What Small Business Owners Want from Obama

An end to the credit crunch, less talk of tax increases, and health-care reform without coverage mandates top entrepreneurs' lists

By Karen E. Klein

Editor's note: This is the second of a two-part series about small business owners' reactions to the Obama Administration's policies. The first column and its accompanying slide show were published on June 19.

Along with resentment about billions in government bailouts to large corporations deemed too big to fail, the issues most commonly mentioned as troubling for small business owners as they contemplate life under the new Obama Administration are the persistent credit crunch, the Administration's plans for health-care reform, and the possibility of tax increases on top-tier income brackets, experts say.

While many entrepreneurs give President Barack Obama credit for a policy initiative that dropped fees on U.S. Small Business Administration-backed loans and increased the agency's loan guarantees, they worry that the incentives are not working. "All this recovery money is going out and yet nobody's lending and we don't know when they ever will be," says Margo Dorfman, CEO of the U.S. Women's Chamber of Commerce. "The businesses we deal with have been around for decades, they've been paying their lines of credit as they're supposed to, but now they're getting cut off left and right. Our members are saying, 'Hey, I could grow my business but I can't get access to capital.'"

George Isaacs, president of JEDA Polymers in Decatur, Ill., has felt the credit crunch firsthand. "Our banker told us several months ago that they have no money to lend to anyone because federal regulators are telling banks to write down the value of all loans because of the poor economy," he says. "When a bank writes down a loan, money that would otherwise be available for loans must be used for the bank's capital reserve and can't be lent out."

tax-hike talk scares small business

Even while they're unable to access existing credit lines or get new loans to take advantage of business opportunities, small business owners worry about potential tax increases.

Although nonpartisan tax analyses show that the impact of tax increases proposed for 2012 would be felt by a relatively scant portion of the small business community—mostly wealthy investors rather than mom-and-pop business owners—just the idea of tax increases is another "disgruntler" for entrepreneurs, says Dennis J. Ceru, an adjunct professor of entrepreneurship at Babson College in Wellesley, Mass., who studies fast-growth companies.

"Small businesses have bootstrapped their companies into existence with private funds and grown them largely by sweat equity and a great deal of hard work over long hours. The small business owner is seeking some amount of payback in the latter years of the business, and that usually means higher compensation with bonuses or profits coming out of the firm," he says. "The risk-reward ratio becomes particularly difficult if you've taken a lower salary during many years in the hope that you'll have a bonus at the end, and then you find that that bonus is taxed at a dramatically higher rate than you had anticipated."

But the issue that seems to be most worrisome for small business owners—as well as the most fraught with possibility—is health-care reform. For many years, surveys have shown that entrepreneurs see rising health-care costs as their number one business concern.

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