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.
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.
health-care Reform, but no mandates
"Most business owners feel that our outrageous health-care costs significantly impact them and their employees," says Neil Shroff, managing director at Orion Capital Group, a mergers and acquisitions firm in Menlo Park, Calif., and president of a Republican business owners' organization. "With insurance costs rising year after year, it is making U.S. companies uncompetitive. Business owners will appreciate any cost reductions while keeping similar care standards we enjoy today."
But while they want something done, entrepreneurs worry that heavy-handed coverage mandates could drive them out of business. "If the health-care agenda gets rammed through Congress, I will seriously consider having to close my doors," says Dick Olenych, who owns a small printing company in Virginia Beach, Va. "Maybe I could outsource to China?"
Olenych is not alone in his fears. Barbara Monteiro, owner of Monteiro & Company, a boutique book-publicity firm in New York City with five employees, also worries. "What concerns me the most is the possibility that Obama might insist that all businesses offer their employees health insurance. If a law to this effect is put in place, I'll have to greatly reduce my business," she says.
But Ann Sullivan, president of Madison Services Group, a government-relations firm that works closely with Women Impacting Public Policy
says she is encouraged by recent comments from the White House. "President Obama said we can't impose mandates on a system that we can't be assured will give affordable rates. I think the small business community breathed a huge collective sigh of relief at that, because he's saying you can't impose mandates without making sure that people can actually benefit from them. That's a great thing," she says.
Small business owners appear to approve of the possibility of having a public health-care option offered alongside the existing private network of health-care insurers, similar to recent polls of the country's populace.
Both Public and private health-care
Given the choice of a public-only plan, a private-only plan, or a plan that includes both public and private insurance options, 70% of small business owners vote for "both" in recent polling done by Small Business Majority,
a nonprofit advocacy organization focused on health-care reform. However, the public option is not a high priority for small employers.
"When you ask them what is most important, cost is off the charts number one, followed by things like unfettered access to insurance. Having a public plan is not the most important aspect" of entrepreneurs' thinking on health-care reform, says John Arensmeyer, the group's executive director.
His polling has also shown that entrepreneurs are generally open to new ideas on health-care coverage.Two-thirds—66%—of small business owners support the concept of shared responsibility between employers and government for health care and a majority says they are willing to put in 3% of their payroll to pay for coverage in some kind of pooled-insurance arrangement, Arensmeyer says. "Although 30% to 35% say they are not willing to contribute anything in additional costs to fund health-care reform, a majority are willing to step up to the plate. We think there is an openness among small business owners to accept a role in the system," he says.
If they've done nothing else, issues like health-care reform and tax increases have galvanized small business owners to become more active politically, many experts say.
"If you talk to elected officials, they'll tell you that at every town hall meeting they go to, there's a small business person there saying, `Are you ever going to do anything for us? This [recession] is killing us!" Sullivan says. "It's a grassroots effort that hasn't even been organized, but small business owners realize that they have to get engaged if they want to see a change."