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US small businessMinority-owned startups face extra hurdles – Senator Ben Cardin wants to helpThe Maryland senator is working to pass three bills that would support minority entrepreneurs Gene Marks@ More
Isabella Guzman is the new administrator of the Small Business Administration (SBA). And she’s got a long-term problem.No, it’s not about pandemic loans or the bottleneck in disbursing grants under other stimulus initiatives. It’s not even about catching fraudsters or approving applications. She has these problems of course. But that’s not the long-term problem.Guzman’s long-term problem has to do with awareness.“The SBA has always been the best kept secret in government, and we don’t want to be that,” she told me in a recent podcast interview. “We want to be known.”Right now most small business owners I know are only aware of the SBA because of the media attention received – both positive and negative – by being the middleman for various stimulus programs. But those programs are going to end this year. So what happens after that? What’s next for the SBA?For years, the department has struggled to get the word out about its services. And there’s no question that the SBA has many services to offer small businesses well and beyond dolling out loans and grants.“We know that government can be hard to navigate, and we’re trying to simplify our processes,” Guzman says. “Our customers are small businesses owners who have to wear so many hats and have so many responsibilities and need a team behind them.”What kind of team? There are the Small Business Development Centers, a network of free consulting agencies generally tied to colleges and universities which use professors and grad students as resources to help small businesses create business plans, do market research and evaluate technology. Or there’s Score, a long time, SBA-linked association of “retired” small business experts and owners who provide wisdom and advice at no charge. The SBA also has a myriad of educational programs and customer assistance resources that can help small businesses get government contracts or just better manage cash flow.Then there are the many guaranteed loan programs the agency offers through its lender network that can provide millions of dollars of working capital and other financing opportunities to buy property and equipment for small businesses who otherwise would not be able to fulfill normal banking requirements.And yet, when I ask my clients – who are mostly established firms – about the SBA I usually get blank stares. These clients aren’t aware of these options. They don’t realize they can get free consulting from university professors and retired CEOs or bank loans from lenders that wouldn’t ordinarily lend to them. Even the business owners I know operating in low- to moderate-income areas aren’t aware of the special services and funding available specifically for them. Or the more than a hundred women’s business centers throughout the country specifically devoted to the needs of female entrepreneurs.Why not? It’s awareness. The SBA has an opportunity to leverage the enormous PR it received during the pandemic and use it to make more businesses aware of all that it does. So how does administrator Guzman plan to do this?“We’re going to be looking at all of our programs completely and trying to apply a customer-first and technology forward approach as well as an equitable approach,” she says. “We intend to make sure that we’re meeting businesses where they’re at in their current situations and providing products and services that can best help them grow.”Specifically, that means hiring better and brighter people for her organization (“like Nasa” she says), increasing their partnering outreach to government departments, local organizations and chambers of commerce, and focusing on issues that are top of mind for many business owners, such as exit strategies.“Our small business development centers in particular are training up on ESOPs (Employee Stock Ownership Plans) and other types of alternatives for exit strategies,” Guzman says. “We know that it’s a big challenge to sell or hand down a business and we don’t want those businesses to disappear.”Finally, Guzman plans a greater reach out to communities of color and other areas where discrimination and lack of education is holding back on their opportunities. Her goal is to prevent “barriers from limiting entrepreneurship” and “to make sure that every type of entrepreneur from all backgrounds have the opportunity to pursue their dream of small business ownership”.Will the SBA be able to leverage its notoriety from the pandemic into a message that enables more small business owners to take advantage of all the resources it provides? Other administrators have tried this in the past, with mediocre outcomes. But Guzman has a chance right now to increase capitalize on what her agency has done in the past and make more business owners aware of the services it can provide in the future. Let’s hope she succeeds. More
Three bills are working their way through Congress that can provide significant help for small businesses. Do you know what they all have in common? Welcome signs of bipartisan support for small business.The first is the 504 Modernization and Small Manufacturer Enhancement Act of 2021. This bill, which passed the House in mid-April and is awaiting a Senate vote, is designed to make the Small Business Administration’s (SBA) 504 Loan Program more accessible to manufacturers through certified development company (CDC) intermediaries. The manufacturers would be able to apply for the funding – which can be as much as $6.5m – if they can show that funds will be used for energy efficiency or aid in the revitalization of a disaster area. The bill increases the loan amount available for small manufacturers and relaxes some collateral requirements, as well requiring the SBA to provide training.Why is this bill important? Because it directs capital to manufacturers and leverages the underused CDCs. “Too many people are not as familiar with institutions like certified development companies,” says the Democratic representative Sharice Davids, a co-sponsor of the bill. “But they have a really great track record of servicing and helping small businesses who are either unbanked or underbanked.”Next is the Opportunity Zone Extension Act. Sponsored by the Republican representative Tim Burchett, this bill was introduced in the House in February and awaits a vote. It extends for two years the election and capital gain deferral periods for qualified opportunity zones (defined as an economically distressed community where private investments, under certain conditions, may be eligible for capital gain tax incentives).The bill incentivizes investments in small companies located in areas that need it the most. “If people don’t invest, the property falls into disrepair,” says Burchett. “But if there’s investment then jobs can be created, there’ll be more encouragement for further investments. I just think it’s a winning opportunity for our rural America and our inner-city America.”Finally, there’s the Microloan Transparency and Accountability Act of 2021. Passed in the House in September 2020 and re-introduced this year, the bill establishes a 5% technical assistance grant for certain financing intermediaries, including intermediaries who make 25% of their loans to rural small businesses.“It just really helps ensure that the Small Business Administration (SBA) gives rural small businesses access to micro loans,” Burchett, who also sponsors the bill, says. “I just don’t feel like people should be overlooked because of their location or maybe the color of their skin or the region that they grew up.”The bill also requires the SBA to report certain metrics related to the disbursement of microloans to small businesses.Yes, these bills all help small businesses – particularly small manufacturers, businesses in low to moderate income areas and rural companies – get more funding from the federal government. But there’s a bigger thing that these bills have in common: they’re very, very bipartisan.For example, the 504 Modernization and Small Manufacturer Enhancement Act of 2021 is co-sponsored by five Republicans (including Burchett) and three Democrats. The Opportunity Zone Extension Act has nine Republicans and two Democrats signed on. The Microloan Transparency and Accountability Act of 2021 has three Republicans and two Democrats on board.Unfortunately, these bills don’t get much media attention because they’re not headline-worthy. But for many small business owners, their passage could mean the difference between growth and stagnation, survival or demise.So, yes, political infighting makes a juicy story. But behind the scenes, there are some issues that both parties can agree on and one of those issues is supporting small businesses. More
Sign up for the Guardian’s First Thing newsletterJoe Biden stopped by a unionized, Black-owned flooring company in the battleground state of Pennsylvania on Tuesday to highlight how the provisions of his $1.9tn coronavirus relief package will help lift small businesses hurt by the pandemic, part of a cross-country campaign to promote the first major legislative achievement of his presidency.During his visit to Smith Flooring Inc, located in the Philadelphia suburb of Chester, Biden said the sweeping new law was a “big deal” and promised the owners: “More help is on the way – for real.”“We’re gonna be paying our employees,” James Smith, who co-owns the business with his wife, Kristin Smith, said of their plan for the relief checks. “We’ve been paying them. Since the first run of PPP, we decided we wanted to take that money and not lay anyone off. We put everybody in a group and said, ‘Look, we’re gonna do this for you as a team, we’re gonna get through this together.’”Biden’s visit to Smith Flooring, in a state he clawed back from Donald Trump in 2020, was his first stop on the White House’s “Help is Here” tour and comes a day after Biden announced that his administration was on track to mark two key milestones in the coming days: delivering 100m Covid vaccinations since his inauguration – far outpacing his initial promise to administer those doses in his first 100 days – and distributing 100m stimulus checks to Americans.The tour includes Biden, Kamala Harris and their spouses, Jill Biden and Doug Emhoff. Later this week, Biden and the vice-president will visit Georgia, another swing state that he narrowly won in 2020.During the visit, Biden explained how his plan would help small businesses like Smith Flooring, which saw its revenue fall by roughly 20% during the pandemic, according to the White House. The flooring company recently qualified for a federal Payment Protection Program (PPP) loan under an action taken by the president targeting businesses with 20 or fewer employees.Biden’s plan, one of the largest emergency aid packages ever enacted, will provide $1,400 direct payments to most Americans, send $350bn in aid to state, local and tribal governments, dramatically expand the child tax credit and spend tens of billions of dollars to accelerate Covid-19 vaccine distribution and testing.“Shots in arms and money in pockets,” Biden said in brief remarks on Tuesday. “That’s important. The American Rescue Plan is already doing what it was designed to do: make a difference in people’s everyday lives.“We’re just getting started.”Alawi Mohamed, the owner of a commercial strip in Chester, said the first loan given in last year’s coronavirus relief package had helped him stay afloat, but he was hoping Biden’s plan would give him a much-needed boost.“Everybody got affected by Covid-19. When they shut down everything, we got affected big time. Nobody was around and people were actually staying home,” he said. Now he said, he is “back to business, gradually, but everything came out good”.Also on Tuesday, Biden introduced Gene Sperling, a longtime Democratic policy aide, to oversee the implementation of the $1.9tn package.Democrats are increasingly confident that the stimulus package will boost their prospects in 2022, when they will attempt to keep their slim majorities in both chambers of Congress despite a long history of the president’s party losing seats during the congressional midterm elections.Every Democrat except one House member voted for the bill while Republicans unified against it.Republicans have attacked the plan as bloated, filled with liberal priorities that run far afield of the coronavirus response. But Democrats argue that the package will lift the nation from the dual crisis by rushing immediate aid to those hit hardest by the economic downturn and help ensure a more even recovery. They also say it will go further to tackle deep-seated economic inequalities, halving child poverty and expanding financial aid for families squeezed by job loss and school closures.Polling has consistently found that Americans favor Biden’s stimulus plan. According to a new CNN/SSRS poll released this week, 61% of Americans approve of the coronavirus relief package, while 37% oppose it.Haunted by their lashing in the 2010 midterms, Democrats now believe that they didn’t do enough to promote their sweeping stimulus package, shepherded by the new Obama administration and passed by Democratic majorities in response to the financial collapse.The House speaker, Nancy Pelosi, has touted the package as among the most consequential bills of her decades-long career, putting it on par with the Affordable Care Act. In a letter to colleagues after the bill was signed, she urged members to hold tele-town halls and send informational literature to constituents to explain how the bill could benefit them and their families.“We want to avoid a situation where people are unaware of what they’re entitled to,” Harris said during her visit to a culinary academy in Las Vegas on Monday. “It’s not selling it – it literally is letting people know their rights. Think of it more as a public education campaign.” More
Thanks to the stimulus programs, there are now five ways small can save big on their taxes in 2021 … and even get money back.The signing of the American Rescue Act this week means that more than $5tn has been spent on stimulus programs in the US to fight the economic impact of the Covid pandemic. A significant amount of this money has been earmarked towards funding small businesses, such as the paycheck protection program and the economic injury disaster loan program. However, all of the stimulus programs contained generous tax incentives that can not only save business owners a significant amount on their taxes in 2021, but also provide additional funding. Here are five that every small business owner should be considering.Employee retention tax creditThe employee retention tax credit is one such tax incentive. The credit was initially part of the March 2020 Cares Act and has been extended through 31 December 2021. To be eligible for the credit for any quarter in 2021 a business must show that it has been partially or fully shut down or experienced a revenue decline of more than 20% that quarter compared with the same quarter in 2019. If eligible, then the business can take a credit of up to $7,000 per employee per quarter based on their wages against their employer payroll taxes owed.The big deal is that if the credit is larger than what’s owed, the business can get the difference back in cash. The credit is also available to businesses that participate in the paycheck protection program, although wages used for forgiveness cannot be used to calculate the credit. The criteria for claiming the credit in 2020 are different but businesses owners can still apply to do that. All of these calculations are done on a company’s quarter federal tax returns.Families First Coronavirus Response Act tax creditAnother tax benefit has to do with the Families First Coronavirus Response Act (FFCRA). This legislation predated the Cares Act in 2020 and required employers to compensate their employees if they had to take time off because they, or their family members, were affected by Covid. This includes having to stay home to supervise their children while they attended virtual classes. The act provided for a tax credit where the business owner could claim money back on their federal payroll tax returns for the wages they were required to pay.The FFCRA is now voluntary in 2021. But for those employers that do continue to offer these benefits – which now includes time off to get vaccinated or to recover from any effects of vaccinations – the credit is still available and has been extended through September.Cobra tax creditCobra – or Continuation of Health Coverage – is a federal law that requires employers to make health insurance available under their corporate health plans to employees for a certain period of time who lose their benefits because of layoffs or reduced hours of employment. The idea is that people don’t lose their health insurance if they lose their jobs, but they do have to pay.In a new provision, the American Rescue Plan now fully subsidizes for the continuation of Cobra benefits for employees from April through September and offers a tax credit for employers who continue to pay for the health insurance premiums on behalf of their laid-off employee.Carryback of lossesThere is another big benefit for companies that lost money in either 2020, 2019 or 2018.Thanks to the Cares Act – and subsequent stimulus bills which kept this rule in place – companies that lost money those years can, for one time only, carry back those losses for up to five years. Which means that if a business paid taxes in the past, those losses would reduce what was owed and therefore a company would be due the money back. Normally tax rules don’t allow this kind of carryback but this year is an exception. We’re telling our clients to amend and file their corporate returns as quickly as possible in order to start the refund process, which takes an average of six weeks.Work opportunity tax creditThe National Federation of Independent Businesses reported this past week that 40% of their surveyed members had open jobs to fill and another 56% of owners reported hiring or trying to hire in February, up five points from January. These numbers are likely to increase significantly over the next few months as the economy recovers. The good news is that a big tax credit related to hiring has been extended through 2025.It’s called the work opportunity tax credit and it provides a credit on income taxes due for any employer that hires a veteran, someone off of welfare or – more timely – a worker who has been unemployed more than six months. It could be an enormous tax benefit for those employers who take advantage. Some of my clients are calculating this credit in advance before a hire and then using it as a signing bonus to help them better compete against others seeking talent.Clearly there are significant tax benefits – many which include cash refunds – for small business owners who choose to take advantage of them. My smartest clients are already talking to their tax advisers and getting help. They know that these benefits are short-term. They also know that leveraging them could provide much needed funds to help them navigate to, and through, the post-pandemic recovery. More
US small business
My election advice to small businesses? Let your people vote
Gene Marks
About 100m registered voters did not cast a ballot in 2016, many citing lack of time. We can help More
Now that the paycheck protection program (PPP) has ended, there’s a new story evolving. It seems like millions of dollars meant to prop up small businesses were fraudulently received by a bunch of bad people. Surprised? Not if you run a small business.In a press conference this week, acting assistant attorney general Brian Rabbitt announced that the Department of Justice has already charged 57 people who were trying to steal approximately $175m from the program. “The money these defendants stole was taxpayer money,” Rabbitt said. “Every dollar received was a dollar drawn from the American people’s account. Even worse, every dollar they took was a dollar we had set aside to help our fellow Americans weather one of the worst national crises in recent history. As we allege, these defendants tried to steal these funds for themselves.”The cases are something out of The Wolf of Wall Street. There’s money stolen to pay for Rolls-Royces, luxury yachts, homes and visits to strip clubs. A group in South Carolina is accused of laundering PPP money through casinos and probably using some of it to pay for heroin and methamphetamines. The Washington Post reports that an NFL player was charged with fraudulently using PPP funds to pay for Gucci and Dior items. Politico says that Rolex watches, Lamborghinis and a $3,750 diamond pinky ring were among the items confiscated from alleged abusers of the program.My goodness, who knew? Oh, that’s right. I knew. You knew. We all knew.Of course there was fraud. Anyone who applied for a PPP or an economic injury disaster loan knew this was going to happen. I have countless clients who mentioned to me just how easy it was to get approved for these grants and loans. Any business owner who claimed they were “affected” by Covid-19 could get relief, regardless of whether they were truly affected now or just worried about the future. “I could’ve told the bank anything,” one client said to me. “They didn’t care. My banker just told me to get the paperwork in and I’ll get my money.”Waiting around for government bureaucrats to come up with detailed rules and procedures would have cost much, much moreBut despite these very real scandals these government programs worked. Millions of loans were extended to small businesses that really needed them. Billions of dollars were made available – quickly – to keep many companies afloat, or at the very least provide them with a cushion to operate through these very unprecedented times.The fraud – hundreds of millions – sounds like a lot. But as a percentage of the overall program it’s probably no more or less than what my allowance is for overdue invoices that will likely not be paid. Could the fraud have been less with better policies? Sure. But waiting around for government bureaucrats – secure in their jobs – to come up with detailed rules and procedures would have cost much, much more.Of course, the political show will continue. Democrats will accuse Republicans of wasting taxpayers’ money. Republicans will argue that their actions saved the economy. Investigators will root out more celebrities and one-percenters who took advantage and present them on a platter to a hungry media looking for a tasty story.But there are bigger fish to fry … like propping up a very damaged economy. And let’s also hope that this finger-pointing circus doesn’t stop Congress from doing another round of PPP or some other type of stimulus for those businesses that really need it. Because many businesses really, really do need it. More
US small business
Are US small businesses ‘gone forever’? No, not all of them
Gene Marks
If there’s one thing I’ve learned about small businesses it’s that you can’t just lump them all together to support a narrative, be it moral or political More
