Some clichés are clichés because they’re true. It really does “take money to make money,” which is why small to midsize business owners say easier access to capital is one of the most important ways the Trump administration can help them.
Every president claims to be an advocate for Main Street and not just Wall Street, but if this president is listening to entrepreneurs, here’s what else is high on their list: tax relief, giving them a larger voice in shaping policy and making healthcare more affordable. Regulatory relief is part of Trump’s agenda, but some business advocates are actually hoping for more regulation in some cases.
In Trump’s recent speech to Congress, he mentioned tax and regulatory relief, health insurance, and a joint program with Canada that will “help ensure that women entrepreneurs have access to the networks, markets, and capital they need to start a business and live out their financial dreams.”
The words sound right, but putting them into meaningful action is often something different in Washington, D.C. Here’s what small businesses want to see happen.
Expand Access to Capital
Better and more efficient access to capital would be a huge victory for small businesses, according to David Shulman, CEO and founder of Veris Benchmarks, which reduces risk for financial institutions through measurements of prospective employees’ level of trustworthiness.
“The administration needs to help facilitate that process by loosening up stringent credit and reporting parameters that prevent banks and lending institutions from feeling comfortable extending capital,” Shulman says. “The regulatory environment currently in place is stringent, and as a result, it’s a deterrent for lenders feeling comfortable providing credit to SMBs.”
But how confident are small business owners that the Trump administration will make it a priority to help them obtain capital? According to a recent survey by Lendio, only 37% think the president will make it easier. But the responses were divided widely by who they voted for. Only 10% of the people who didn’t vote for Trump said yes while 74% of those who supported him felt that way.
Beyond just hope, though, organizations such as the Small Business and Entrepreneurship Council and the American Sustainable Business Council (ASBC) are pushing to help small businesses get their hands on more money.
Karen Kerrigan, president and CEO of the SBE Council, says they are working on reforms to equity and debt-based crowdfunding as well as encouraging changes that will help community banks lend to small businesses. She also sees a need “to clear unnecessary and outdated red tape at the Securities and Exchange Commission that deter capital formation.”
Richard Eidlin, vice president of policy and campaigns at the ASBC, agrees that capital access is a huge challenge for small businesses, but he says there’s a downside to relaxing some financial and banking regulations. Doing so could erode the smaller companies’ ability to access affordable capital.
“The administration can instruct the Treasury Department to bolster the funding of community development financial institutions,” Eidlin says, “as well as support community banks and credit unions. Rules implemented under the Dodd-Frank Act need to be revised to relax reporting requirements for banks with less than $3 billion.”
Regulations: Tread Carefully
By expanding and enforcing federal procurement laws and regulations, Eidlin says, the Trump administration could enable women- and minority-owned businesses to better compete. And, he adds, strong regulations that prevent powerful business interests from dominating the markets are a critical way for helping small businesses thrive.
“SMBs want fair competition on a level playing field,” he says. “Regulations that help ensure workforce safety, food safety, water quality, air quality, financial oversight, and so on lead to healthier communities and a healthier economy overall. That is crucial to SMBs that require employees and consumer demand. ”
But Raj Bhandari, a dentist who owns two offices in the Los Angeles area, says he sees some environment and workplace regulations as huge hurdles. Complying with Occupational Safety and Health Administration regulations, he says, costs him thousands of dollars and hundreds of hours of work each year.
“We have to meet maintenance regulations, construction regulations, chemical regulations, exhaust regulations, water runoff, etc.,” he says, adding that he also would like to see the Trump administration “fight the $15 minimum wage as this will slow job growth.”
But there could be a downside to such actions, according to Eidlin.
“If more and more companies are allowed to push their costs onto the public, by damaging the environment or providing inadequate wages, taxes will go up,” he says. “Those tax increases hit owners of SMBs especially hard.”
Tax Revisions: Remember the Smaller Companies
Taxes are a major concern for many small business owners like Ron Cherubini, the owner/principal of GJV Pharma LLC, a consulting provider for pharmaceutical and biotech companies.
“What I would like to see from this administration is a sensitivity to all small businesses, not just C Corps,” he says. “The details of the tax code changes matter a lot to entrepreneurs like me. I operate a pass-through entity—I don’t retain corporate profits—so what does this administration really mean when they say they want to help small business and entrepreneurs?”
Cherubini says that if his personal taxes were lowered and if the corporate tax rate went down 15% (possibilities mentioned by Trump), he could hire more full-time employees rather than limit his projects to independent contractors.
“The desire is there to hire more,” he says, “but that has not been a real option for me to date. I am hoping that my business will see some of this relief.”
Shaping Policy Needs Small Biz Input
The sensitivity to small businesses that Cherubini hopes for is also priority for Kerrigan, who would like to see entrepreneurs and small business have a bigger voice with the Trump administration. Trump established the President’s Strategic and Policy Forum, but it is comprised of CEOs from large companies.
“Listening to entrepreneurs with the same regularity as bigger businesses is critical because small businesses are impacted by policies in different ways,” Kerrigan says. “Entrepreneurs will bring their innovative policy ideas to the president’s attention—larger enterprises often lack this innovative mindset. Small businesses are on the front-line in the economy, and they detect and are impacted by important trends more quickly and can bring these to the attention of President Trump and his team.”
Healthcare: Look at All Angles
The Affordable Care Act has the full attention of the Trump administration and the GOP—as well as the attention of small business owners. Cherubini is hopeful that whatever path lawmakers take—whether they improve or replace the law—the end result will reduce some of the expense involved. As it is, the cost of healthcare is “astronomical” in Cherubini’s view, to the point that it prevents him from hiring more employees.
“My employees need to have deeper skills and, in order to hire,” he says, “I need to provide much more than minimal healthcare options, so I am providing a best-in-class healthcare benefit with minimal employee contributions. And that is very expensive.”
Shulman also offered advice from the core of his business—trustworthiness—to the Trump administration on healthcare costs.
“Some of the reasoning behind the rising expenses has to do with medical fraud,” he says. “The president needs to find a way to eliminate and curtail medical fraud so that healthcare costs can at least be contained to protect both the consumer as well as the insurance companies that need to charge higher prices to combat and make up for the fraud.”
Unfortunately, Bloomberg BNA reported that Trump’s federal hiring freeze could hinder efforts to recover money from such fraud. Since the inception of the Health Care Fraud and Abuse Control Program in 1997, it has recovered $17.9 billion. But that might only be a small portion of what was stolen. In 2014, The Economist reported that such fraud, and the costs associated with trying to prevent and recover it, could be as high as $272 billion annually across the entire healthcare system in the United States.
Whatever the Trump administration does to address these issues, Cherubini hopes that the new system will include a close look at how current and future plans impact small businesses. He said that in the past three years, the cost of his group health insurance more than tripled and, despite the soaring price, there were fewer real benefits for himself or his employees.
“There has to be a better way,” Cherubini says.