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The Weekly Dispatch: SBA Funding on the Chopping Block

The Dispatch scours the Web every Monday to find must-read news that affects you and your business, and what it really means. Here's what I'm reading this week.

1. Obama proposes cuts in SBA funding
The takeaway: The same agency that got a boost from stimulus money faces a 45 percent drop in funding in President Obama's budget proposal. Under the terms of the deal, the agency would get $945 million in funding for fiscal year 2012 and guarantee $27 billion in loans for small firms, but would face cuts to Small Business Development Centers and administrative spending.

As part of the proposal, the administration said it will work on legislation that would let the agency adjust fees in its loan programs to help it become "self-sustaining."

2. Small business hiring remains sluggish
The takeaway: In a speech before the Chamber of Commerce last week, President Obama asked small businesses to let go of some of their cash reserves and start hiring. But -- even though owners are reporting increasing optimism about the shape of the economy -- only 3 percent plan to step-up their hiring.

So where's the disconnect? Even if business is getting back to normal for some, creating jobs is expensive when you factor in salary, state and federal unemployment insurance premiums, worker's compensation and state and federal taxes. And with many states fiddling with their tax rates and the cost of unemployment insurance, there's just too much uncertainty for some firms to take on new employees.

3. Small employers: too numerous to fail
The takeaway: Federal policy makers are relying on the idea that businesses shed jobs when the economy faltered, and that they'll add them back as things get better. The problem? Scott Shane, a professor of entrepreneurial studies at Case Western University, argues that thinking fails to account for the fact that many of the smaller firms that shed jobs are simply out of business, and there's no one left to pick up former employees. Between 2007 and 2009, the country lost 146,000 employers, according to the SBA. And though new companies have sprung up, younger firms are less likely to hire new employees than older companies. Crawling back from where we were before the recession is going to take a long time.

4. Solutions for getting slacker customers to pay up
The takeaway: Many smaller firms are turning to Web services that can check clients' credit, ease the pain of invoicing, and make sure that getting paid on time is all but guaranteed. The help, they say, is worth the potential hazard of technical problems, like losing data if an application crashes.

5. SBA loan program still waiting on rules... five months later
The takeaway: Five months ago, the federal government created a program to help small businesses stay afloat by refinancing their mortgages. Sounds great on paper, but the SBA still has not set up rules for the program, which means businesses can't even figure out if they qualify for it, much less apply for it. And time is running out. The program is slated to run for two years after the law was signed, meaning business owners who need the help have lost five months of the program's window. A spokeswoman for the SBA told the L.A. Times that the agency had always planned to release the rules this month, and that they're "on track."

6. Banks cut small biz lending by $43 billion
The takeaway: The SBA released data last week confirming what small business owners have been saying for two years: Small business loans have plummeted. Between June of 2009 and June of 2010, the value of outstanding loans to small firms fell by $43 billion -- or 6.2 percent. While some of the drop can be attributed to lower demand, government watch dogs say the credit crunch was too extreme, and it cut small shops off from one of their only resources.

7. The Groupon dilemma: what small businesses should consider
The takeaway: Groupon itself may be making money hand over fist, but small firms need to bust out a calculator before they commit to deals with the daily deals site. Things to be aware of:

  • Some small businesses have been swamped with coupon toters, and unable to deal with the upswing in demand.
  • Others haven't been able to sustain the discounts over long periods of time, and the deals usually don't expire for six months.
  • The deals won't necessarily bring in all new customers--your regulars want a good deal too.
(Image courtesy Flickr user Obama-Biden Transition Project, CC 2.0)