Posts Tagged ‘Business’

Crippling 1099 Change Slipped into Law

Tuesday, May 25th, 2010

What happens when you pass a 2,409 page health care overhaul bill into law? All kinds of terrible things. No, this is not a post about the merits of the health care “reform” that the Democratic Congress and our President force fed to the American people. Instead, this is a perfect example of why Americans should just tell their elected representatives, “No!” anytime they want to pass legislation into law weighing in around twenty pounds  and containing more pages than the Bible.

See, invariably, when that many pages is included in a law, it’s going to do a WHOLE LOT MORE than it is purported to do. It’s going to do things that have absolutely nothing to do with its stated purpose.  Case in point, let’s look at one of the non-healthcare aspects of this new law with which we’ve all been sadled:

An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork.

Section 9006 of the health care bill — just a few lines buried in the 2,409-page document — mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

The full negative impact of this new burdensome regulatory burden on the business community will go into effect in just 18 short months. As a small business owner, I can unequivocally tell you this will be a truly devastating and production draining practice on America’s business community. A compliance demand by our federal government that will only serve to increase overhead expenses for every businesses – from the struggling artist to the multinational behemoth –  without adding the least bit of value.

Those of you that own or operate a small business already know how difficult it can be to stay afloat and compete in today’s economy, especially during tough times. Besides the regular day-to-day operations, there are all kinds of fees, taxes and other regulatory burdens that make doing business a challenge.

Can you imagine having to track and tally every single business purchase you make throughout the year and send 1099 forms to all of them? How about having to collect names and taxpayer identification numbers from every vendor or payee that you dealt with? Can you imagine how long it would take on the phone with Wal-Mart customer service to try to obtain the company’s tax ID? Multiply this by the other five hundred companies you do business with, and you start to get an idea of the new burden this is going to place on small businesses across America.

It’s going to take a whole lot more time to comply with these rules, and many small businesses will probably have to hire someone full-time just to take care of it all. The additional expense will either further strain companies who can take the hit (which will just drive up prices for consumers) or force them out of business. But no matter how you look at it, it’s a lose-lose situation for American businesses.

If you’re in business, now would be a good time to let your elected representatives – from county officials to the White House –  know that this is a bad regulation for America. It’s also a good wake-up call for every American.  The Democratic Congress and our President have encore performances of the healthcare sized legislation in the works. They’re eager to push financial “reform” and climate change  bills.

Well, I think its time to pass a new law. Simply stated,  if a bill is longer than the Constitution of the United States, it doesn’t even get printed – let alone come up for a vote.

The Big Against the Small Continued

Thursday, April 15th, 2010

I’ve noted time and time again that a change has occurred in America that is quite unsettling.  The dynamic shift that concerns me is the alignment of big business and big government interests against those of small businesses and individuals. Now, maybe this has always existed, but I don’t think so – at least not to the level that is currently evident.

It used to be that government interests (tax collection and regulation) were contrary to the majority of business and individual interests, but this has now changed.  What has emerged is a return to days of old (i.e. landed aristocracy and ruling monarchs indenturing the masses and suppressing entrepreneurship).  Consider that “too big to fail” businesses are now encouraging increased taxation and regulation that will:

  1. stifle competition from upstarts with regulatory barriers to entry
  2. burden potential challengers with profit draining regulation
  3. create new revenue streams by artificially increasing costs of individuals (think cap and trade)

The latest evidence of this trend is the new compliance focus of the IRS:

A new study by the Transactional Records Access Clearinghouse (TRAC) shows that despite a growing federal deficit, IRS audit efforts aimed at the nation’s largest corporations have precipitously declined in the last few years and now are at an all time low.

According to Dean Zerbe, alliantgroup National Managing Director and former Tax Counsel on the Senate Finance Committee, “As if April 15th isn’t frightening enough for small business owners, now comes news that the IRS has increased audit hours for small and medium businesses by 30% over the last five years, while at the same time decreasing the number of hours spent auditing large corporations by 33%.”

Keep in mind, that taxpayer bailouts went to the largest of corporations.  Those same corporations are now reaping the rewards of free money:

For 2009, the Fortune 500 lifted earnings 335%, to $391 billion, a $301 billion jump that’s the second largest in the list’s 56-year history, approaching the increase in the robust recovery of 2003. 

Yet, this taxpayer investment into corporate profits has nothing to do with creating jobs for Mr. and Mrs. Taxpaying America.  In fact, the opposite has held true:

The number of Americans filing for unemployment insurance for the first time jumped for the second week in a row, according to government data released Thursday.

There were 484,000 initial jobless claims filed in the week ended April 10, up 24,000 from an unrevised 460,000 the previous week, according to the Labor Department’s weekly report. 

 And, it’s not just jobs that continue to disappear. Those losing their homes also continues to increase:

In the first three months of 2010 foreclosure filings rose 7%, to more than 930,000, compared with the previous quarter, according to the online foreclosure marketing firm RealtyTrac. That is a 16% jump over the first three months of 2009.

Foreclosures started off the first quarter with modest gains but spiked in March to a record 367,000 filings. Plus, nearly 258,000 of those filings were for bank repossessions, the highest quarterly total RealtyTrac has ever reported.


This is not good for America.

Job Killing Legislation Needs Immediate Fix

Wednesday, March 24th, 2010

Yesterday I had reason to communicate with our New Mexico Congressional delegation, or at least try to do so.  No, I wasn’t sending a note about the recently signed 2,000 page Healthcare bill. Instead, my request had to do with the actual number one concern of the vast majority of Americans – the economy and jobs.

I was asking them to fix a flaw in Section 31(b)(2)(B) of the Small Business Act to clarify and confirm contracting officers’ discretion to treat SBA’s programs equally.  The problem has to do with replacing the word “shall” with the word “may” in the referenced legislation.

Seems relatively simple, right? Well, Congress has been failing to act on this relatively simple correction for nearly a year and half despite the fact that even HUBzone advocates have long been onboard with the fix:

Even some strong HUBZone advocates agree with the proposed change of wording. In July, Rep. Roscoe Bartlett (R-Md.), co-chairman of the HUBZone Caucus, said the small business categories should be treated equally. 

The lack of action on that one little word, or on the one line bill introduced by Rep. Wally Herger (R-Calif.), is at the center of a recent Federal Court decision that threatens to single-handedly do the following according to a recent communication from the SBA:

  • Potentially undermines program opportunities for socially and economically disadvantaged, SDVOSBs and WOSBs.
  • Substantial federal contracting dollars potentially will NOT go to non-HUBZone 8(a) (socially and economically disadvantaged small businesses), SDVOSBs, or WOSBs. 
  • Based on contracting data for FY2008, $29.3 BILLION went to SDBs (of which $16.2 BILLION went to 8(a) firms); $14.7 BILLION to WOSBs; and $6.5 BILLION to SDVOSBs.  
  • The Court’s reading of the Act, if applied to other procurements, could re-direct to HUBZone firms tens of BILLIONS in federal procurement dollars currently spread across small businesses, including HUBZone, 8(a), SDVOSBs, and WOSBs. 
  • An absolute HUBZone preference could have a devastating economic impact upon thousands of non-HUBZone 8(a), SDVOSB and WOSB firms that currently participate in government contracting, and the hundreds of thousands of jobs they provide. 
  • This could cause a flood of protests in any non-HUBZone procurement, paralyzing the procurement process and making litigation-avoidance a primary contracting objective.

    And, if you think this is an exaggeration on the part of the SBA, think again. Click here, and you’ll see that the impact of this job crippling legislation is already having an effect with contracts worth millions being canceled or needlessly delayed. Now as a disclaimer, I have to acknowledge that I have a personal stake in this as I own a recently certified 8(a) firm that might be impacted by this lack of action by Congress.

    As such, I have a reasonably in-depth knowledge of the different set-aside programs.  My company is small enough that I could just move it into a HUBzone, make sure that 35% of my employees live in a HUBzone and seemingly call it a day.  But, it’s not that simple.  It took over 14 months, hundreds of hours and nearly 500 pages of paperwork to get 8(a) certified.

    The HUBzone certification process is just as onerous. I have a friend who owns a one-man business which he operates from his house in a HUBzone here in New Mexico, and nearly a year into the process he has still not been certified. Worse yet, the HUBzone program was crippled because of widespread fraud uncovered by the GAO.

    Now, the timing of this court decision is critical. In about a week’s time, we will enter into the last two quarters of the federal fiscal year. This is the time that agencies start getting a significant number of their contracts out the door. The impact of this court decision, and the failure of Congress to act to correct the parity issue, is going to cause wide-spread confusion and delay in the award of those contracts.  In other words, it is going to further devastate the small business sector and cause jobs to not be created or worse yet cause additional jobs to disappear.

    It’s for this reason I tried to reach out to our congressional representatives yesterday via email.  Interestingly enough, you’ll notice on their websites that if you try to email our congressional delegation via their House websites, your only option is to use an online form.  The problem is, if your address is out of their district, the form rejects your submission.

    Considering the fact, that I’m a small business owner who is currently bidding on projects in all three congressional districts as well as other states that could provide jobs for their constituents, you’d think they would want to hear from me regardless of where I live in New Mexico.

    As a final note, take a moment to think about how one word in legislation passed in 1997 can devastate thousands of businesses over a decade later.  Then, factor in how difficult it is to get that one word fixed, and you’ll understand why 2,000 pages of life and death legislation pushed rapidly through Congress (i.e. the new healthcare laws) are so dang scary.

    Compliance Trumps Jobs as Governmental Priority

    Monday, February 22nd, 2010

    There is well reasoned analysis out there that the high unemployment numbers we are currently experiencing might be with us for some time:

    The unemployment rate hit 10 percent in October, and there are good reasons to believe that by 2011, 2012, even 2014, it will have declined only a little. Late last year, the average duration of unemployment surpassed six months, the first time that has happened since 1948, when the Bureau of Labor Statistics began tracking that number. As of this writing, for every open job in the U.S., six people are actively looking for work.

    All of these figures understate the magnitude of the jobs crisis. The broadest measure of unemployment and underemployment (which includes people who want to work but have stopped actively searching for a job, along with those who want full-time jobs but can find only part-time work) reached 17.4 percent in October, which appears to be the highest figure since the 1930s. And for large swaths of society—young adults, men, minorities—that figure was much higher (among teenagers, for instance, even the narrowest measure of unemployment stood at roughly 27 percent). One recent survey showed that 44 percent of families had experienced a job loss, a reduction in hours, or a pay cut in the past year.

    So, it is kind of interesting that federal and some state governments are more interested in “catching” businesses in a worker misclassification game to fill government coffers than making sure that people can work and feed their families.

    President Barack Obama‘s proposed 2011 budget suggests tough times ahead for employers who rely heavily on independent contractors in order to keep down labor costs.

    If the budget is approved, the Internal Revenue Service will add 100 new enforcement personnel as part of a $25 million plan to crack down the misclassification of workers as independent contractors.

    When you consider that 50 percent of jobs created during the economic recovery are contingent labor, you quickly see that a Catch-22 situation is unfolding.

    Of course, many of the businesses that are able to survive the recession are also smart enough to quickly assess the forthcoming penalties and make employment decisions based on those pending government regulations.  Those decisions will be in the best interest of the business and its current employees, but will do nothing to put out of work Americans back to work:

    And our associates voted to schedule 50-hour workweeks rather than hire new associates — even if it means working five 10-hour days or maybe even working on Saturdays when needed. We’re just not going to hire right now because we don’t know what’s coming next. We hope something will be made clearer in the next 90 days as our country focuses on what is necessary to create jobs in America. Then we can re-evaluate our decision.

    Put yourselves in the shoes of the tens of millions of Americans struggling to keep their families fed and housed.  Now, think what this crackdown will mean to them.  Instead of earning a living, they will be forced to remain on the public dole or worse, so that tax collectors can go after those that are trying their hardest to survive.

    Explaining it Another Way

    Wednesday, February 10th, 2010

    Some of you, actually just one person, likes to take me to task time and time again for standing up for small business and insisting that the proposed gross receipts tax and income tax increase negatively impact those most likely to actually help the economy rebound by creating new jobs. This individual argues that a couple of hundred dollars more in taxes really shouldn’t be a big deal to a business making $200,000 in profit. But, nothing could be further from the truth.

    First, let’s consider the environment in which these tax increases are being pushed:

    Please note that no efficiencies to government bills have been adopted and no true cuts to the budget have yet to be made, however tax increases on the private sector are being considered.  Unemployment in our state is at a 22 year high, and our focus must be on job retention and creation. 

    That’s the current reality spelled out in a recent communication from the Association of Commerce and Industry (ACI).  Mind you, no efficiencies or true cuts are being made even though we know at a bare minimum there are $129 million in cuts that could be easily made. We also know that the despite all of the hype, government stimulus money did not create new jobs.  At best, it may have saved some public sector jobs.

    We also know that big business isn’t adding to their employee roles. So, that leaves small business to come to the rescue. Only someone who has never run a business could argue, “What’s $500 in additional taxes?” They’ll smugly try to make the case that $500 is not enough to put someone on the payroll. But, that’s because they think jobs are added in the private sector in the same manner as they are in the public sector.  They are not.

    In the government arena, if you want to add a $40K a year employee, you have to raise $40,000 a year in addition taxes. In the small business sector, a $500 investment could very easily result in a $120,000 to $240,000 in new salaries.

    Let’s explore this a little further with a real life example.  Last week, I spent $500 in travel expenses to meet potential customers for a new and innovative technology.  The meeting went very well. If the deal is closed it will result in a contract that could easily be worth $1M or more.

    New people will be added to the payroll to fulfill the contract. They will have paid benefits and won’t need to be supported by the state. The $500 that was not collected in taxes will likely save the state (i.e. taxpayers), tens of thousands of dollars in the form of unemployment benefits that will not have to be paid.  In fact, these wage earners will pay state income and gross receipts tax far in excess of the $500 in additional taxes on my business. If they get to keep their house because they are once again gainfully employed, they will also pay property taxes.

    Now, let’s go back to the scenario being pushed in the legislature. They want to take another $500 (or more) away from small businesses. This is a zero sum game. My business has a budget. If you pull $500 from it in the form of additional taxes that money has to come from somewhere. Due to the tight credit market, it can’t come from my retained earnings.  Nor, can it come from any line item that will keep me from fulfilling my current obligations.

    So, that means it will come from marketing dollars. It might be one less trip I can take to market my business. Or, maybe ten or more marketing lunches that can never be scheduled. Or, a critical conference that has to be passed up.

    Those are all possibilities. The one undeniable fact is that it it will be four, five or a dozen jobs that will never happen because elected officials refused to do the right thing and cut unnecessary spending.

    Is Monday the New Sunday?

    Monday, November 16th, 2009

    This is a decidedly unpolitical post, but a thought struck me over the weekend that I think is worth consideration. Maybe the attention given to Rupert Murdoch’s recent decision is what caused the thought:

    Is Rupert Murdoch bluffing? Making a bold high-stakes gamble that will save the troubled newspaper industry? Or pursuing a pipe dream that can only end in failure?

    The News Corp. chairman has prompted a fierce debate among media watchers with his accusation that Google is “stealing” from his vast newspaper empire and his threat to block the search engine from accessing its content.

    Personally, I don’t see this strategy working. There are just too many sources of information. Basic information have become commodities (i.e. weather, sports scores, classifieds, catastrophes, etc). Does that mean news organizations are going to go away? I don’t think so. People still crave and need news, especially local news. But, as the continued closures of local news organizations have made clear, the current model is broken.

    I used to be a dead tree news subscriber. However, I haven’t been for at least two years now, but I do still peruse the Albuquerque Journal daily. Well, at least I did. Now, it’s becoming more difficult because I’m finding I’ve often “used up my sponsor pass trials for the week.” So, what do I do when I’m presented with the option to pay $60 to become a six month subscriber? Naturally, I go elsewhere to get my news fix for the day.

    See, the offer is out of sync with the action. I want to read a particular article. I don’t want to spend $60 to get access to all of the articles for six months that I’m not interested in reading. What if the ABQ Journal allowed me to pay for just that particular article? Would I do it? Probably depends on the price. But, if that article only cost me a dime to read. I’d probably do it.

    In fact, if the Journal allowed me to pay $10 for credits that I could apply toward reading articles of my choice at a dime a pop (think: iStock.com approach to news), I’d probably be all over it. After all, a dime is still a small enough amount of money for me not to think twice about spending.

    So why don’t they do it this way? I don’t know. Actually, very little about how the Albuquerque Journal approaches sales makes any sense to me. Consider for a moment that if I want to sign up for home delivery, they’ll charge me $60 for six months. But, if I want to sign up for six months of eJournal, it will cost me $76.50. Where is the logic in that? In what world does it cost more to deliver digitally than it does to deliver hard copy to my door?

    My first job when I was 12 years old was delivering newspapers. Within a few months, I became the drop captain for all of the newspaper boys in my neighborhood. This meant a couple hundred newspapers were dropped at my house every morning, and at the end of the week, after they had collected from their customers, the newspaper boys came and paid me. I had my own delivery route, plus I made a little extra for taking on this added responsibility.

    Paying a small amount weekly is an easier commitment to make. Heck, the smaller the amount the more likely we are to pay. News is an impulse buy. If you think about the heyday of the newspaper industry, hawkers selling papers on street corners for just a few cents, you’ll realize that it has always been an impulse buy.

    Consider something else…

    What’s the largest newspaper of the week? The Sunday paper, right? Yet, every online information source will tell you that attention to news drops significantly over the weekend. The next generation of news followers take a break on the weekends. Why isn’t the biggest edition of the news on Monday? Because they’re still doing business like they did in the past.

    The Albuquerque Journal better figure out what it is doing wrong and soon, or we’re going to find ourselves in a situation that the largest city of the state doesn’t have a local newspaper reporting style source of information.

    Whole Foods Absolutely Packed

    Saturday, August 15th, 2009

    First, let me say that I almost never go to Whole Foods. It’s just not close to where we live or shop. However, today our oldest had a soccer tournament right up the street from the Whole Foods on Wyoming. We were tight on time to grab lunch, so we decided to run into Whole Foods to grab a quick lunch. The place was packed. Now, I don’t think it has anything to do with the CEO’s recent stance on healthcare in the Wall Street Journal:

    While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction—toward less government control and more individual empowerment.

    However, it was also seem that threats of the demise of Whole Foods as result of Mr. Mackey speaking his mind also seem to be premature:

    Less than two days after the editorial appeared, the protest and boycott group organized on Facebook is up to more than 4,000 members, and pundits seem to be scratching their heads as to whether Mackey’s missive was a bold entrance into a polarizing political debate, or a shortsighted business blunder that will only alienate his customer base. What do you think?

    Well, I think that the people that love to shop at Whole Foods regularly will continue to do so, and I wouldn’t be surprised if the stores find a whole new clientele as a result of Mr. Mackey’s refreshing willingness to speak his mind. After all, it’s not like the guy just hired Michael Vick.

    An Observation About the Changing Paradigm

    Friday, August 14th, 2009

    For many people, Republican policy has always been seen aligned with business, and Democratic policy has been equated to big government. Now, with the Republicans out of power and the Democrats firmly in control, it has been interesting to observe the shift that is occurring.

    President Obama and the vast majority of congressional Democrats are proposing big government solutions to every problem from the economy to healthcare and everything in between. Of course, that’s exactly what was expected. What wasn’t expected, at least not by me, is that the these same Democrats are not only out there promoting big government solutions, but the big government solutions have all been crafted in a way to put the interests of big business first.

    Consider the bailouts, they have all gone to the biggest of the big businesses. The biggest banks, the biggest insurers, the biggest automobile manufacturers are the beneficiaries while the small businesses that drive our economy are left to languish with programs that are nothing but smoke and mirrors. Now, I’ve never thought of big businesses as evil empires. After all, as a small business owner, my goal is to one day become a big business. But, I’ve always been against legislation that specifically benefits one industry over another, or puts a competitor at a disadvantage.

    Yet, this is precisely what is occurring on the federal level. A recent Business Week Behind This Week’s Cover Story podcast examines the ways that UnitedHealth has been a key player in crafting the healthcare legislation, and how at the end of the day, it is the giants of the healthcare insurance industry that are going to be the big winners:

    As the health reform fight shifts this month from a vacationing Washington to congressional districts and local airwaves around the country, much more of the battle than most people realize is already over. The likely victors are insurance giants such as UnitedHealth Group (UNH), Aetna (AET), and WellPoint (WLP). The carriers have succeeded in redefining the terms of the reform debate to such a degree that no matter what specifics emerge in the voluminous bill Congress may send to President Obama this fall, the insurance industry will emerge more profitable. Health reform could come with a $1 trillion price tag over the next decade, and it may complicate matters for some large employers. But insurance CEOs ought to be smiling.

    This is a theme that is being repeated over and over since the Democrats have taken full control. However, as a result of continued economic pressures, more and more people are finding themselves being laid off from large companies. More and more people are struggling to ensure their families have the basics. The Democrats in control may talk on the stump about being the advocates for hard-working Americans, but their actions speak louder than their words:

    Missing from Washington’s health-reform discussion is a simple change that would make insurance more affordable for millions of the nation’s smallest business owners by letting them fully deduct the cost of their health insurance premiums.

    By a quirk in the tax code, self-employed workers who buy their own health insurance essentially pay an extra tax on their premiums. They’re the only taxpayers in the system who pay taxes on premiums, which count as a business expense for corporations and pretax income for employees. Because self-employed workers have no corporate employers to match their payroll tax contributions to Social Security and Medicare, they pay double the rate of wage and salary workers in a levy known as the self-employment tax equal to 15.3% of their net earnings. That’s on top of regular state and federal income taxes, and the income they spend on health premiums is not exempt.

    The nation’s 9 million self-employed—sole proprietors with few or no employees, contract workers, and freelancers—constitute about 8% of the total U.S. labor force, according to the Bureau of Labor Statistics. (The Census Bureau counts 22 million sole-proprietors, but it’s not clear how many of those may be payroll workers as well.)

    Healthcare is just one example where inequities like these exist. Right now, there is a large section of the population that is not being represented by our elected officials. There is an opportunity for leaders to emerge that represent our interests. Those leaders will find their support crosses party lines. Their supporters won’t be made up of the radical fringes of the left or the right. Their supporters will not look for big government solutions to their problems or to further their pet causes, anymore than they want big business to solve their problems. It’s time for these leaders to step forward.

    The Ugly Truth About ARC Loans

    Friday, August 7th, 2009

    The federal government under the Obama Administration and the Bush Administration before it has bent over backwards to bailout America’s largest mismanaged companies from banks to automotive makers to insurance companies to investment houses. And, when they’re not bailing out big business, they’re bailing out mismanaged states. The latter is why the vast majority of the Recovery Act dollars are being floated through states before… never mind, there is no before. The dollars are just flowing into state coffers, period.

    Now, maybe you’re thinking that small business is getting a piece of this stimulus spending. After all, you’ve heard the countless news stories about that great SBA program, the American Recovery Capital (ARC) Loan:

    ARC loans can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. ARC loans provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt. These loans allow borrowers to redirect cash flow from making loan payments to investing in their businesses, to help sustain the business and retain jobs. For example, making loan payments on existing loans with proceeds from an ARC loan can allow a business to focus more funds on core operations, such as buying inventory or making payroll.

    ARC loans are interest-free to the borrower, carry a 100 percent guaranty from the SBA to the lender, and require no fees paid to SBA. Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years.

    Hey, I own a small business, actually three, and wow, what a great deal. After all, I’m part of the original MTV generation. “Money for Nothing” was practically a theme song of my high school years. So, forget my limited government, no bailout philosophy. Sign me up for the free money. After all, look how quickly the federal government has been able to put billions upon billions of dollars in the pockets of big business. How difficult can it be for me to get my hands on a small $35,000 loan? Well, it turns out very difficult.

    Diego Iorio sounds like the kind of small business owner the government’s new ARC loans are made for. His two-employee audio gear retailer, SIRS Electronics, had been profitable through last year, with 2008 revenue nearing $500,000, but his projections for this year are down 40% to 50%. Although he has not missed any payments yet, SIRS, based in McAllen, Tex., has $140,000 in debt split among credit cards and payments owed to vendors. “We are in a very delicate situation right now,” the 41-year-old Iorio says.

    He prepared 200 pages of paperwork, including financial statements and tax returns going back three years, and applied for an ARC loan through Wells Fargo (WFC) just after the program launched June 15. The loans, made by banks and fully guaranteed by the government, give small businesses up to $35,000 interest-free to pay off other debts for up to six months, with repayment deferred for a year after that. But Wells Fargo rejected Iorio’s loan application because his personal credit score, at 649, was below the 680 the bank requires. To Iorio, it’s a catch-22: His score had been above 700, but it suffered when he took on debt to support the business.

    Let me bring this to a more personal level. I called a business banker in town I’ve known for years when this money finally became available. He told me his bank would only be considering making the loans to current bank customers. Okay, fair enough. So, I called one of the banks with which I have a business account. As luck would have it, it was none other than Wells Fargo.

    Wells Fargo told me they couldn’t give me information over the phone or email me about the program, and that I would have to stop into a branch. Okay, no problem I had a deposit to make anyway. So, off I went to my local branch. I made a deposit into my business account and when the nice lady behind the counter asked me if there was anything else. I said, “Yes, I’d like to apply for an ARC loan.” She looked at me quizzically. So, I explained what an ARC loan was. She thought she might have heard of that. Unfortunately, she said she’d have to take down my name and number and have someone get back to me later that day about how to apply for the loan. So, off I went.

    Well, two and half weeks went by and I still hadn’t heard anything back. I decided to go back into the bank. I signed the book, took a seat and waited 30 minutes for a banker to become available to see me. She called my name, and we sat down at her desk. As luck would have it, it was the same nice lady that had taken my deposit during my previously mentioned visit. I told her why I was there, and her response was, “Oh right, I remember you.”

    She then took out a piece of paper and said, “You’re going to have to call this number and talk to a business banker. We don’t have a business banker at this branch, so no one here can actually give you information on ARC loans.” I asked if I was going to have to go into that branch and repeat the process, and she said, “Oh no, he’ll be able to tell you over the phone whatever you need.”

    Hmm, couldn’t help but wondering if he could help me over the phone, why I ever had to go in to the branch in the first place. Well, I called the guy and got voicemail. No surprise. He did return my message that same day, and after I told him what I was looking for, he said, “I can send it to you, but you should know it’s a 25-page application.”

    “No problem,” I thought. Although, since I’m in the business of billing for my time. I was beginning to doubt this whole money for nothing concept. I’d already spent a couple of hours looking into this thing. Heck, I was thinking this might take less of my time if I could just be called to testify in front of Congress and then walk away with a much bigger check. I would even know not to take the company jet. Granted, I don’t own or have access to one, but I still would know not to take it.

    So, the guy emails me the ARC application. Hmm, they could answer my question over the phone and email the application. Still wondering why I had to go into a branch. Sure enough, it was 25 pages long. But, I actually didn’t have to spend too much time filling it out because I didn’t get past the first page, which contained this fact listed under the section, Facts about the ARC Loan Program and Wells Fargo::

    ARC loan funds are to be used for payments of principal and interest for up to six months on existing, qualifying small business loans, capital leases, business credit cards and vendor loans. Wells Fargo will only fund Wells Fargo business credit cards transactions of $5,000 or higher.

    As luck would have it, I don’t have business credit cards with Wells Fargo. But, this all got me to thinking. First,
    why couldn’t Wells Fargo include these facts on their website? Next, exactly who is this loan fund supposed to benefit?

    Apparently, it’s not intended to benefit me the small business owner. In fact, it looks like another gift for large banks. Specifically, it looks like a way for a bank like Wells Fargo to convert their unsecured credit card debt of $5,000 or higher to a 100% guaranteed loan backed by the SBA at prime, plus two percent. Not a huge profit by credit card standards, which is probably why the bank is only interested in converting their own credit card debt.

    Despite the lip service paid over and over again to small business driving the economic engine needed to bring us out of the deepening recession. Nothing could be further from the truth. When it comes to small business, the only interest the federal government has is how to increase taxes on those businesses.

    Just Checked – The Recession is Not Over

    Monday, June 29th, 2009

    So, I went outside and looked around. As near as I can tell, the recession is not over. People are still losing jobs and fighting for their homes. Now, what is the absolute worse thing the government could do right now? That’s simple. Pass tax raising regulation that drives more jobs overseas:

    Microsoft Corp. Chief Executive Officer Steven Ballmer said the world’s largest software company would move some employees offshore if Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.

    “It makes U.S. jobs more expensive,” Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”

    Obama on May 4 proposed outlawing or restricting about $190 billion in tax breaks for offshore companies over the next decade. Such business groups as the National Foreign Trade Council, the U.S. Chamber of Commerce and the Business Roundtable have denounced the proposed overhaul.

    There is a coalition out there fighting hard against this latest hairbrain scheme. And, less you think this won’t affect New Mexico, because after all we don’t have any large corporations headquartered in our own backyard, think again. Just look what former New Mexico Governor Jerry Apodaca, a strong President Obama support, warns:


    The new U.S. tax proposal would eliminate the policies that were put in place to protect our global companies from these differences in tax burden and make us less competitive. The U.S. would stand alone with one of the highest burdens in the world.

    The end of these traditional tax policies would essentially amount to a $200 billion new tax on U.S. companies operating overseas. This new expenditure would mean less money to invest in expansion, less money for research and development, and less money for new jobs.

    Is now really the time to pass policies that eliminate jobs? Yeah, I don’t think so either.