Why Washington's Worth Watching
It's National Small Business Week in Washington, D.C., time to celebrate the entrepreneurs and businesses that, according to President Barack Obama, form "the backbone of the nation's economy." But the roster of sponsors for the 47th annual observance of the occasion reads more like a Who's Who of corporate behemoths, dominated by names like Sam's Club, Visa, Ford, Raytheon and AT&T.
Dichotomies like that are feeding an undercurrent of concern in some quarters of the small-business community. The worry is that in Washington, policy-makers are continuing to let big business crash the small-business party, just as they did when George W. Bush ran things--despite a host of new pro-entrepreneur initiatives and the Obama administration voicing steadfast support for small business.
The tension isn't new. Indeed, Lesa Mitchell, vice president at the Kauffman Foundation, calls the dynamic between entrepreneurial interests and the Washington, D.C., policy-making machine "very schizophrenic."
Even so, Mitchell and other voices in the entrepreneurship movement laud the Obama administration's work in furthering the small-business cause, pointing to recent developments such as implementation of the American Recovery and Reinvestment Act, plus the administration's move to address government small-business contracting practices, to create an Office of Innovation and Entrepreneurship, and to push legislation to establish a new small-business lending fund.
"Historically, this is by far the greatest level of interest [in entrepreneurship and small business] we have seen from any administration," says Mitchell. "And that is a bipartisan comment."
The Obama administration is backing up that interest with action, asserts Karen G. Mills, who heads the U.S. Small Business Administration, pointing to "a very comprehensive and exciting agenda about small business all across the administration, but particularly here at this agency."
Yet other small-business advocates, along with business owners such as Mike Mitternight, wonder whether they have a true ally in the White House, and whether policy-makers inside the Beltway are inclined to do anything substantial to help small businesses.
"They all seem to be talking about small business as the backbone of the economy," says Mitternight, owner of Factory Service Agency, Inc., a family-owned commercial air conditioning and construction company in Metairie, La. "But they don't seem to be backing that up with policies that help us. Politicians are giving us their ear. They're giving [small businesses] a chance to speak--not that they necessarily listen to what we say. Really, it seems like they're putting a bigger burden on our backs."
"I think [small-business owners] are frustrated [with Washington policies], quite frankly," says Molly Brogan, vice president of public affairs for the National Small Business Association. "[There have been] so many things Congress had an opportunity to pass, and they haven't done it. But.at least they are talking about small-business issues a lot more than they had been."
Yet talk hasn't always translated into action, Brogan contends, listing last year's overhaul of credit card regulation among many missed policy opportunities to help small business.
That inaction also extends to issues such as the SBA's failure to meet its target for awarding government contracts to small business, says longtime SBA critic Lloyd Chapman, head of the American Small Business League. The Obama administration's small-business policy is more "smoke and mirrors" than substance, he says, while Obama and Mills themselves "are what I would characterize as anti-small business."
Nonetheless, U.S. entrepreneurial activity is growing. According to the Kauffman Index of Entrepreneurial Activity, business startups reached their highest level in 15 years after a 4 percent increase in 2009. However, existing small businesses continue to struggle. According to a January NSBA report, the number of small businesses citing decreases in revenue over the past 12 months rose to its highest point since 1993. Meanwhile, 39 percent of small businesses report they are unable to get adequate financing for their business.
Among the many small-business issues under discussion in Washington, loan access sits near the top of the agenda. Mitternight, who as a New Orleans-area business owner witnessed the much-maligned SBA disaster loan program in action in the wake of Hurricane Katrina, says he sees evidence that the agency "has improved their lending procedures" since then.
Through the American Recovery and Reinvestment Act, SBA figures indicate that the agency has supported more than $26 billion in loans to small businesses while increasing the number of lenders making loans. Also part of the act, it eliminated and reduced loan fees, while raising the guarantee on certain loans. According to Mills, the Obama administration is seeking to extend those provisions through the end of 2010, and to raise SBA loan limits from $2 million to $5 million.
"There are a lot of companies--manufacturers, franchises--that need the larger loan size, and [some of] the players in the market that used to provide that type of funding are still absent, so we need to step up and fill that gap," Mills explains. "We've also asked for the ability to use our 504 [loan] program to refinance owner-occupied real estate, understanding banks are going to need credit support."
More help could be on the way in the form of White House-endorsed legislation introduced this spring that would create a $30 billion lending fund designed to increase small-business lending by community banks. The measure is currently making its way through the U.S. Senate.
Even without that fund, the outlook for SBA small-business loans is improving, says the National Small Business Association's Brogan. "They're not quite at pre-2007 levels, but they have rebounded. It's very encouraging." Still, she adds, "the credit crunch is ongoing."
Government small-business contracting practices are another hot-button issue. According to the American Small Business League's Chapman, the diversion of contracts to large corporations is the "number one problem" at the SBA.
Noting that Uncle Sam consistently falls short of meeting the goal of awarding at least 23 percent of all federal contracting dollars to small business, the president in April announced formation of two task forces aimed at improving small-business contracting with federal agencies. One, the Interagency Task Force on Federal Contracting Opportunities for Small Businesses, is co-chaired by Mills. Sometime this summer, it is due to provide the White House with recommendations for making government contracts more accessible to small businesses.
The fact that there's a range of other initiatives means there will be plenty for Small Business Week participants to discuss during this week's festivities in Washington. For example, there's the status of the administration's Strategy for American Innovation, a blueprint for how the federal government will invest in high-growth entrepreneurship and other economic building blocks. There's the work of the new Office of Innovation and Entrepreneurship within the Commerce Department, which is geared toward the first step in the business cycle: turning an idea into a business plan. The new i6 Challenge, a $12 million competition soliciting ideas to drive technology commercialization and entrepreneurship, is among the office's first programs. There's also the new Entrepreneurship.gov website launched last year by the Kauffman Foundation and the Commerce Department to improve the global environment for entrepreneurship.
Also worth watching, according to Kauffman's Mitchell, is a proposed startup visa program that would allow an immigrant entrepreneur to receive a two-year visa by showing that a qualified U.S. investor is willing to dedicate at least $250,000 to the immigrant's startup venture. Bipartisan legislation to create such a program was introduced in February and is still pending.
Given what's at stake, Mitternight suggests that small-business owners pay close attention to developments in Washington. "Up until a couple years ago, I never felt as though what happened inside the Beltway could affect us much," he says. "But I was wrong. What happens there does have a significant impact on small businesses."