Did 2012 seem like a year of one step forward, two steps back? Sometimes it did to me, with every optimistic report on the economy seemingly met by a contradictory study immediately. So far, 2013 is playing out to be more of the same. Here are the issues I think mattered most to small businesses in 2012—and that will continue to matter in 2013:
Small-business owners were in wait-and-see mode much of the year due to a close presidential race. President Obama’s reelection means the Patient Protection and Affordable Care Act (PPACA), or Obamacare, will go forward. While big companies concerned about the costs this will impose have grabbed headlines, for small-business owners (those with 50 or fewer employees), the PPACA could actually mean savings and tax breaks. (Visit the IRS website to see if your business is eligible.)
Moving forward, for those would-be entrepreneurs who’ve been on the fence about starting their own businesses because they’re worried about health insurance, the PPACA could free them up to do so by removing barriers to health insurance for people with preexisting conditions and setting up exchanges for small businesses and individuals to purchase affordable insurance. That could mean more startups, which could further boost economic growth—especially if those startups start hiring.
In 2012, uncertainty about economic conditions held many small-business owners back from making key moves such as seeking capital for their businesses or hiring new employees. In Capital One’s most recent Small Business Barometer survey, for example, the majority of small-business owners polled said they planned no changes in hiring, spending or seeking capital in the next six months. That hiring freeze has been particularly problematic, with small-business owners’ much-touted role as job creators at odds with the reality that many of them are still too uncertain of the future to hire. Given a holiday shopping season that was less robust than initially expected, and a lack of final resolution to some key tax and spending issues (see the next point), entrepreneurs’ wait-and-see attitude is likely to continue for the foreseeable future.
Entrepreneurs in a 2012 survey by the National Federation of Independent Business (NFIB) cited “tax complexity” and “frequently changing tax laws” among the top tax issues burdening small business. With the fiscal cliff looming, small-business owners waited … and waited … for Congress to take action on the expiring Bush tax cuts, the debt ceiling and the federal budget as well as many other tax credits and deductions for small business, such as Section 179 expensing and the R&D tax credit. While the legislators’ eleventh-hour agreement resolved some key issues in a way that will mollify many entrepreneurs, it essentially just “kicked the can” a little bit further down the road, with another stalemate likely in February when the debt ceiling issue will rear its ugly head. Expect uncertainty about the fiscal future to continue.
In September 2011, 13 of the nation’s biggest banks made a commitment to boost lending to small businesses, and in September 2012 the Small Business Administration touted the success of the initiative. But data gathered by MultiFunding LLC shows that loans of under $1 million (what MultiFunding CEO Ami Kassar says account for 99 percent of small-business loans) actually declined by nearly $2 billion in that period. Instead, some small businesses are turning to alternative lenders like cash-flow lenders or factoring companies, which often charge high interest rates. Others have given up seeking capital at all. Whether this means they have learned to get by with less or that they are holding back from expansion, either way, the end result stifles economic growth—and given the uncertainty about all of the above, I don’t foresee small-business owners lining up for bank loans anytime soon.
Read more articles on what to expect in 2013.