Cutting Out the Red Tape for Small Businesses The Obama administration's new effort to trim inefficient practices and wasteful spending might help small businesses the most.

By Diana Ransom

Opinions expressed by Entrepreneur contributors are their own.

Cutting Out the Red Tape for Small BusinessesNow here's a ribbon cutting event that even typically skeptical small-business owners can get behind: The federal government is cutting reams and reams of red tape.

In an effort to ferret out wasteful spending and streamline processes, federal agencies from the Environmental Protection Agency to the Small Business Administration to the Internal Revenue Service yesterday proposed their final regulatory reform plans. All told, the moves, which have been in the works since January when President Barack Obama first called for the initiative, are projected to save U.S. taxpayers more than $10 billion over the next five years.

While obviously helpful for reining in costs at a time when the national budget is so top of mind, the move is seen as a boon for small businesses, in particular. Here are just three regulations that are seen as onerous to small businesses, along with the respective agency's proposed reforms:

  1. Adopting a single, electronic lender application for loan programs.
    According to the SBA's final plan, providing a single e-application for all 7(a) loans could reduce the paperwork burden on lenders, which in turn impacts small business borrowers. And the measure could result in greater lender participation, particularly among small community banks, credit unions and rural lenders, says the SBA. Further, the e-application could help reduce the rate that applications get rejected and improve the timeliness of delivering loan approvals -- thereby speeding up the delivery of loan proceeds to small businesses.
  2. Clarifying the way export products are classified.
    The Commerce Department's Bureau of Industry and Security is offering to revamp how companies identify and classify their export products and services. By basing product classifications on objective, physical criteria exporters can more easily determine their items' classification, which in turn helps determine if a license is required and cuts down on the time it takes to start exporting. Clearer standards will reduce uncertainty, increase predictability and better facilitate lawful trade, said the Commerce Dept. in its final plan.
  3. Expediting payments to small-business contractors.
    The Department of Defense plans to issue a new rule that expedites payments on contracts to as many as 60,000 small businesses. By extending to small businesses a payment policy that used to only be available to "disadvantaged" firms, owners working with the Defense Dept. will be able to receive payments quicker -- after invoices are received and before the normal payment due dates. Accelerating payments to all small businesses improves their cash flow and removes some of the burden of obtaining extra financing, according the final plan from the Defense Dept.

"This is definitely a positive step," says Molly Brogan, a spokeswoman for the National Small Business Association in Washington, D.C. "We've been supportive of the President's goal of reducing the burden on small business and easing regulation where appropriate."

Still, Brogan and other small business advocates aren't entirely convinced. They note that new and prospective rules and regulations could wind-up undermining the benefits of the administration's latest effort.

The Dodd-Frank financial reforms and the healthcare overhaul, for instance, are often cited as contributing new costs for businesses. Similarly, a proposed rule from the National Labor Relations Board, which would expedite union election campaigns, and the Department of Labor's persuader rule -- requiring greater disclosure on consultants hired by businesses during a union campaign -- might also force added burdens on businesses, says Brogan.

Cass Sunstein, the Administrator of the Office of Information and Regulatory Affairs, discounted those critiques. According to the Office of Information and Regulatory Affairs, regulation costs were higher in 2007 and 2008 than they were in 2009 and 2010, says Sunstein who is leading the regulation-reform charge. "Many people are focusing on the cost of new regulations, and so are we."

Will your business benefit from the federal government's effort to trim inefficiencies? Let us know how in the comments section below.

Wavy Line
Diana Ransom is the former deputy editor of

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