Most of our politicians, so quick to assert how they are going to help small businesses and thereby stimulate an economic recovery, do not have a clue what the problems are. From personal experience, I do. The government has created those problems!
The Dodd-Frank Act has crippled small business by ham-stringing with massive regulations the small banks that used to make small business loans. I know, because they have impacted me directly. Under Dodd-Frank banking regulation…s, if the income from a business with renewable loans is not at least 1.25 times the expenses, the renewable loan is considered to be in default. A new business that breaks even in five years is on its way to success, so starting a business with commercial (renewable) loans is simply out of the question. First, the bank won’t loan the money. Second, unless the business can meet unrealistic financial goals, the entrepreneur can be forced into foreclosure even if all payments have been made on time. That is completely insane. Many small banks have been driven out of business because they cannot handle the overburden of regulations and cannot find anyone who is willing or qualified to borrow the money under the Dodd-Frank rules.
Among the most pernicious impacts of the Dodd-Frank banking regulations is that they have made selling small commercial properties nearly impossible. We have four small commercial properties for sale. Three of them have tenants, each of whom has started their small business the way that most small businesses must now start–by scrounging for every penny, using whatever assets they can personally assemble, and working excessive hours—NOT from borrowing from a bank. Even if these tenants could borrow from a bank, and they can’t even though they want to purchase the properties, they could not realistically meet the income to expense ratio that would keep their business out of jeopardy.
Among small businesses, we were fortunate because we had a way to meet the new regulations. Not a pleasant way, but a way nevertheless. We could not increase income, so we had to cut expenses. To do that, we have gone from twelve employees to three, I have gone back to the long hours more commonly associated with a startup business than with retirement (I don’t have to pay myself, so my labor does not count as an expense), and we have stopped every shovel ready project that was not absolutely essential. Multiply my experience by that of tens of thousands of other small businesses and you can understand why the U.S. economic recovery has been rendered truly pathetic. The ultimate irony is that most of the employees we had to let go will not understand the underlying cause and probably end up voting for the political party whose regulations prevented us from continuing their employment.
***Gary A. Howie MSc, PhD*** is a business owner/rancher and a Life & Liberty News contributor
