An appearance on the SalesFusion blog

I was recently interviewed by SalesFusion for their new “Industry Insight” feature. The results were published today in a blog post titled, “Industry Insights with David Kirkpatrick.” The interview covered my thoughts on marketing automation software and small- to medium-sized businesses (SMBs).

Thanks guys! It was a lot of fun being on the other side of the microphone for a change.

From the second link:

Salesfusion commenced Industry Insights, an interview series with industry analysts and marketing and sales experts. Industry Insights kicks off with an interview with David Kirkpatrick. David Kirkpatrick—award winning journalist, author and marketing expert—is Manager of Editorial Content for MECLABS, parent company of MarketingSherpa and MarketingExperiments.

Bank lending important to small business

Much more important than expected in terms of financing small business. The total credit freeze when the financial crisis hit hurt everyone, but the ongoing credit crunch on small businesses and entrepreneurs may be a fairly big piece of the slow economic recovery puzzle.

From the link:

Small businesses are more sensitive to the contraction of bank lending than previously thought, and the conventional wisdom about how small businesses finance themselves may be hogwash, according to a new working paper from the National Bureau of Economic Research.

The paper, “The Capital Structure Decisions of New Firms,” found that newly created firms rely heavily on “outside” debt financing, such as owner-backed loans, business bank loans, and business credit lines. The average amount of bank financing is seven times greater than the average amount of
“insider”-financed debt — money from family members and personal networks of the owner. Those groups were previously thought to be the primary providers of fuel for start-ups.

New legislation offers small business tax incentives

News straight from the source …

The release:

Recent Legislation Offers Special Tax Incentives for Small Businesses to Provide Health Care, Hire New Workers

Videos
HIRE Act: English
Small Business Health Care Tax Credit: English

IR-2010-69, May 28, 2010

WASHINGTON — In recognition of National Small Business Week, the Internal Revenue Service encourages small businesses to take advantage of tax-saving opportunities included in recently enacted federal legislation.

A variety of business tax deductions and credits were created, extended and expanded by the American Recovery and Reinvestment Act of 2009 (ARRA), this year’s Hiring Incentives to Restore Employment (HIRE) Act and the Affordable Care Act. Because some of these changes are only available this year, eligible businesses only have a few months to take action and save on their taxes. Here is a rundown of some of the key provisions.

New Health Care Tax Credit Helps Small Employers

The small business health care tax credit, created under the Affordable Care Act, is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

The credit takes effect this year and is generally available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small employers that primarily employ low- and moderate-income workers.

For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers. The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees ––  paying annual average wages of $25,000 or less. The credit is completely phased out for employers with more than 25 FTEs or with average wages of more than $50,000.

Because the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals. More information about the credit, including a step-by-step guide and answers to frequently asked questions, is available on the IRS website.

Two New Benefits for Employers that Hire and Retain Recently Unemployed

Employers who hire unemployed workers this year (after Feb. 3, 2010, and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from the employer’s share of Social Security tax on wages paid to these workers after March 18. In addition, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new hire retention credit of up to $1,000 per worker on their income tax return.

These tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives generally do not qualify.

Employers must get a signed statement from each eligible new hire, certifying under penalties of perjury, that he or she was not employed for more than 40 hours during the 60 days before beginning employment with that employer. IRS Form W-11 can be used to meet this requirement. Further details, including answers to frequently asked questions, are posted on IRS.gov.

Work Opportunity Tax Credit Aids Employers That Hire Certain Workers

The work opportunity tax credit (WOTC) offers tax savings to businesses that hire employees belonging to various targeted groups. These groups include people ages 18 to 39 living in designated communities in 43 states and the District of Columbia, recipients of various types of public assistance, certain veterans, ex-felons and certain youth workers. The instructions for Form 8850 detail the requirements for each of these groups.

Certification by the state workforce agency is generally required. Normally, a business must file Form 8850 with the state workforce agency within 28 days after the eligible worker begins work.

An eligible employer can claim both the WOTC and the new hire retention credit for the same employee. However, an employer may not claim both the payroll tax exemption and the WOTC for the same employee. Therefore, any employer that chooses to apply the exemption to wages paid to a qualified employee may not receive the WOTC on any wages paid to that employee during the one-year period beginning on the employee’s hiring date.

Exclusion of Gain on the Sale of Certain Small Business Stock

An extra incentive is now available to individuals who invest in small businesses. Investors in qualified small business stock can exclude 75 percent of the gain upon sale of the stock. This increased exclusion applies only if the qualified small business stock is acquired after Feb. 17, 2009, and before Jan. 1, 2011, and held for more than five years. For previously-acquired stock, the exclusion rate remains at 50 percent in most cases.

COBRA Credit

Employers that provide the 65 percent COBRA premium subsidy to eligible former employees can claim credit for this subsidy on their quarterly or annual payroll tax returns. To help avoid imposing an unnecessary cash-flow burden, affected employers can reduce their payroll tax deposits by the amount of the credit. For details, see the instructions for Form 941.

Small business owners can find a variety of helpful on-line resources in the Small Business and Self-Employed Tax Center on IRS.gov.

IRS offering open house May 15 for small business and individuals

The facts straight from the source:

Open House on Saturday May 15 to Help Small Businesses, Individuals Solve Tax Problems

IR-2010-55, May 3, 2010 WASHINGTON — The Internal Revenue Service will host a special nationwide Open House on Saturday May 15 to help small businesses and individuals solve tax problems. Approximately 200 IRS offices, at least one in every state, will be open May 15 from 9 a.m. to 2 p.m. local time. IRS staff will be available on site or by telephone to help taxpayers work through their problems and walk out with solutions. “Our goal is to resolve issues on the spot so small businesses and individuals can put any issues they have with the IRS behind them,” IRS Commissioner Doug Shulman said. “If you have a problem filing or paying your taxes or resolving a tough tax issue, we encourage you to come in and work with us.” IRS locations will be equipped to handle issues involving notices and payments, return preparation, audits and a variety of other issues. At a previous IRS Open House on March 27, approximately two-thirds of taxpayers requested and received assistance with payments and notices. So, for example, a taxpayer who cannot pay a tax balance due can discuss with an IRS professional whether an installment agreement is appropriate and, if so, fill out the paperwork then and there. Assistance with offers-in-compromise will also be available. Likewise, a taxpayer struggling to complete a certain IRS form or schedule can work directly with IRS staff to get the job done. At the March 27 Open House, 88 percent of the taxpayers who came in for help had their issues resolved the same day. Locations for the May 15 Open House are listed here. The Open House on May 15 is the first of three events scheduled through the end of June. The next two are planned for Saturday June 5 and Saturday June 26. Details regarding those events will be available soon.

Recovery still hasn’t reached Main Street

I’m sure this is not news to all of us Main Streeters out there. The stories I’ve been hearing from small business owners are just incredible. People with impeccable credit histories having credit lines slashed to almost nothing, companies offering payment plans never before considered only to find the customers still unable to meet the soft terms and enough accounting tricks to try and deal with the facts on the ground to make your head spin. Nope, the recovery still hasn’t made it to Main Street.

From the link:

The economy may be showing halting signs of recovery, but the turnaround hasn’t reached Main Street yet: A pair of recent small business surveys found that most owners are skeptical or downright gloomy about their business prospects this year.

“Something isn’t sitting well with small business owners,” Bill Dunkelberg, chief economist of the National Federation of Independent Business, said in a written statement accompanying the latest edition of his organization’s monthly “Small Business Optimism” report. “Poor sales and uncertainty continue to overwhelm any other good news about the economy.”

Capital expenditures remain near record lows, sales are still weak, and credit lines are hard to find, according to the around 950 business owners NFIB surveyed in March. While job cuts have slowed, few businesses say they plan to hire new workers within the next three months.

Congress working on small business and construction aid

With health care over and done Congress is already looking to boost an ailing Main Street.

From the link:

The House approved 246-178 a bill designed to boost investment in small businesses, which have been reluctant to take on new workers as the economy recovers from the worst recession in 70 years.

The bill would also expand subsidies for state and local construction bonds in an effort to bring down the 9.7 percent unemployment rate ahead of the November congressional elections.

Democrats noted that the popular Build America bond-subsidy program has funded $78 billion in state and local construction projects.

“It’s been an effective tool in job creation,” said the bill’s author, Ways and Means Committee Chairman Sander Levin.

Corporate belt tightening led to cash reserves

Of course all this liquidity was wrung out of Main Street and the lifeblood of the economy — the workforce.

From the link:

The brutal recession has left many American families, small businesses and state and local governments in financial ruin or teetering on the brink.

But it’s a much different story for the nation’s biggest companies. Many have emerged from the economy’s harrowing downturn loaded with cash, thanks to deep cost-cutting that helped drive unemployment into double digits.

And although the banking crisis starved countless entrepreneurs for money last year, credit was never scarce for business titans.

Payroll services company sees small business bounce

And that is a very good thing for the economy.

Merchant cash advance, a small business capital option

There’s a serious credit crunch out there right now, as anyone in business — particularly small- to mid-sized business — knows. Remember all that TARP bank bailout money from fall 2008? The biggest recipients of federal dollars continue to cut lending to small companies and seven of the top 11 TARP banks cut their small business loan balances every reporting month from the time they received taxpayers dollars through the end of 2009. Small Business Administration-backed loans are taking up some of the slack, but where else can a small company turn when looking for loans for business or just extra operating capital?

Merchant cash advance

One option is the merchant cash advance market. This industry has existed for around a decade and has really ramped up during these tough economic times coupled with an extremely tight credit industry. Merchant cash advance providers give businesses a lump sum of immediate cash in exchange for a percentage of future sales or future credit receivables. A disadvantage of a merchant cash advance is the equivalent interest rate can be pretty high when compared to a more traditional business bank loan or line of credit, but this capitalization option does offer some advantages over working through a bank.

The upside

The key upside is it’s available, and right now a bank loan in this credit market just might not be an option. Other advantages include a relatively quick approval process, bad credit won’t prevent you from obtaining a merchant cash advance and the only collateral you really need is strong credit card sales.

If you decide to pursue a merchant cash advance remember to consider the money you’re advanced as a loan to be repaid, not as just some extra cash going into the business account. Merchant cash advances aren’t the best way to capitalize your business, but they serve a very necessary function for businesses looking for, or needing, liquidity in a tight credit economy.

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A new small business loan solution from a Congressman

Raise the cap on credit union small business lending. Sounds reasonable.

From the link:

Rep. Paul Kanjorski (D., Penn.) has offered one solution to this problem: lifting the cap on credit unions’ loans to small businesses, allowing them to extend more loans to help the economy grow. When I spoke with Rep. Kanjorski about his proposal, he told me that credit unions lent wisely before the crisis, and are lending more now. Credit union business lending grew by more than 11% in 2009. Now credit unions are facing a statutory cap on lending. To fill a void in business lending, Rep.Kanjorski says credit unions need Congress’ help.

From the “be careful what you wish for” department

You might just get it.

From the link:

Lobbyists for small businesses, construction companies, manufacturers and other trade groups are racing the clock to convince Congress to reinstate the federal estate tax they’ve fought for years to abolish.

The National Federation of Independent Business and more than 40 business organizations wrote Senate and House leaders last week asking for quick action on a proposed 35 percent levy on inheritances worth more than $10 million per couple. The Associated General Contractors of America is urging members to contact lawmakers about the plan.

The groups have changed positions in a bid to head off higher taxes on the horizon: Unless Congress acts, current law would raise the tax next year to 55 percent on estates after they exceed $2 million per couple, from nothing this year.

“Clearly, we can’t live with what’s going to come in 2011,” said Chris Walters, an estate-tax lobbyist in Washington for NFIB, the trade group for small businesses.

Small business loan relief courtesy of Congress

Finally.

From the link:

Added incentives for banks to make Small Business Administration-backed loans will continue through the end of March, thanks to a fresh funding infusion authorized by Congress as part of Tuesday’s bill extending unemployment benefits.

Since early last year, the SBA has waived its fees and offered banks guarantees of up to 90% on the small business loans the agency backs. Created as part of the Recovery Act, the deal sweeteners helped SBA-backed lending rebound from its near collapse in late 2008, in the wake of the financial crisis.

Congress initially authorized the incentives to continue through September of this year, but the measures proved so popular that their funding was quickly exhausted. The SBA has been relying since late November on temporary extensions to keep the incentives running.

The unemployment benefits extension bill — passed by the Senate and signed by President Obama late Tuesday after Sen. Jim Bunning, R-Ky., dropped his objection — allocates $60 million to fund the program’s subsidies for another month.

Just this issue alone illustrates how Bunning’s so-called “principled” roadblock tactic put real short-term hurt on Main Street. Over 100,000 federal employees missed a paycheck because of that asshat’s grandstanding. How would you like to make a mortgage, or other bill, payment late because one Senator wanted to make an inane point about federal spending? Particularly a Senator who offered no fiscal backbone for eight years of profligate federal spending with zero attempt to pay for the outlay under the previous administration.

Health care reform won’t help self-employed tax issue

As a self-employed freelance writer, I completely understand the pain of the odd taxes and hoops of red tape the IRS has put in front of the self-employed sole proprietor. Too bad none of the reform ideas floating around include helping those smallest of businesses.

From the link:

By a quirk in the tax code, self-employed workers who buy their own health insurance essentially pay an extra tax on their premiums. They’re the only taxpayers in the system who pay taxes on premiums, which count as a business expense for corporations and pretax income for employees. Because self-employed workers have no corporate employers to match their payroll tax contributions to Social Security and Medicare, they pay double the rate of wage and salary workers in a levy known as the self-employment tax equal to 15.3% of their net earnings. That’s on top of regular state and federal income taxes, and the income they spend on health premiums is not exempt.

The nation’s 9 million self-employed—sole proprietors with few or no employees, contract workers, and freelancers—constitute about 8% of the total U.S. labor force, according to the Bureau of Labor Statistics. (The Census Bureau counts 22 million sole-proprietors, but it’s not clear how many of those may be payroll workers as well.) “You correct this, think of the widespread health benefit you would give to so many people,” says Kristie Arslan, executive director of the lobbying group National Association for the Self-Employed (NASE), which represents the self-employed in Washington.

New credit card regulations go into effect

But they only cover consumer credit, so keep a watch on business and corporate credit cards because the Truth in Lending Act does not cover that plastic.

From the link:

A batch of new restrictions aimed at curbing the most egregious credit card practices kick in Monday, but business owners will need to stay alert — the new rules don’t cover cards used for corporate purposes.

The bill Congress passed in May reforms the Truth in Lending Act, which governs only consumer credit. The measure fulfills a wish list of long-sought reforms. Issuers won’t be able to hike the interest rates on existing balances as long as customers pay their bills on time, and they’ll need to notify customers at least 45 days in advance of interest rate increases and most fee changes.

Those two changes alone will save consumers an estimated $10 billion annually, nonprofit research firm Pew estimated in a recent report.

“Regulation” is often a dirty word to small business owners, but few would object to new laws offering them similar protection. With bank loans and credit lines drying up, credit cards are one of the only sources left for fast capital injections.

Nearly 60% of business owners polled recently by the National Small Business Association said they use plastic for their capital needs — and 79% said the terms of their credit cards have grown worse in the past five years.

“Regulation, particularly in the long-term, is good for the consumer. But these regulations won’t be there for the small business owner,” says Curtis Arnold, founder of CardRatings.com. “They’re going to have to be on their toes to protect themselves.”

Small business still being ground down by credit crunch

I’ve done a lot of blogging about the ongoing credit crunch, and last week exposed an article at Forbes that attempted some linguistic sleight-of-hand to argue — quick look at my waving hand over here — there is no credit crunch.

Here’s an article on the same topic from CNN Money that actually cites some real numbers on just how tough things remain for Main Street, and maybe just a little bit why small- to medium-sized business owners are still chafed over the bank bailouts from the fall of 2008.

And yes, small business and personal households are truly suffering under a crippling credit crunch that does not have an ending point in sight.

From the link in the second graf:

Small business loans continue to dry up at the nation’s biggest banks. Eleven top TARP recipients — including Wells Fargo, by far the nation’s largest lender to small companies — cut their collective small business loan balance by more than $2.3 billion in December, according to a Treasury report released late Tuesday.

The drop marked the eighth consecutive month of declines for the 11 banks. In that time, their total loan balance has fallen 7%, to $169.4 billion. Seven of the reporting banks have cut their small business loan balance every single month.

“Credit is still tight for many small businesses,” the Treasury acknowledged in a Feb. 10 report.

The 22 banks that got the most help from the Treasury’s bailout programs have been filing monthly lending reports to the government, and since April, they’ve been required to break out their small business lending. But as of this month’s report, the 10 banks that have completely repaid their bailout funds in June are no longer required to divulge their lending.

Tapping your 401(k) to fund a start-up

One option for start-up capital for a new business is your 401(k). You can take a loan against your retirement savings with no penalty in order to start a business. You do have to repay the loan with interest, but since credit is still very, very tight and home equity is way down, tapping the retirement account is a viable way get a new business up and running.

From the link:

Entrepreneurs who have left their regular jobs to start a firm essentially have two options for using their 401(k)s as start-up capital. One is less complex than the other, but the more complex option can provide access to more money without fees.

The simple option is not all that different than a regular 401(k) loan.

Let’s say a lawyer or tax accountant plans a very small or single-person firm. He or she leaves a corporate job and takes the 401(k) savings from that company to the new business by establishing a 401(k) plan in that business’ name.

At that point, a traditional 401(k) loan can be taken from the new firm’s 401(k) plan. There are restrictions, though.

The entrepreneur can only borrow the lesser of 50% of savings, or $50,000. And the loan repayment plan typically lasts for five years and requires a fee of the prime interest rate plus 1% or 2%, says Robert Cheney, a financial planner at Westridge Wealth Strategies.

The small-business owner needs to have enough steady income to repay the loan. If payments can’t be made, the loan is considered in default, and taxes and an early-withdrawal penalty will apply if the 401(k) owner is not 591/2 or older.

The second, more complex option is often referred to as a ROBS loan — Rollovers as Business Start-ups, so-named by the IRS.

Entrepreneurs using this option typically need help from a firm specializing in such work.

For a fee, these firms help the new business create its own 401(k) plan and transfer funds from the owner’s existing 401(k). The retirement money is then used to purchase company stock that’s held in the new 401(k) plan. This provides the entrepreneur’s corporation with start-up capital.

Some experts believe that it is harder for a new small business to meet IRS guidelines for ROBS loans.

The wording is not clear-cut in IRS rules, but the agency seems to require an independent appraisal of a business value to ensure tax compliance. But a start-up often has trouble meeting that goal because it may have zero value, Hauptman says.

That may be one reason why ROBS are mostly used by franchisees who are buying into an existing business.

Quite the misleading lede

Here’s the lede in an article about the banking industry and the ongoing credit crunch:

Those wicked bankers–refusing to lend to small businesses! So say the pols. The reality is something else.

You read that and think, man this whole credit crunch thing is just some sort of hoax cooked up by the mainstream media or opportunistic politicians. Then you hit the link up there, read the article and realize the gist of it is a lot of businesses have drastically cut expenses and are now self-capitalizing because profitability is up and operating costs are down.

The problem there is those companies drastically cut expenses — those pesky things like salaries for jobs that no longer exist and such — because the banking industry completely screwed Main Street and continued a ridiculous credit squeeze long after receiving billions in Federal bailout money. And trust me, the credit crunch is still going on.

It’s great some companies managed to pare down to the point of self-capitalizing. But I bet both the newly unemployed from those companies, and the now overworked employees doing a job that once was covered by two, or more, workers would prefer for those companies to hoard a little more cash (something like what banks are still doing) and dip into the credit market to cover operating costs. I bet some of the companies would love to do just that, but can’t — why?, because of that still overly tight credit market

White House looking to end LIFO

Ending last-in/first-out accounting would be a very, very bad idea and would punch businesses — particularly small businesses — in the gut at a time when a drastic tax hit is something no business needs. The economy is still rough sledding all around and unemployment isn’t abating. The Obama administration has been making good noises about helping Main Street. Ending LIFO would do anything but.

From the link:

House Ways and Means members crossed party lines in Feb. 3 budget hearings to criticize the Obama administration’s proposal to raise an additional $59 billion in tax revenues by eliminating firms’ ability to use the last-in, first-out accounting method.

“If we do this, if we end it, what’s going to happen is U.S. small businesses are going to take a big tax hit and their competitors overseas are going to have a terrific advantage over us in the marketplace,” Rep. Mike Thompson (D-Calif.) told Treasury Secretary Timothy Geithner. “There’re some industries that have to hold their inventory for a long time; this is a fair and reasonable way to recognize that and I would strongly urge you to go back and revisit that.”

The practice can reduce a business’s tax liability, particularly in times of rising inflation, because it takes into account the higher costs of replacing inventories. The LIFO method is especially important to companies that maintain large inventories over a period of years, such as wineries and distilleries that need to age their inventories. As a result, shifting to a first-in, first-out accounting practice would have the effect of giving those producers income on which they would have to pay taxes, even though the products they have put into inventory may not be available for sale for several years.

Recycling TARP funds for small business loans

As much as I think the deficit is a significant issue, the ongoing credit crunch for small business is a much more pressing issue for the economy. Recycling money that bailed out Wall Street to give Main Street a leg up is probably good politics, but more importantly, it is good policy.

From the link:

President Obama called on Congress Tuesday to recycle $30 billion of the remaining Troubled Asset Relief Program (TARP) funds into a new government lending program offering super-cheap capital to community banks that boost their small business lending this year.

Touted last week in Obama’s State of the Union address, the plan is the latest incarnation of a proposal the president first floated in October. While credit conditions for large businesses have improved over the past year, small companies are still widely reporting problems finding the capital they need to fund their operations.

New employee $5000 tax credit proposed

More detail on the White House plan to help Main Street.

From the link:

President Obama will propose Friday in Baltimore a new business tax credit worth up to $5,000 for every new worker hired this year.

Under the president’s plan, a business could claim a tax credit of up to $5,000 for every net new employee it adds to its workforce this year.  If that business hires a worker and fires another, it would be ineligible for this credit.

Senior administration officials said they capped the total credits a business can claim at $500,000 to ensure their proposal mostly helps small businesses.

“The focus is really on small businesses,” said a senior administration official.

The president is also proposing the federal government reimburse businesses for the Social Security taxes they owe on increases in their payrolls this year.

Small business tax credit still in play

It may have died in Congress, but a tax credit for small businesses creating jobs is a good idea. There are pros and cons, but overall Main Street needs this. Companies need a little more financial flexibility, especially if they legitimately need to add employees, and people out there just need more jobs.

From the link:

President Barack Obama’s push to create jobs includes a new tax credit for small businesses that add employees, an idea that fell flat in Congress last year and continues to have skeptics this year.

The idea has appeal as the nation struggles with an unemployment rate topping 10 percent. But House Democrats left out Obama’s proposal when they passed a jobs bill in December because they didn’t know how to target the credit effectively. The Obama administration still hasn’t provided details on how the tax credit would work, and some tax experts question whether it would.

How to really start cutting small business costs

Overall this is a decent case study article on controlling costs at a small business, and a lot of the advice and actions are sound — things like renegotiating with a major supplier to get a better price.

But this particular step to cut costs for a gourmet ice cream maker seems a bit over the top:

… We also advised them to put an end to the “Do It Yourself” Sundae offered in the stores. Customers were making lavish use of sprinkles and whipped cream, and it was killing the profit on each item sold.

Wow. Those must have been some super-premium sprinkles and whipped cream to significantly put a dent in the bottom line.

There’s one thing I’d like see during the health care reform debate

And that thing is an unbiased as possible (I know, I know — that’s probably a pipe dream) breakdown on the business costs for the various plans. Health care reform is a huge and necessarily complicated topic taking into account entire large swaths of the current U.S. economy, and corporate health care benefits are front and center since most Americans currently get health insurance through their employer. So much so that health insurance actually stifles job mobility because some people are afraid to lose their current health benefits and the grandfathered in “preexisting conditions.”

Now the complex topic of heath care reform has become so much more so with the House and Senate muddying the waters through the sausage-making that is legislation. Right now the major national business organizations oppose both the House and the Senate health bills, but how do the bills actually break down and affect businesses of different sizes? I’ve read in many places where small business owners are looking forward to health care reform and see the issue along the lines of, “well, reform couldn’t be any worse than what we have right now.”

With all that in mind in mind, what I’d like to see is a clear auditing of both the House and Senate health care reform bills and how much each costs businesses of different size — size in number of employees and in annual revenue. I have a feeling health care reform would actually be an improvement for businesses that most anyone would consider small, but I don’t know and I’m too lazy (and probably incapable) of doing the policy wonkery number crunching to figure this out. Anyone out there game?

TARP costs coming in $200B under expectations

Looks like the Obama administration is going to put some toward the deficit and some toward Main Street. Given the facts on the ground, this sounds like fairly conservative fiscal policy to me. Quite a revelation after the last eight years.

From the link:

The government recently announced that the Troubled Asset Relief Program (TARP), established at the height of the financial crisis last year to recapitalize the nation’s banking system, will cost $200 billion less than expected. Obama wants that money redeployed into additional stimulus initiatives: “This gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street,” Obama said Tuesday.

Getting Main Street hiring again is key to job recovery: Small businesses have created 65% of new jobs in the past 15 years, according to government estimates. Obama’s latest set of proposals includes several brand-new measures, as well as extensions of existing stimulus acts.

The small business credit crunch and unemployment

These two elements — little to no credit for small business and a difficult rebound from deep unemployment — are integrally tied together. Small business jobs are the backbone of the U.S. economy, and small businesses need revolving credit to help ensure cash flow. When your accounts receivable go from averaging 20 days to averaging 45 days, ongoing business expenses become an issue.

I know several small businesses that are currently in a state where invoices are getting paid late so in consequence the companies pay late and the entire cycle helps no one. With banks not providing credit to worthy small businesses the entire system is being ground down by a lack of liquidity.

This example is almost beyond belief and perfectly illustrates where the banking industry — both local and national — is doing real damage to the economy’s small business backbone.

From the link:

Veteran Chicago restaurateur Ivan Matsunaga needs a $300,000 loan to finance a renovation of his flagship pizza restaurant into a higher-end eatery. The revamp is required for his lease renewal, but it will also create job opportunities: Matsunaga estimates that he’ll need five additional staffers to run the updated restaurant.

Three banks turned down his loan request — including a community bank Matsunaga personally invested in at its launch three years ago.

“How perplexing is it that they would not reciprocate? What type of banking environment exists where they currently have $100,000 of my money and yet they won’t give me a loan?,” Matsunaga asked at the hearing. “If my bank were to approve my loan today, I, for one, would create jobs immediately.”

Big banks have shaved more than $10 billion from their small business lending totals over the past six months, which drew sharp criticism from Senators at Wednesday’s hearing. “I know that my situation is not unique,” Matsunaga said. “I have had numerous discussions with my peers who are frustrated by these same issues.”

Retirement planning for the self-employed

Are you self-employed and looking for retirement planning options? Of course you take the process completely into your own hands through savings and investing, and I bet that’s the approach a lot of self-employed tax payers do. Being self-employed at all takes a certain amount of independence in your character. For the self-employed looking for more traditional retirement planning that’s geared for their specific needs two decent options include a solo 401(k) and a Simplified Employee Pension (SEP).

And keep in mind the tax savings from these retirement planning and saving vehicles. Here’s a good breakdown on what circumstances lend best to each option.

From the link:

A solo 401(k) may be your best bet if most of your income is from self-employment. You can contribute $16,500 to a solo 401(k) in 2009 plus 20% of your net business income (which is business income minus half of your self-employment tax), up to a maximum of $49,000 in 2009. You can also make a catch-up contribution of $5,500 if you’re 50 or older. You can’t contribute more than your business income for the year, but even if you earn just $16,500 from self-employment, you can contribute the entire amount to a solo 401(k). You must open a solo 401(k) by December 31, and you have until April 15, 2010, to make your 2009 contributions Your combined contributions to a solo 401(k) and any 401(k) you may have through another job cannot exceed the contribution limits.

If you have a 401(k) through a primary job and earn some freelance income on the side, a SEP-IRA may be a better option. It’s easier to set up — you can open an account at most brokerage firms or mutual fund companies that offer IRAs — and you can set aside 20% of your net business income, up to a maximum of $49,000 in 2009. You have until April 15, 2010, to open a SEP and make your 2009 contribution. See Do-It-Yourself Retirement Plans for more information.

That SBA stimulus cash loan program? Gone

Well, more correctly out of money.

From the link:

The stimulus cash that helped boost small business lending this year just ran out.

The Small Business Administration said Monday that it has run through all of the $375 million Congress allocated to temporarily waive fees and boost guarantees on loans backed by the SBA’s lending programs. Businesses still hoping for a slice of the pie can get in line, cross their fingers and wait.

Unemployment taxes an impediment to small business job creation

This is one of those chicken/egg scenarios, but states are hurting for revenue, unemployment remains high and small business are being dissuaded from hiring because those broke states are cranking up the unemployment taxes on those small businesses. The end result? Small businesses are going to put of taking on new employees right at a time when jobs are needed. There’s no great answer here, but I’m going out on a limb and the discussion needs to be begin in state capitals around the nation.

From the link:

Employers already are squeezed by tight credit, rising health care costs, wary consumers and a higher minimum wage. Now, the surging jobless rate is imposing another cost. It’s forcing higher state taxes on companies to pay for unemployment insurance claims.

Some employers say the extra costs make them less likely to hire. That could be a worrisome sign for the economic recovery, because small businesses create about 60 percent of new jobs. Other employers say they’ll cut or freeze pay.

Small business are getting bigger

At least in the eyes and definition of the Small Business Administration. Both small- and mid-sized businesses can use all the help they can get right now, but these moves seem to always open a back door for the very large structures in the corporate world to get hold of some unneeded “free” money through subsidiaries that are big, but just enough not so to qualify.

From the link:

The Small Business Administration will redefine what “small” means for firms in hundreds of industriesby revamping size standards over the next two years. The result: More businesses will qualify for all types of SBA financial aid, such as the flagship 7(a) loan guarantee program.

The SBA hasn’t taken a hard look at its size standards for more than 25 years, although it periodically makes inflation adjustments, as it did last year. There’s no doubt that in the last quarter-century, changes in industry structure, market conditions and business models have changed the definition of “small” for all sorts of businesses. The SBA’s effort will involve reviewing the standards for businesses in about 900 industries and adjusting them upward — or, in a few cases, downward — as needed.

Also from the link:

In the first round of this size standard revamp, SBA is looking at 138 industries and proposing to change the standards for 71 of them. For example, SBA wants to raise the cap on annual receipts for jewelry stores from $7 million to $25 million, which would allow a lot more stores to qualify for aid. The cap for nurseries and garden centers is proposed go from $27 million to $30 million.

More news from the “no duh” department

Today it’s from Treasury Secretary Tim Geithner:

“This credit crunch is not over,” Geithner at a small business financing forum in Washington hosted by the Treasury. “It may feel dramatically better for large companies, but it is not over for small businesses across the country.”