Washington, D.C. Could Help Small Business by Doing Less



washington dc small business

Washington wants to be seen as helping small business. With approval ratings hovering around 25 percent, Congress wants to associate itself with one of America’s most popular institutions – small business – which 95 percent of Americans report viewing positively in a November 2012 Gallup Organization survey of 1040 randomly selected adults.

To aid small business, Congress has established small contracting set asides, written legislation to facilitate small company access to credit, sought to protect small business owners who use consumer credit products in their business operations, and put in place a number of other policies to support small business.

Small business owners don’t want to sound ungrateful. But they’d prefer something else from Washington.

The vast majority of small business owners would gladly trade Washington’s help for more policy predictability. The 4th quarter 2012 Small Business Outlook Study – a survey of approximately 1,500 small business executives conducted every three months by Harris Interactive on behalf of the U.S. Chamber of Commerce – revealed that nine out of every ten small business leaders would prefer less assistance and more certainty from our federal officials.

Small business sees much of what Washington does as harmful. For example, as part of the January 2012 Wells Fargo Small Business Index – a survey of a representative sample of 600 small business owners conducted by the Gallup Organization – 80 percent of respondents said that federal taxes are hurting their small businesses. Similarly, 72 percent said government regulations were having an adverse effect on their companies’ operations.

The pattern is repeated with other surveys. More than three quarters of small business owners surveyed by Harris Interactive said that federal regulation, taxation and other legislation are holding them back from hiring. Nearly three quarters reported that the Affordable Care Act deters them from hiring.

Assistance is usually most valuable when the helper does something that the recipient finds useful. Our elected officials might want to think about that the next time they are looking to “help” small business owners.

Washington DC Photo via Shutterstock

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Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

4 Reactions
  1. Agreed. The government usually causes more trouble than good when they get involved. In anything!

  2. Very important article. Small business owners have thought this way for a long time. We just want the Federal Government to get out of the way. Uncertainty and taxes, with the threat of more taxes, impedes innovation and hiring. I hope our leaders will learn this and change their ways, but I’m not optimistic.

  3. In the Gallup/Wells Fargo Index, it states that 53% of business owners are concerned about cash flow or their ability to meet payroll expenses. Many business owners may not be aware that there are alternative lenders to traditional banks called factoring and asset based lending commercial finance companies. Factoring and asset based lending are two forms of financing that provide stable capital for business of all sizes. For small/mid size businesses that don’t have easy access to capital markets the availability of Factoring or ABL is critical. While you cannot plan customer’s slow payments you can still obtain the stability of cash flow by using factoring or asset based lending. Both products provide an influx of capital on the day the goods or services are provided to a customer. With predictable cash flow, business owners can better manage their liquidity requirements to support COGS or payroll expenses, purchases of inventory or to accommodate growth. By Einat Steklov

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