Dear Congressman....Help Small Businesses First!

I am a firm believer that you must participate in everything that affects your life if you want to control your life. Otherwise, you are a bystander in your own life and have no right to complain. With that said I believe the American people are spending too much time complaining about what congress is doing with the bailout and not putting forward good ideas. We have a responsibility to help our government, which is a way of helping ourselves.

With that said, here is the letter that I have sent to Rep. Edward Markey of the 7th District of Massachusetts discussing a few ways that congress could help small businesses quickly:

The Honorable Edward J. Markey
2108 Rayburn House Office Building
Washington, DC 20515

Dear Representative Markey,

The American people are currently witnessing good people at all levels of government doing their absolute best to turn things around. I do not agree with everything being done by Congress, but I respect our leadership for doing what I am sure to be their best in a difficult situation.

I think all Americans should look beyond the politics of whether or not bailing out large corporations and banks is a good thing. For now, it is a certainty and it is a waste of calories to get upset about it. With that said, I would like to mention something that seems to be missing (at least in media reports if not in reality). What is the federal government doing for small businesses?

Small businesses in this country account for 60% of the labor force and 78% of all new job creation. A fraction of the money being spent on GM, Citigroup or AIG would create more jobs in a more diverse set of industries than all the money being spent on keeping these behemoths afloat will save. I believe that congress should develop a “grass roots” spending program that would result in a more competitive and stable economy for our children and grandchildren. This means spending at the bottom to build the economy, not trying to save poorly run businesses at the top of the economy and hope it trickles down.

Here are a few ideas that I would like to put forward for your consideration:

Create an interest free factoring program for small businesses – Small businesses are being hurt right now by a cash flow crunch created by the protective policies of much larger businesses. These larger businesses are often our clients and vendors. The result is that little family-owned businesses that are responsible for so much of the jobs across the U.S. are laying people off to save money or to pay their suppliers, which is understandable and sound business practice. If the government could step in as a factor and provide interest free loans to small businesses so that they may maintain cash flow and keep people working while they wait for larger firms to pay their bills, that would save millions of jobs today. When payments on invoices are finally received from a client, the business owners can make an immediate repayment back to the government via EFTPS, which is the same mechanism that we all use to pay our payroll and other taxes to the federal government.

The benefit of this approach is the ability for the government to directly support business activity without having to build the deficit further. Small businesses will happily pay the loan back if it allows them to keep growing their business. The U.S. government can utilize existing technologies for collecting revenues from small businesses through EFTPS and therefore would only have to make a minor investment in technology to adjust the current system to account for and track payments related to these interest free cash flow loans. More importantly, this approach would not change the workflow of any American business.

Create a micro loan program for existing businesses working to create new products – Micro loans are widely used in the developing world as a way to help individuals and families in impoverished nations build revenue streams to improve their lifestyles. These loans typically range from only a few dollars up to a few thousand dollars, at most.

New products that are currently being developed by our nation’s small businesses will create the majority of the high paying jobs of the future. The government can provide low interest short term loans (at LIBOR +0%) for qualified businesses that need just a little bit of help to push a new idea forward. These loans could be managed by asking local banks to spend a percentage of their bailout dollars on the program. This way the government will not have to increase its own spending to manage the loan program. Small businesses can use these dollars to improve existing products by hiring outside help (creating jobs) or to develop new products without the need to shed jobs in order to save money or sacrifice current revenues from an existing client base. This approach represents a direct investment by the government into the economy of the future as an alternative to focusing on bailing out the economy of the past.

Give a tax credit for each job created – Small businesses will need an incentive to begin hiring as the economy begins to stabilize and recover. Most companies that survive this period will be running very lean and will be reluctant to build overhead again through increased payroll. The government needs to incentivize small companies to hire again.

For businesses that make under $10 million per year, the government should give a tax credit of up to 100% of the wages of the person hired. This seems really aggressive on the surface, but there are a number of real benefits. The amount of taxes lost by the government will be more than made up for by adding another working individual to the economy. That newly hired person will soon be spending money locally and will stay out of debt. This will help strengthen the banking system and support a local housing recovery as well as bring increased dollars to the states through increased property and sales tax receipts. This will help reduce the federal government’s need to directly support states that cannot find a way to reduce their own budgets. In the long term, the increased national payroll will increase the government’s revenues in years to come by significantly more than it will give up in the short term. Small businesses can use the additional bandwidth to grow their businesses and create more jobs, creating a positive economic snowball effect.

I appreciate how busy you must be and that these are challenging times. I hope the mention of these ideas provides you with something to think about when the next piece of legislation comes across your desk. I believe it is our responsibility to support our legislators and I hope you receive this letter in the constructive manner in which it is intended.

Respectfully,

Jeffrey Roy
CEO
Implementation Factory, Inc.
Framingham, MA 01701