Where Do You Stand?

Some say the new administration isn't exactly oozing with support for new start-ups; some say help is on the way. So what's the truth?

For the past six months, the nation has been on a financial roller coaster that has sent destructive tremors rolling throughout the economy. Consequently, small businesses have found it almost impossible to secure risky venture capital, and even bank loans have plummeted. Business bankruptcies are inching up, and unemployment is seesawing. In manufacturing alone, the Bureau of Labor Statistics reported a monthly loss of 124,000 jobs in May and a total of 675,000 positions gone since July 2000. And that's just one industry.

In the past, laid-off workers in a tight job market have turned to entrepreneurship, but according to the "Challenger Job Market Index," a quarterly survey released by Challenger Gray & Christmas Inc. in April 2000, only 8 percent of discharged managers and executives started their own businesses in the first quarter of 2001. This is in sharp contrast to past downturns, when start-up activity thrived. In the first quarter of 1991, for example, 18 percent of discharged managers and executives started businesses.

Can the new administration pump up this lackluster start-up activity? That remains to be seen. So far, the Bush Administration's small-business agenda has primarily clung to tax cuts as the cure-all for entrepreneurial firms. "The tax relief plan will increase cash flow of small businesses, giving folks more resources to buy more equipment and hire more workers," said George W. Bush during a speech at the White House to small-business owners in March.

Under the Economic Growth and Tax Relief Reconciliation Act of 2001, which took effect July 1, the top tax brackets (28, 31, 36 and 39.6 percent) will be reduced 1 percentage point annually until 2006; the top level will also decrease an additional 1.6 percent. At that point, the rates will be 25, 28, 33 and 35 percent.

But beyond cutting taxes, entrepreneurs are still waiting for a definitive small-business agenda from the Bush administration. "We don't necessarily see the same level of support for micro and very small businesses under Bush that we saw with Clinton," says Bill Edwards, executive director of the Association for Enterprise Opportunity (AEO), a nationwide umbrella organization for microlending agencies. "However, I will say we're working very hard with the administration. There are a lot of signs that have been quite positive. I believe part of it is an education process, and we're involved in that with members of the administration."

"We don't necessarily see the same level of support for micro and very small businesses under Bush that we saw with Clinton."

Edwards points to the implementation of the PRIME (Program for Investment in Microentrepreneurs) Act as an example of how the AEO's educational efforts are making headway. Although initially signed into law in November 1999, PRIME wasn't funded until late 2000, says Edwards-and when the new administration took office, a freeze was placed on disbursement of the $15 million allocation. But with the help of the AEO, that money is now seeing the light of day: "We worked very hard to reach out to the Democrats and Republicans in Congress who had supported the legislation and [we] got the money released," says Edwards.

And that funding means training and technical assistance for disadvantaged microentrepreneurs as well as strengthening of the organizations serving these budding business owners. The net result of the additional funding is that the agencies that win the grants will be able to increase the number of people served and the areas they serve, says the SBA.

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This article was originally published in the July 2001 print edition of Entrepreneur with the headline: Where Do You Stand?.

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