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Local small businesses hurt by new policiesThe Obama administration has focused on small businesses,

The Obama administration has focused on small businesses, classified as businesses with less than 200 employees, as the engine to jump start the economy. The thought being that small businesses are more likely to hire new employees, grow at a faster rate and are able to operate more nimbly than large, public corporations. During the downturns of the 1990's and early 2000's, this was certainly the case.

Small businesses have been hit much harder during this downturn as their access to bank financing all but dried up to stricter lending practices put into place since 2008. These businesses rely solely on bank financing to grow and increase their payrolls. The administration responded by putting into place loan guarantee programs backed by several hundred million dollars of government funds. Before the money ran out, this seemed to be working as loan approvals for small businesses rose over 90%.

But many business owners say that any positives in these loan guarantee programs have been eaten up by higher taxes, health care mandates and stricter accounting policies. This has prevented many small businesses from expanding their payrolls. "There's a direct correlation between access to capital and job growth," said Molly Brogan, spokeswoman for the National Small Business Association. "If people are able to get loans and financing, they're able to grow their business and that includes creating new jobs."

The Obama administration is trying to convince congress to allocate a $30 billion loan fund for small businesses, reduce taxes and make it easier for small businesses to increase their payrolls. To its credit, congress approved a onetime payroll tax exemption for new hires in 2010. But this has not worked out as well as expected. The main reason is that many business owners in the Baltimore market feel over burdened by taxes and paperwork, over regulated and very hesitant about the economy. Much of this won't change until consumers feel confident enough to begin spending on goods and services again.

The national unemployment rate sits at 9.2% and the Maryland unemployment rate is 7.2%. But the real key here is consumer spending. Consumer spending in the country has been flat for most of the year. In Maryland, it is no different. Consumers are hesitant to spend and they are the real drivers of the economy. 


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