With President George W. Bush's term underway, the nation's entrepreneurial community is waiting to see whether money will flow as freely into their coffers under this leader as it did during Bill Clinton's second term. How much can the new administration impact the money landscape? We asked experts what to expect.
C.J. Prince is a New York City writer who specializes in business topics..
Access To Capital
Industry pundits say the changing of the guard probably won't have as much of an impact as general macroeconomic trends, the health of the public markets and investors' willingness to sink money into good ideas, even after a tumultuous correction. "Most early-stage investors are gun-shy now, and I don't think the election is going to change that," says Dave Pell, the managing partner of Arba Seed Investment Group and author of daily e-newsletter Davenetics, which provides links to top tech stories.
While access to capital still exists, says Jim Goetz, partner with Palo Alto-based venture capital firm Accel Partners, the dotcom fallout has led to an emphasis on solid business plans and good management. He says, "The return to the basics will continue to be the focus of the venture community." Assuming the IPO market picks up again, VC experts say that return is good for both businesses and investors.
The small-business lending climate won't prove much different, says the SBA's Mike Stamler. Many factors will determine how much cash entrepreneurs will borrow during Bush's term: bank liquidity, interest rates, the economy's overall direction, the demand for capital and the inflation outlook, among others.
"[These factors] affect entrepreneurs' thoughts about whether to borrow money or postpone it," says Stamler. "And all of them affect the availability of loan capital on affordable terms. What Bush can do with Congress is make sure the safety line provided by SBA loan guarantees remains available to creditworthy small businesses otherwise [unable] to get loan capital under reasonable terms."
If Bush delivers an across-the-board tax cut-even if it doesn't amount to the near $1.6 trillion over 10 years he's angling for-entrepreneurs should have more money in their pockets come tax time 2002. "The Bush administration will have a bigger appetite for tax cuts," says Clint Stretch, director of tax policy for Deloitte & Touche. "That means tax rate cuts, the biggest thing small businesses could get." There may be some relief on estate taxes, which top out at about 55 percent compared with the top income tax rate of about 40 percent. "We have to bring those back in line," says Stretch, who thinks it likely Bush will ask Congress to repeal the estate tax. Entrepreneurs can also expect a package of small-business incentives, he adds, "the sort that Republicans tied to the minimum wage bill in 2000-increase in spending allowance, increase in self-employed medical, more deductions, among others."
The nation may have to wait until summer to find out how much tax relief it's going to get, however. Stretch says, "What drives congressional timing tends to be largely unrelated to the executive branch."
While experts readily agree that no president can be held responsible for the rise and fall of the public markets, perception is key on Wall Street-and investors need to be concerned with how much confidence those driving the market have in Bush. "The people making the buy/sell recommendations generally are in regions of the country where you can't throw a rock and hit somebody who voted for Bush," says Pell. "San Francisco, New York, Los Angeles-those are places that had little faith in Bush's intellectual ability. If that uncertainty were confirmed in people's minds, it could be dangerous for the market."