved in pay-to-play politics. It’s our tax dollars being spent and we deserve to know.

But the U.S. Chamber calls the proposed requirement that Federal contractors disclose direct or indirect campaign contributions over $5000 a chilling effect on free speech. Using the U.S. Chamber’s convoluted logic, all transparency efforts in government should be eliminated because it infringes on free speech (the U.S. Chamber’s code words for big corporations being able to buy political influence to the detriment of the public and small businesses).

The Citizens United Supreme Court decision that allows corporations to make unlimited contributions to elect a politician either on their own or through a third party has made transparency even more important. But the U.S. Chamber is the beneficiary of these big campaign contributions so they are vigorously fighting back.

Tomorrow the House Committee on Small Business and the House Committee on Oversight and Government Reform will hold a hearing on this issue. The title of the hearing tells which side the House majority is on—“Politicizing Procurement: Would President Obama’s Proposal Curb Free Speech and Hurt Small Businesses”.

Once again small business is being used as a front to protect big corporate greed and power.
For the record on transparency:

“I think what we ought to do is we ought to have full disclosure, full disclosure of all of the money that we raise and how it is spent. And I think that sunlight is the best disinfectant.”

- John Boehner, Meet the Press, Feb. 11, 2007, http://www.msnbc.msn.com/id/17065119/print/1/displaymode/1098/

"Why would a little disclosure be better than a lot of disclosure?"
- Mitch McConnell, Washington Post, May 13, 2010 (the quote is from “the last major fight over regulating money in politics”), http://www.washingtonpost.com/wp-dyn/content/article/2010/05/12/AR2010051205094.html

Tuesday, May 10, 2011

Microenterprise Development Month

Last week, Small Business Administration Administrator Karen Mills spoke to the Greater Miami Chamber of Commerce. She had good news for many businesses seeking credit. “Lending is back to 2008 levels,” Mills said.

But the news wasn’t so good for the small businesses in geographically challenged areas and our smallest of small businesses. According to Mills, “we are not back in underserved communities and we are not back when it comes to small loans.”

The truth is that lending hasn’t been good in underserved communities and for our very small businesses for a very long, long time.

This June will be Microenterprise Month in South Carolina. These businesses with fewer than five employees and started with less than $35,000 represent 87% of our businesses. These are the businesses we need to grow with proper technical assistance and very small loans.

If you want to find out more about organizations in the state trying to help microenterprises, come to a forum on May 25th at 12:30 in the Blatt Building (room to be announced) on the State House grounds. That’s when we’re kicking off June as Microenterprise Development Month.

Hope to see you on the 25th.  Let me know if you want to be involved in Micorenterprise Development Month.

Friday, May 6, 2011

SC GOP House members attack small businesses

In case you missed Wednesday afternoon’s vote in the U.S. House of Representatives, all five of our Republican members cast a vote that would result in either small businesses losing health insurance tax credits or forcing them to change health insurance plans.  H.R. 3 passed largely along party lines.

All of these elected leaders—Joe Wilson, Tim Scott, Jeff Duncan, Trey Gowdy and Mick Mulvaney—were made aware of the potential negative impact of H.R. 3 on small businesses. A letter from The South Carolina Small Business Chamber opposing the bill was widely circulated.

Before the vote I participated in a press conference in front of the Capitol with Representatives Jan Schakowsky (D-IL) and Judy Chu (D-CA) calling on the House to stop the direct attack on small businesses. Rep. Schakowsky even read excerpts of my comments on the House floor during the debate.

Our Republican House members have some “splaining” to do. After you read my comments below, call their offices and let them know that you won’t forget how they put partisan politics above the interests of their small business constituents.


Frank Knapp, President and CEO, South Carolina Small Business Chamber of Commerce – Statement at Press Conference in Opposition to HR 3, 5/4/2011

A story yesterday in LifeSiteNews.Com said that H.R. 3 can have a historic impact on the future of the pro-life movement.

But what H.R. 3 really is – is an attempt to roll-back the historic small business health insurance tax credits created by the Affordable Care Act.

When the House voted to eliminate and defund the entire Affordable Care Act earlier this year, we could rationalize that this great benefit for small business was just collateral damage.

After all, everybody likes making health insurance more affordable for small businesses through tax credits.

Even my congressman, Joe Wilson, told me that he would support the small business health insurance tax credits in the Affordable Care Act replacement legislation.

But small businesses can no longer think of themselves as collateral damage in the efforts to kill the Affordable Care Act.

H.R. 3 is a direct attack on small business.

Even supporters of the bill have no response to our criticism that H.R. 3 is a “slap in the face to millions of small businesses now offering health insurance to employees and eligible for the new tax credits”.

Instead, as reported in the LifeSiteNews.Com story, they just change the subject and talk about H.R. 3 being tax neutral.

Not to small business it’s not. For many it will be a tax increase and for all small businesses wanting to receive the tax credits, H.R. 3 will increase their costs.

Should H.R. 3 become law, small business owners who want the health insurance tax credits will face a difficult situation:

1. Small businesses will have to take considerable time to learn medical terminology to try to determine if their health plans cover any service that could be considered an abortion service. I challenge members of Congress to try to do this.

2. If small business owners don’t choose to spend the tens of hours away from running their business, at great cost, they will turn to their insurance agent. Today, it is unlikely that these agents have the knowledge about every possible abortion service that might be in a policy. Once they ramp up, they will still have to sit down with the small business owner to review the policy.

3. And, if the conclusion is that a health plan does include some abortion service, the small business owner has another time consuming decision to make.
a. Take a tax increase because she wants to keep the health plan she has; or

b. Probably pay higher premiums under a new health plan because of new underwriting and new provisions that now might be required in policies.
Supporters of H.R. 3 are aware of the costs to small business. They know that H.R. 3 targets small businesses for punitive action while ignoring big businesses that also receive tax benefits from their health plans that might also include some abortion service.

So, let me make this very clear – A vote for H.R. 3 is a direct attack on small business.

Every Representative who loudly proclaims their love for small business because “we are the backbone of the economy,” now can put their vote where their mouth is – their true support for small business will be judged on their H.R. 3 vote.
House Member Name- DC Office Phone Number

• Representative Tim Scott (R - 01) 202-225-3176

• Representative Joe Wilson (R - 02) 202-225-2452

• Representative Jeff Duncan (R - 03) 202-225-5301

• Representative Trey Gowdy (R - 04) 202-225-6030

• Representative Mick Mulvaney (R - 05) 202-225-5501

Thursday, May 5, 2011

Rejecting NFIB spin

I met Zach Carter, a young journalist with the Huffington Post, back in April.  We had lunch at a trendy deli in DC with David Levine (American Sustainable Business Council), Scott Klinger (Wealth for the Common Good) and Chuck Collins (Institute for Policy Studies).  While we couldn't get Zach interested in writing about tax haven abuse, he jumped on the idea that small businesss supported ending the Bush-era income tax cuts for the wealthiest Americans.  Below is Zach's story.

Huffington Post
Zach Carter
May 4, 2011

Small Business Owners Demand Repeal Of Bush Tax Cuts For The Rich

WASHINGTON -- Michael Teahan, like his father, mother, and uncles before him, is a small business owner. The 52-year-old has spent most of his adult life running his own businesses: a restaurant, a coffee bar and various companies involved in the espresso machine business.

"I was the only person in my family to go to college, because that’s not what we did -- we all opened up businesses," Teahan says. "For some people, that’s a big hurdle ... for us, it was like having lunch."

Teahan currently operates Espresso Resource, a company that imports espresso machine parts from Europe to sell to U.S. restaurants and coffee shops. And he’s doing very well for himself: The two-man operation clears about $1 million a year in total sales, Teahan says -- enough to secure himself annual income in excess of $250,000.

That makes Teahan one of the few small business owners to actually benefit from the Bush administration's tax cuts for the wealthy. He says the cuts save him about $12,000 a year, compared to what he paid before they were enacted. But as debates over the federal budget deficit have intensified, Teahan has found the political discussion increasingly divorced from the reality of his experience as a small business owner.

Tax cuts for the wealthy, according to Teahan, will do nothing to bolster his firm. They won’t affect his hiring decisions, they won’t encourage him to buy new equipment or help him move into a bigger warehouse. He says all of those decisions -- the nuts and bolts of actually running a small company -- depend on the his customers' economic conditions, not his personal tax rate.

"What we do in business, how we spend our money, how we allocate our resources -- that has very little to do with tax policy," Teahan says. "I map my business based on my customers, and what my customers want to buy, and what they can afford to buy."

It’s a common complaint from small business owners. While congressional Republicans and entrenched corporate lobbying groups like the U.S. Chamber of Commerce -- which is holding a Wednesday meeting on small business priorities -- and the National Federation of Independent Business (NFIB) have been pushing hard to preserve the Bush tax cuts for the wealthy by touting the interests of small firms, much of the small business community is demanding that those very tax cuts be repealed. The tax breaks for the wealthy will add $700 billion to the debt over the next 10 years, according to the White House's Office of Management and Budget. And many small firms say that money would be better spent on direct aid to the middle class.

"We are fed by our consumers, not by our tax breaks," says Rick Poore, owner of Designwear, Inc., a screen-printing business based in Lincoln, Neb. "If you drive more people to my business, I will hire more people. It's as simple as that. If you give me a tax break, I'll just take the wife to the Bahamas."

Poore emphasizes, however, that -- like the vast majority of small business owners -- he isn't among the elite class of taxpayers making $250,000 a year or more. He and his wife take in a combined $80,000 a year from their business. Teahan is an outlier, because most small businesses don’t make nearly enough to benefit from the Bush tax cuts for the wealthy.

"Most small business owners make less than $250,000 and so the tax cuts don’t benefit most of us, and they’re really taking important valuable resources away from the federal budget," says ReShonda Young, corporate vice president and operations manager for Alpha Express, a Waterloo, Iowa-based company that specializes in transportation services and snow removal.

Young also serves on the executive board of Main Street Alliance, a coalition of small firms. Main Street Alliance notes that 98 percent of small businesses will not be affected by the Bush tax cuts in any way.

"The reality is that most businesses don’t pay the top marginal tax rate,” notes John Irons, an economist with the left-leaning Economic Policy Institute. "Most small businesses won’t be affected at all by a reversal of Bush tax cuts for the rich.”

For his part, Poore, the screen-printer, sees some dark humor in the entire notion of wealthy small business owners. He says that any accountant "that allows $250,000 in profit to get through to my bottom line would be fired."

Teahan emphasizes that even the few firms that do qualify for the Bush tax cuts don't boost their hiring in response to the Bush tax cuts. For decades, small companies have been able to secure tax breaks on the expenses that actually affect their bottom line -- labor, rent, equipment and other necessary costs. The Bush tax cuts for the wealthy, by contrast, only affect how much of a firm's total profit owners keep for themselves.

"The economic premise, that people won’t hire because they might have to pay more taxes if they make more money, is beyond laughable,” says Lew Prince, owner of the Vintage Vinyl record store in St. Louis, Mo. "You hire when you think there’s a way you can make more money with that hire. The percentage the government takes out of it has almost nothing to do with it.”

So what really affects small businesses? High health care costs, which will likely be ameliorated by President Barack Obama’s health care reform, and limited access to credit in the wake of the financial crisis. Just as important to Teahan, Poore, Prince and other small business owners are federal economic policies that directly benefit their middle class customers. If extending tax breaks to millionaires means denying aid to the middle class, their firms will suffer.

"My customers work for a living,” Teahan says. "They’re working on espresso machines and selling coffee. They’re not these uber-rich Wall Street bankers. [My customers] need the money. If they’ve got money, then I'm doing great."

The upper-end Bush tax cuts are not corporate taxes -- they’re taxes on wealthy individuals. Many small firms are not corporations, and owners report their profits as the individual income of their owners. Some firms, like Teahan’s, choose to incorporate, though they never officially report a profit because all excess earnings are paid out to the owners.

The U.S. Chamber and the NFIB say that, because these business profits are reported as individual income, allowing tax hikes for wealthy individuals will hurt small business. The U.S. Chamber declined to comment for this story but NFIB spokesman Kevan Chapman says his organization has repeatedly polled its members and found that they favor the Bush tax cuts.

"We have over 300,000 members who would disagree with the notion that we don’t represent small business. The last time we balloted this measure was in November, and 89 percent said the federal government should extend those tax breaks," Chapman said.

There were 26.9 million small businesses in the United States in 2008, according to the Small Business Administration, though that figure includes millions of people who work on contract for employers but have no business, in the traditional sense, of their own. There were 6 million small firms with at least one employee.

Another small business groups beg to differ with the NFIB. The American Sustainable Business Council, which represents 70,000 small firms and social groups, maintains that "there is a strong business case for letting the tax relief for the wealthiest expire,” noting that doing so would "reduce the federal budget deficit and lessen the crisis with state and local budgets around the country.”

Frank Knapp, president and CEO of the South Carolina Small Business Chamber of Commerce has written on the Bush tax cuts issue for The Huffington Post. He emphasizes that many of the people who report business income on their personal income tax returns are bond traders, partners in corporate law firms, lobbyists and hedge fund managers -- not the kind of activity that most people think of as "small business.”

These alternative small business groups say that the debate over the Bush tax cuts has been heavily skewed by talking points from the NFIB and the Chamber. The Chamber has a long track-record of backing the economic priorities of corporate elites, while the NFIB has increasingly become a partisan wing of the Republican Party, as HuffPost detailed in January.

While the NFIB continues to support the indefinite extension of the Bush tax cuts for the rich, it opted last year not to fight for a bill that would expand lending to small firms.

"Any small businessman who is in the NFIB is paying his enemies to stab him in the back,” says Prince, the record store owner.

Alpha Express VP Young agrees. "It's the corporate interests and the wealthy stealing our name to further their agenda," she argues.

While the upper-end Bush tax cuts would increase the federal debt by $700 billion over the next 10 years, the broader class of Bush tax cuts, which affect many middle-class taxpayers, would cost $3.1 trillion over the next decade, according to the Congressional Budget Office.

"We should have learned from the last decade that slashing taxes for the richest Americans is a great way to grow the national debt –- not jobs," says Holly Sklar, the executive director of Business for Shared Prosperity, a non-partisan small-business group funded predominantly by the Ford Foundation. "Few small businesses benefit from the top rate tax cuts, but many lose from a shrinking middle class and deepening budget cuts in everything from the Small Business Administration and education to vital infrastructure repair and modernization. The tax cuts are like termites, eating away at our economy and our nation’s future.”


Wednesday, May 4, 2011

H.R. 3 a deliberate attack on small business

Today the U.S. House might vote on H.R.3., legislation which would negatively impact small busiesses in their ability to obtain health insurance tax credits.  Call your congressman today and ask him to vote NO on H.R. 3.  Below is my editorial that ran in The Hill's Congress Blog on May 2, 2011

House Member Name- DC Office Phone Number

  • Representative Tim Scott (R - 01) 202-225-3176
  • Representative Joe Wilson (R - 02) 202-225-2452
  • Representative Jeff Duncan (R - 03) 202-225-5301
  • Representative Trey Gowdy (R - 04) 202-225-6030
  • Representative Mick Mulvaney (R - 05) 202-225-5501
  • Representative James E. Clyburn (D - 06) 202-225-3315  
After decades of escalating group health insurance premiums and demands for Congressional action for relief, a little over one year ago many of our small businesses finally were given the opportunity for federal health insurance tax credits.

Now H.R. 3, up for a vote this week, threatens to erase this benefit for small businesses because it would eliminate the health insurance tax credits under the Affordable Care Act for any existing or new plans that provide coverage for abortion.

The problems H.R. 3 would cause for small businesses that are trying to do the right thing and offer health insurance have nothing to do with the ideological intent of this bill. Even if a small business owner agrees with the intent, the cost of passage of H.R. 3 in terms of time, money and continuity of policy is very significant.

Small business owners do not have the expertise to closely examine healthcare plans to determine if abortion coverage is included. Such services are not labeled “abortion” but rather fall into numerous clauses in a health care policy from prescription drugs to outpatient surgery to maternity care that includes unforeseen complications. Small business owners are no more prepared to completely understand the fine print of their health insurance policies than members of Congress.

Requiring a small business owner to try to understand the intricacies of their health insurance policies would require considerable time on their own or with an insurance agent (who also probably has no idea how to interpret the verbiage in the policy as it relates to abortion). Essentially H.R. 3 will cause a small employer to divert time from running the business. And if time is money, as we are all told, then H.R. 3 will be an increase in cost for small businesses offering health insurance.

Small businesses that finally determine that their health insurance policy does in fact cover even one abortion service will be financially punished in one of two ways. Either they can keep their present policy and lose thousands of dollars in hard won tax credits or they will give up their current health plan and most likely have to pay higher premiums for a new plan. The latter will result from both re-underwriting by a new carrier and adding provisions now required in any new policy. This is especially true since the health insurance exchanges will not be in place until 2014 to increase competition for this business.

H.R. 3 is simply a slap in the face to the millions of small businesses now offering health insurance to employees and eligible for the new tax credits. Targeting small businesses for such punitive action, while ignoring big businesses that also receive tax benefits when offering health insurance, demonstrates a callous disregard for the “backbone of our economy”, as members of Congress love to proclaim.


Tuesday, May 3, 2011

Main Street Matters

Almost 7 years ago, The South Carolina Small Business Chamber made an economic development proposal to a S.C. House Rural Caucus. Extend the job tax credits available to big businesses that add 10 new jobs to small businesses that create just one new job.

Our argument was very simple. A job is a job. Ten small businesses adding one new worker each is just as important for economic development as a big business adding 10.

The following year, the S.C. Legislature went almost that far. They made job tax credits available to any small business hiring at least two net new workers with the value of the tax credits being dependent on the economic status of the county.

Since that time our national and state economies collapsed. Now more than ever, every job is important.

At yesterday’s opening of the 20th National Microenterprise Conference, the message was clear.

If just one in three microbusinesses hired a single employee, the United States would be at full employment.

The Association for Enterprise Opportunity, which sponsors the conference, picked “the Power of One in Three” as the theme because, with the proper attention, our nation’s microbusinesses (0-4 employees) have the power to rebuild our economy because they represent 88% of all the country’s businesses.

Instead states and counties spend most of their time and money trying to recruit big business away from other states and counties. We’re not usually increasing net new jobs—just moving those jobs around on the map.

Our small and microbusinesses aren’t moving. Any job they create is a net new job for the state and the nation. That’s building sustainable economies. Main Street Matters.

Monday, May 2, 2011

Smallest of Businesses Underserved

The demand for small business loans is picking up.

A Greenwich Associates survey recently found that small businesses increased their seeking of loans in the first quarter of this year by 100 percent over the previous quarter.

That’s the good news.

The question is how many of these small businesses actually received a loan. According to Greenwich, on average about 60% of the small businesses they surveyed received the credit they sought between March 2010 and March 2011. And the majority of these loans came from smaller, community banks.

But even with signs that big banks are trying to get back into the small business lending game, not all small businesses will be served by the traditional financial institutions, big or small.

Greenwich surveyed only small businesses with annual revenues between one and 10 million dollars. The entire category of microenterprise business doesn’t even appear on any lending radar.

Microenterprises are small businesses typically with 5 or fewer employees and started with $35,000 or less. While census data shows that about 53% of South Carolina businesses have between 2 and 4 employees, when you throw in all the sole proprietor microenterprises make up to 89% of our state’s businesses that account for most net new jobs.

If we in South Carolina and in this country really want our economy to grow, getting financing, training and consultation for microenterprises to start and grow is essential.

Today these microenterprises primarily finance their businesses out of their own pockets, loans from friends or through credit cards. This is an extremely inefficient way of growing small business and basically leaves to chance that the start-ups that could grow into larger employers will be created at all.

This week I’m attending the Annual National Microenterprise Conference in D.C. sponsored by the Association for Enterprise Opportunity. When I return, the South Carolina Small Business Chamber and other interested organizations will make plans for a microenterprise forum on May 25th to kick off June as microenterprise month in South Carolina thanks to a Legislative resolution sponsored by Representative Ken Hodges.

You’ll be hearing more about all this later.