President Barack Obama: The Small Business President
He has been dubbed “anti-business” but his living legacy says otherwise.
WORDS: Sara Grant Wilson
The US economy depends on small business. Bryan Marshall, a political science professor at Miami University said small business customers “drive 70 percent of the economy,” so the small business vote is very important. When small business owners are happy, small business consumers are happy.
President Barack Obama has launched a series of initiatives to create a thriving economy for the nation’s entrepreneurs.
“Entrepreneurs embody the promise of America: the idea that if you have a good idea and are willing to work hard and see it through, you can succeed in this country,” says President Obama. “And in fulfilling this promise, entrepreneurs also play a critical role in expanding our economy and creating jobs.”
His record to date includes the signing of 18 direct tax breaks that bolster small business growth, including new credits for hiring unemployed workers and veterans and investing in new equipment. His administration has supported lending to more than 166,000 small businesses through community banks, state-run loan programs, and the Small Business Administration. He has reformed patent law to help entrepreneurs bring their inventions to market sooner, reduce patent application backlog, and protect U.S. intellectual property abroad through the American Invents Act. Launched Business USA, a centralized, one-stop shop to make it easier than ever for businesses of all sizes to access services to help them grow, hire, and export.
It’s clear that during his first four years in office President Obama has implemented several programs to benefit small business owners. Even the hotly debated heath care reform, signed by the President in 2010, includes some important plans for small businesses. It established a tax credit that helped an estimated 360,000 small businesses with the cost of providing health insurance for 2 million workers in 2011. The credit will increase in 2014. NV decided to focus the following pages on two of his programs that drew more of our interest, the Startup America Initiative with its private sector component and the Jumpstart Our Business Startups (JOBS) Act
White House Startup America Initiative
The White House Startup America Initiative is one of several supports for new and small businesses. The initiative, created in 2011, gives small business owners a launching pad by helping them access the financing and support needed to start their business. From agricultural companies to tech startups, Startup America not only gets businesses going but it supplies the necessary tools to keep businesses current and able to compete with cutting edge technology.
The Startup America initiative aims to create the ideal policy environment for entrepreneurs. For one, the President signed into law a 100% capital gains tax cut for investment in small businesses made throughout 2011. The President’s budget would make this tax incentive permanent.
Business owner Tony Giordano was one of many who benefited from the tax incentive. He owns TheraVasc, a Cleveland, OH-based biotech company that opened in 2009. His team of researchers were testing drugs that could aid diabetic patients with limb problems, as well as, patients with peripheral artery disease with the focus of bringing a promising new therapy from the lab to the marketplace.
The research was expensive, says Giordano. “But – in large part because of the Obama administration’s tax incentive for small business investments — we were able to raise over $2 million for these early clinical trials from individual “angel” investors. In fact, when the incentive was set to originally expire on December 31, 2010 (The President has signed a one-year extension, and wants to make it permanent), one individual wired us $20,000 on December 30 to ensure that they didn’t miss the deadline!” Giordano shared in the White House blog.
He adds “Equally important, the 5-year holding requirement for this tax incentive encourages our investors to build a sustainable company, and not simply pursue a “quick flip.”’
Tal Flanchraych developed the Cabulous project through a Best Buy contest. She and her team developed a system to create efficiency for connecting passengers with cab drivers. Launched in San Francisco, the company raised $500,000 from investors, led by Silicon Valley’s Sand Hill Angels. Within a year, a second city, over 1,000 drivers were added. The company needed money for expansion. “The 100% capital gains exclusion was instrumental in convincing investors to increase their investment in the company quickly, enabling us to add customer service, sales, and additional development resources,” says Flanchraych. What was just a project became the corporation UpStart Mobile, which now serves 15 taxi fleets in 10 cities here and abroad.
Within a year, a second city, over 1,000 drivers were added. The company needed money for expansion. “The 100% capital gains exclusion was instrumental in convincing investors to increase their investment in the company quickly, enabling us to add customer service, sales, and additional development resources,” says Flanchraych. What was just a project became the corporation UpStart Mobile, which now serves 15 taxi fleets in 10 cities here and abroad.
Startup America Partnership
The White House Initiative is supported in part by the Startup America Partnership, which is an independent alliance of entrepreneurs, corporations, universities, foundations, and other leaders, who joined forces to launch U.S startups. Since its creation, the Partnership has mobilized to make over $1 billion in business services available to a national network. The network is expected to serve 100,000 startups over the next three years.
Startup America is a national network of Startup Regions by Regional Champions to benefit local members. Local investors, universities and government, as well as, the organization’s corporate partners, sponsors and board work to support members. Members can apply through the website. Although the White House Administration is a partner with Startup America, the organization is not overseen or funded by the federal government.
In fact, The Ewing Marion Kauffman Foundation and the Case Foundation provided the initial funding for the Startup America Partnership. Corporate sponsors include American Airlines, American Express OPEN, Dell Inc., Intuit Inc., NYSE Euronext, and Microsoft
The CEO is Scott Case, founding CTO of Priceline.com. The Chairman is Steve Case, AOL co-founder and CEO and chairman of Revolution, LLC, and the chairman of the Case Foundation.
Jumpstart Our Business Startups
On April 5, 2012 President Obama signed the Jumpstart Our Business Startups (JOBS) Act. The JOBS Act includes all three of the capital formation priorities that the President first raised in his September 2011 address to a Joint Session of Congress, and includes crowdfunding, expanded mini public offerings and creating an IPO on-ramp.
1. Allow Small Businesses to Harness “Crowdfunding”: This allows small businesses to raise up to $1 million through investors with web-based platforms. All platforms must be registered with a self-regulatory organization and regulated by the SEC.
2. Expand “Mini Public Offerings”: Raising the limit on the amount of public offerings from less than $5 million to $50 million.
3. Create an “IPO On-Ramp”: Creates a window of opportunity for young “high growth” firms to reach compliance with auditing requirements after their initial public offering (IPO).
President Obama lowered taxes for small business owners and signed billions of dollars in tax relief to encourage businesses to create more jobs. According to barackobama.com the Small Business Jobs Act made 4.5 million small businesses eligible for a larger tax break on new investments in equipment and machinery. . President Obama has been an advocate of small businesses since the beginning of his term. In order for him to implement more plans that benefit small business President Obama will really need Congress to work with him. Hopefully more bipartisan ideas will be presented.
SBA Emerging 200 Initiative
The Emerging Leaders (e200) Initiative is the federal training initiative for executives of established businesses. The program targets urban areas and Native American markets. The only such federal training program of its kind, e200 provides trainees with the organizational framework and resource network necessary to build a sustainable business. The seven month-long program includes specialized workshops and engagement with experienced mentors from an array of sectors. The e200 Initiative uses a researched-based curriculum. Participants can focus on development and growth strategies. They also learn how to access capital and secure government contracts. Recruitment begins in January and classes start in April.
“It was business therapy for me,” says Adrienne Benton, Onyx Spectrum Technology, and e200 participant. Dexter Miller, owner of Massachusetts Telephone Company found the program to be insightful. “There are many issues I came across through the class that I never really thought of, that are pertinent to my business, that I should have been thinking about for years,” he says.
“We believe that small business are the engine of economic growth in this country,” says President Obama.
If he earns a second term as the President of the United States his administration plans to keep taxes low for 97% of small businesses by extending tax credits that will expire in 2013. Renew tax breaks that allow companies to immediately write off the total cost of certain purchases like computers and machines to encourage investment. Jumpstart small business hiring by cutting taxes for businesses that hire new workers or pay higher wages. In 2014, small business will be able to shop for affordable health insurance plans through state-based marketplaces, and be eligible tax credits that cover up to 50% of the cost of providing health care for employees through the existing bill. Permanently eliminate capital gains taxes on certain small business stock held for more than five years to encourage investment that provides crucial funding for small businesses. Of course, Congress will have a lot to say about a lot of this.
“If you’re walking down the right path and you’re willing to keep walking, eventually you’ll make progress.” — President Barack Obama.