Business Information for Entrepreneurs by an Entrepreneur

In the battle over healthcare reform, it seems like small businesses are caught in the middle - again.

Earlier in the year, Congress proposed a set of reforms that would heavily fine small businesses if they didn't provide healthcare for their employees, sparing only those companies with a few employees. After small business advocates cried foul on these proposals and stated that the burden on small business owners would just be too great, the measure was dropped.

However, in its place came a new set of proposed reforms. The Senate Finance Committee decided to introduce a new healthcare reform bill that essentially rewards those small businesses that provide healthcare to their employees.

The main proponent of this bill, Senator Max Baucus (D) of Montana, is interested in creating nonprofit insurance exchanges, which will be offered to small businesses with less than 100 employees.

This current piece of healthcare reform has many aspects, much of which will greatly affect small business owners regarding how they pay for their employees' healthcare:

• Tax credits will be rewarded to small businesses that provide health insurance to their employees, although only those employers with 25 or fewer employees will qualify for these tax credits. It is important to note, however, that more than 92 percent of small businesses have less than 25 employees. In addition, this new bill will only apply to small businesses whose average employee makes less than $40,000 per year.

• Small businesses with 50 or more employees will likely be fined if they don't offer health insurance to their employees. It is also important to note than just four percent of small businesses have more than 50 employees. Employers with more than 50 employees will have to pay fines for each employee under this bill if they don't provide health insurance, thereby imposing hefty fines on these employers.

• More taxes will be imposed on insurance policies with premiums above $8,000 for an individual and more than $21,000 for a family. These new taxes could be ultimately passed onto employers' health insurance plans, thereby resulting in higher premiums. For many employers, these taxes could result in simply too much financial burden.

While the bill has yet to be finalized, the relationship between small businesses and healthcare will certainly change in the upcoming legislative sessions.

You start a small business and need easy access to short-term credit. Of course, you set your sights on a small business credit card, right?

Not so fast!

Many small business owners are quickly learning that a credit card labeled as a "small business " credit card may not be what it seems. In fact, many experts point out that credit cards specifically designed and marketed for small business may come with extra liability - which small business owners may not want to take on.

Why Small Business Credit Cards May Not be Ideal

Although the Credit Card Holder Bill of Rights, which was signed into law by President Obama over the summer and is expected to go into full effect in February 2010, is designed to protect credit card holders, there are still ways for creditors to get around these reforms and tack another level of liability onto small business owners through their small business credit cards.

In fact, there is no specific offer of protection from the Credit Card Holder Bill of Rights for small business owners, leaving them quite vulnerable to the ploys of credit card companies.

This extra level of liability makes sure that BOTH the company and the cardholder remain responsible for the credit card debt. In other words, if your business is unable to pay the business credit card debt, the credit card company has the right to go after you, as an individual, for the repayment of the debt.

Better Financing Options

Subsequently, many industry experts have recommended that small business owners, in lieu of securing a small business credit card, simply secure a personal credit card for business expenses and pay the expenses from their business accounts.

Although many creditors offer small business credit cards to entrepreneurs and tout them as more convenient and practical than standard personal credit cards, the reality is that you may be able to use a personal credit for your business just as easily as you can with a business credit card.

There are many special features that creditors offer to small businesses through small business credit cards, but the reality is that you often find these features on personal credit cards as well - without double the liability.

Despite the government's efforts and stimulus, lending programs are suffering, and small business lending programs are no exception.

The Real Small Business Lending Numbers

The numbers are quite grim and indicative of the state of the recession and of the economy as a whole: small business lenders secured 25,000 fewer loans to small business entrepreneurs in 2009 than they did in 2008.

The Small Business Administration recently ended its 2009 fiscal year, and the numbers were sadly staggering: the Small Business Administration backed just 44,221 small business loans through banks, which was 36 percent less than the number of backed loans just a year prior.

Dollar volume for SBA-backed loans also fell sharply, as loans from the fiscal year 2009 totaled $9.3 billion, which was a 27 percent decrease from last year's $12.7 billion.

SBA Loans and the Future

Even though the SBA backs small business loans, it is important to note that they back only a certain percentage of the loan - meaning that if the borrower defaults on his or her small business loan, the SBA pays the bank back just a portion of the loan amount. This is exactly why banks still need to be assured that they have secured a trustworthy borrower, even though the loan is backed through the SBA.

These numbers come at a time when the SBA and the Congress are taking steps to ensure that loans continue to circulate for small business owners. In fact, Congress allocated nearly $730 million of February's stimulus package to the SBA to encourage new incentives, including waiving fees and increasing its guarantee to banks regarding the backed loans. Although this move helped more than 1,200 lenders get up and running again, it clearly didn't solve the problem as a whole.

Throughout all of this grim news, however, is optimism that the worst is over. In fact, many lenders have begun to see numbers slowly growing again. Loan programs hit an all-time low in January, when loan amounts fell nearly 48 percent from the prior year. However, when the Recovery Act provisions began in April, the volume on small business loans began to immediately increase. By September, loan volumes, as reported by the SBA, were the highest they were all year, with nearly $1.3 billion loaned to business owners.