A refreshing effort for small business reform

Author: Crystal Fontaine

The signs of economic recession are everywhere. Recently, a small town in mid-Missouri with a population of approximately 5,000 people experienced the distressing effects of the economic slump as a local factory laid off 400 workers – a whopping eight percent of the town’s population. Economies of every size are all realizing the effects of the economic downturn.

According to the United States Small Business Administration, there were 27.2 million businesses in the United States in the year of 2007. Of those, small firms with fewer than 500 employees represent 99.9%. These small firms pay nearly 45% of the total U.S payroll and employee about half of all the private sector. Over the last decade, small businesses alone have generated 60-80% of net new jobs annually. Although big business, such as GM, shows the more “noticeable” effects of the recession, we cannot forget the little guys, who may be struggling just as much.

In November, Senator Olympia Snowe (R-Maine), purposed the small business-focused Senate Bill 3699, which seeks to improve the HUBZone program. Snowe’s efforts may very well go a long way to providing one of the cornerstones of America’s future.

HUBZone Background

HUBZone is a program created under the Small Business Reauthorization Act of 97’that falls under the sponsorship of the U.S Small Business Administration, promoting economic development in historically underutilized business zones. The program attempts to do this by enhancing employment and capital investment by providing Federal contracting preferences to small business in economically distraught areas. The HUBZone areas are defined as a qualified census tract, a qualified “non-metropolitan” with a median income of less than 80% of the state median, or property within the margins of federally recognized Indian Reservations. In order to be eligible, a business must be positioned in a HUBZone, the business must be owned and controlled by one or more U.S citizens, and no less than 35% of the employees must reside in the HUBZone.

Under Snowe’s legislation, numerous concerns with the program are given light. For instance, there is no real assurance that only qualified firms are apart of the program. This is attributable to not acquiring certain documentation and conducting site visits more regularly during certification process. The legislation provides a list of improvement suggestions, including the development and implementation of direction for establishing if an application is qualified, establishing a time period for completing recertification, building measures to measure efficiency that take into account contracts being calculated under several socioeconomic subcategories, economic characteristics, et cetera. In addition, the Comptroller General must present a report to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business in the House no later than two years after the implementation of the bill.

As quoted by Warren Buffett, “In the business world, the rearview mirror is always clearer than the windshield”. Over a year ago, many of us did not anticipate that we would be facing an economic crisis with the scope we are working through. Today, we are facing an economic crisis of which the likes have never been seen. As we work through the urgent, macro reforms currently on the table, we, as Snowe suggests, must improve on what we currently have and find ways to help our small business communities.