Help Wanted: Jobs Engine-Small Business

In all the nice-sounding rhetoric out of Washington about stimulus and economic recovery there has been deafening silence about the one historical reality which leads to the economic growth....jobs creation driven by small business.

We have heard about lowering barriers to access the Small Business Administration funding as evidence of real interest in small business. While the SBA loan program is a very important opportunity for some small businesses to access capital through the loan programs, the waiving of certain fees, deferred payments, and some loss carry-forward provisions, I would not view SBA and its programs as a comprehensive solution to ignite the jobs' creation engine called small business.

Here's history's answer to economic recovery. Small business has created more than 75% of all new jobs in the past 20-25 years. SBA is not a major ingredient in the solution to get small business growing and creating jobs.

Perhaps my view is overly simplistic, but I think I speak for a large number of people who are taking risks every month, entering into long term leases, hiring people with a promise of employment, paying health care benefits, and so on. I am part-owner of two service businesses with an employee headcount of just over 35 people. We have cut everywhere we can in hopes of making it through this period. The next cuts, if they are necessary, will be a radical change of our business model. We provide base salaries and health care benefits along with bonus opportunities which I would suggest are above industry standards.

More than 80% of the businesses in our region are "service-providing" and unlike "goods producing" do not have tangible assets. Our assets are the people and limited intellectual property. SBA is really not geared for service businesses. Further, I really don't need or want any stimulus money or a SBA loan.

I do, however, need my local community banker's partnership. For example, we have borrowed on a line of credit, which is guaranteed by the individual partners to operate one of our businesses. For the last year, I had been deeply concerned that the bank was going to call that loan or provide us with renewal terms which were onerous. As business owners we are personally guaranteeing those loans. We have worked hard to pay off the line of credit and we currently have no bank debt. If the bank had called the loan, it could have been devastating. Banking relationships have become unpredictable as the regulators have tightened scrutiny on the small banks forcing more stringent underwriting criteria. In one sense, that is good, but bankers seem terrified by the regulators' shadows.

For the last several years, we have worked hard to build up cash reserves in one of the businesses to stabilize the funds for daily operations. Because this business is an LLC, any moneys left in the company as reserves are taxed as individual income to the partners at the marginal rate. For example, if we try to build a cash reserve of $100,000 per year, we are now paying as individual owners an additional $32,000 plus in federal taxes which apparently is soon going to rise to $39,500. That is a heavy burden on a small business owner(s) to try to create a way to sustain a business and keep your talented employees in difficult times by having operating reserves.

It is good to know I am "rich" by the new standards, but I can tell you there are days when you ask yourself is the risk worth the reward? The combination of federal, state and local governments already take greater than 40%. Isn't that enough? To hear we are going to "tax the rich" really strikes at the heart of those who take the risks to create most of the new jobs.

What have you heard in all the rhetoric to help those who actually create the new jobs? You can hear a pin drop because of the silence.

You may be asking yourself "what can I do?" Write your congressman and senators asking them why there is no real help for small businesses.