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Stimulus: Life or Death for Some Small Firms


Federal stimulus spending sparked a political debate that may never be settled. But for many business owners, it made all the difference, says James Warren

Rich DeNormandie is the fifth generation of his family to run a South Side Chicago commercial laundry—and the first to take a government handout. Since April he's used federal stimulus funds to hire six workers at $10 an hour each, even though business from key restaurant and hotel clients is down. He doesn't follow politics closely and didn't vote in the 2008 Presidential election. When money was offered via the state's "Put Illinois to Work" program, he felt hiring the six unemployed women was the right thing to do. "I got some new faces in here and introduced them to the business," says DeNormandie amid the drone of industrial washer-dryers and folding machines. "If the economy comes back, two or three may stay for good."

Expectations for the American Recovery & Reinvestment Act of 2009—the stimulus to you and me—were always a bit unfair. Like the junk shot of golf balls and scraps BP (BP) fired into its billowing well, the stimulus was an attempt to fend off economic crisis at a desperate moment with an agglomeration of federal funds. Look over the beneficiaries—individual tax cuts ($116 billion), digital TV transition coupons ($750 million), the National Cemetery Administration ($50 million)—and it's clear the stimulus was an act of ingenuity, not cohesiveness.

Its efficacy has never stopped being debated by Democrats (pro) and Republicans (con) since its February 2009 passage, which shouldn't obscure the fact that, at ground level, employers of all parties say they needed the help. Mike Cullinan runs R.A. Cullinan & Son, a Peoria (Ill.) highway construction company that, by the government's fraction-filled reckoning, created 148.33 jobs via 35 projects benefiting from $51 million in stimulus funds. A Republican with an inherent suspicion of big government, he concedes the money "was a fastball for our business."

Cullinan & Son purchased new pavers, rollers, and milling machines. There were hassles with the reporting requirements—"and helping [the federal government] quantify jobs, which wasn't our expertise." But the speedy arrival of dollars (according to Cullinan's CFO, it took as little as 30 days in some cases between filling out paperwork and receiving a check) more than made up for the administrative frustrations. "I can't imagine a clearer place for a government role than transportation and rail, meeting the needs of the traveling public," Cullinan says. "Whatever government can do in these areas, efficiently, I'm for."

S&C Electric in Chicago is a manufacturer of "green" products that improve energy transmission. "The fact that government realizes we need to find another source of energy as opposed to oil, and will provide incentives for companies to make this stuff more environmentally friendly, is fantastic," says Michael Moses, the financial services director. With part of the employee-owned company's take of $6 million in Energy Dept. grants and tax credits, S&C financed a gleaming, $40 million, 43,000-square-foot facility on a 47-acre industrial campus.

With the rest, S&C hired 25 full-time employees. The company cites $85 million in orders since January as evidence that spending begets growth. A self-described social Democrat and fiscal Republican who voted for President Barack Obama, Moses raves about the speedy start-to-finish smoothness of his applications to the Energy Dept. and IRS. (In all, the process took three months.) "Our only concern is sustainability," he says, alluding to the economy, not the environment. "After the stimulus money runs out, will our customers have enough money to buy these products?"

"As a small business, this really helped when lending just wasn't available," says John Dernis, co-owner of a Chicago grocery chain, Michael's Fresh Market. He's expanding and will hire 50 workers, including some for a new store in Obama's Hyde Park neighborhood. One bit of confusion led to a missed pay period—the government wants payroll sheets to be faxed weekly, not every other week—but his business survived.

And survival, at least for the past 18 months, has been the primary goal for businesses of all sizes and business-owners of all political beliefs. Now that the stimulus is winding down, they have something else in common: hope that they can make it on their own.

Warren is a reporter for Bloomberg News.

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