Free Enterprise - The FindLaw Small Business Law Blog

November 2009 Archives

No Stimulus For SBA Loans Hurts Small Business

The Small Business Administration (SBA) has announced that government stimulus funds for two of its most popular lending programs has run out. No stimulus means fewer new SBA loans. This is not good news for small businesses who apply for SBA loans. This could leave a lot of struggling small businesses out in the cold this winter.

Reuters reports that loan volumes for small businesses could fall if the stimulus money is not replenished. $375 million has already been used to pump up the SBA's popular 7(a) and 504 lending programs.

The money was being used to aid in reducing fees on SBA backed loans and also guarantee the loans from 75%-90%. The money was able to save small businesses up to $60,000 in fees. It also served to tempt other lenders to grant credit to the small businesses as well as convince investors to invest in the securities market.

The Disclosure Counts: the FTC Punishes Fine Print

As a small business owner facing a recession, it can be tempting to bury the disclosure information all the way at the end of a business contract or give customers difficulty with cancelling subscription or services. However, these tactics may not pay off with the FTC.

MediaPost reports that the FTC recently fined Commerce Planet because the FTC claims that the company lured in consumers to provide their banking or credit information for a short trial period of use for their products and then slammed their customers with monthly membership fees. The company also made it hard for consumers to actually cancel these memberships.

Email Internet Policy: Why Your Small Business Needs One

As more and more small businesses are growing, so are the number of small businesses using computers and workplace emails. If you are one of the small businesses that are providing their employees with computers and work emails, be aware that you should have an explicit email internet policy with your employees available.

There are several important reasons for this. The first is that employees may claim an expectation of privacy with their emails if you don't explicitly say that you may be monitoring their emails from work issued computers. The Wall Street Journal reports that courts are increasingly ruling that if companies have not explicitly told employees that they are monitoring employee emails, then they don't have the legal right to do it. And the scary part? That has happened even when the email in question was sent from a workplace email account, not a personal email address.

Treasury Dept. Holds Forum For Small Business

The Treasury Dept. held a forum on Thursday to address how the economy has affected small business. Specifically, the forum addressed how to help small businesses weather the bad economy. ABC News reports that an Obama administration focused on how to increase small business access to financing.

In fact, the press release about the forum from the Treasury Dept. details what Treasury Secretary Timothy Geithner wanted to convey, stating: "Small businesses, in particular, are still facing a very challenging credit environment." This is very true with small business lenders like CIT Group and Advanta  filing for bankruptcy in recent news. Geithner wanted to give small business owners some hope about how to get financing.

Goldman Sachs and Warren Buffett Help Small Businesses

Goldman Sachs and Warren Buffett are working together in order help small businesses gain access to capital. The partnership also provides small business owners with college scholarships. Goldman Sachs will provide the monetary resources. Warren Buffett is not planning to use any of his own money towards the program. He plans on mentoring small business owners.

ABC News reports that the company will contribute $200 million dollars to a project called 10,000 Small Businesses which will help small business owners get a higher education through grants.

An additional $300 million dollars will be given to small businesses though a blend of lending and charitable support. Goldman Sachs executives will also mentor small business owners with advice, technical help, and through networking.

New Gift Card Rules to Affect Small Businesses

The Federal Reserve Board released a press release that announced that proposed rules to restrict fees and expiration dates would also apply to gift cards. The rules were put in place in order to protect consumers from hidden costs in gift cards. The rules also require that the terms and conditions must be stated on the gift cards.

Will These Rules Affect My Small Business?

As a small business owner, please be aware that these gift card rules may apply to you. The rules are meant to cover retail gift cards which can be used to buy good or services at a single merchant (such as yourself) or an affiliated group of merchants (like your local business association). You are also supposed to keep a close watch of any gift cards that are given out by credit card companies if you happen to accept that credit card company's cards.

So if you are planning to give out gift cards during the holiday season (and in the future) for your small business, just make sure you keep these guidelines in mind.

Preventing Defection: Confidentiality and the Non-Compete

The economy has left many small businesses in the dust when it comes to unfair trade practices. Bigger and more powerful businesses have started scalping the talent from smaller businesses. The scary part? Sometimes there is nothing that small business owners can do about it.

CNN  reports how one small business owner almost lost it all because her employees were stolen away from her by a larger rival. Ms. Debra Killian details how she lost 10 of her employees to her rival. Not only did her rival allegedly steal her employees, but it also allegedly stole her pending loans which were worth close to a $1 million dollars, her client lists, and her confidential files.

The worst part was that after fighting a lengthy legal battle that lasted four years, she ended up with a losing verdict on all counts.

Franchisees Have a Cow Over New Burger King $1 Deal

Burger King's franchisees are up in arms about the new promotion for a dollar burger -- specifically a $1 double cheeseburger. They claim that the company does not have the right to set maximum prices on their menus.

AP reports that the National Franchise Association which represents more than 80% of Burger King's United States franchise owners stated that the deal on the double cheeseburgers actually forces the franchisees to take a 10 cent loss on each burger. The raw cost of the dollar burger is 55 cents but when you add on royalties, overhead costs, and worker wages, it typically costs a franchisee $1.10 to make a double cheeseburger.

Social Media 104: The Perils of Paid Reviews

As we have discussed in previous posts on Free Enterprise, online social media outlets can be a powerful marketing tool for you. They can help you gain word of mouth buzz that you would not ordinarily be able to get. And the best part? It's typically free.

The problem is when small business owners start sending their products out to bloggers or online reviewers, or paying them a fee in order to acheive that word of mouth buzz.

It is important that you are aware of the new guidelines set out by the Federal Trade Commission (FTC) that govern endorsements and testimonials.

Shoplifters Beware: New Tools Protect Small Businesses

With the recession cutting into the pockets of many small businesses, it hurts even more when you realize that you lose even more because of inventory loss. According to CNN, this loss is 25% more than the losses that small businesses face from shoplifting. Stealing from employers is not that uncommon.

Employees actually stole an estimated $15 billion dollars from retailers last year according to Univ. of FL criminologist Richard Hollinger. The scary part? The closed circuit TV monitoring system never pinpointed the crime occurring.

It seems that many small business owners just don't have the time, patience and resources to sift through all of those hours of footage in order to catch the perpetrators.

Now they have a solution to their problem.

Is a Small Bank Better for a Small Business?

News has been pretty dismal on the lending front of small business. With the news of bankruptcy filings of CIT Group and Advanta, it seems like there are little if any options for small business financing.

But the NYT is reporting that smaller local banks are moving in to fill that void. With charming slogans such as "Policies to serve your street, not Wall Street," these banks are aiming to keep your business on Main Street alive.

Perhaps turning to the local bank on your street for your small business may not be such a bad idea. A small bank may be more likely to provide stability in today's more somber economy. The Federal Deposit Insurance Corporation (FDIC) thinks that small banks are the best capitalized in the industry right now. That means they have the adequate cash on hand to absorb loan defaults.

Succession Plans & the Small Family Business

No matter how successful your family business currently is, it is hard to maintain that success over several generations. So many family businesses fade over time due to family feuds, fights about money, financial hard times, and a lack of consistency with business operations.

In fact, Inc. calls this the rule of thirds. Only a third of family businesses make it to the second generation, a third of that makes it to the third generation, and so on.

So how do you give your small family business a chance against the odds? It seems that successful family businesses have a few characteristics that define them: they make or sell things that last, keep manufacturing in the United States, and are able to deal with setbacks. They also stick to the morals and values that the company started with.

Another essential part of keeping up a family business is working out the succession plan.

The Wall Street Journal did a piece about how to approach succession.

Here are some tips for dealing with this sometimes touchy topic:

Advanta Bankruptcy May Hurt Small Business

Another blow to small businesses came in the form of Advanta's bankruptcy filing this week. This news coupled with CIT's bankruptcy means that getting credit lines and loans that small businesses need will just get harder and harder.

Advanta is a small business credit card lender. They filed for Chapter 11 bankruptcy this past Sunday CNN reports. Its lending arm called Advanta Bank Corp. was not including in this filing.

News of the Advanta bankruptcy is not surprising. It had stopped giving out new loans earlier this year. It has also seen a very sudden rise in defaults on the loans it had already given out to small businesses. Advanta had listed out its assets as valuing $363 million while its debts are $331 million.  

Small Business Retirement Plans: Help From IRS

While many small businesses want to hire more employees, many small business owners feel that they can not afford the benefits that come with a new hire.

A press release from Intuit, Inc. states that: "The latest Intuit Payroll survey from Intuit Inc. (Nasdaq:INTU) finds that nearly half of the small business owners surveyed, 44 percent, are planning to hire new employees within the next 12 months. At the same time, many small business owners believe that benefits are key to attracting new hires but are finding them difficult to afford."

Many small business owners say that they are in a bind. In order to attract the talent that they need in order to succeed, they need to offer benefits such as healthcare and retirement benefits.

Small Business & the Year End Bonuses

Holiday season is approaching and now is the time that many of you business owners dread: to give or not to give?

I know that it should not be a dreadful decision because holiday season should be about joy and cheer. However, the economy has made it harder to spread joy and cheer around because it means less resources for you to use.

Since holiday gifts means that you have to spend more, it seems that most of you small business owners are coming down to a hard choice of whom to give to.

Small business owners have elected to use their small resources in order to give customer gifts instead of employee bonuses.

Healthcare Reform & Small Business: 3 Bills Explained

As we wrote about in a previous post, small business owners cite healthcare costs as a major hurdle faced by their business.

In a National Small Business Association press release, the President of the organization has stated that "The number of small-business owners who are able to provide health insurance to their employees has dropped from 67 percent in 1995 to 38 percent in 2008. NSBA members voted health care reform their number one priority for 111th Congress--addressing the failures of our health care system simply can not wait yet another year."

Since healthcare reform is such a hot topic for small business owners, here are some key points of each of the proposed bills being discussed in Congress right now.

The key points (which are discussed in Forbes) will help you gain a deeper understanding of what each of the bills holds for you as a small business owner.

American Small Business League Calls out Obama

A statement released today by the American Small Business League criticizes the President's first year policies for small business.

The statement details how Obama made key promises for small business, but failed to live up to those promises. The statement does bring up valid points that every small business owner should be aware of.

Here are the key needs listed in the League's press release:

Facebook for Small Businesses: 5 Savvy Tips

As you have read in our previous posts in Small Business Social Media 101, 102, and 103, Facebook plays a pretty vital role in growing your small business.

However, it can also bring about some issues of oversharing from you, your employees, and even your customers. 

Using Facebook to vet job applicants is becoming more common too. In fact, 30% of today's employers are using the social media site to do just that.

This can be seen as harsh, but when the economy is tough it can seem like a necessary measure. You may do it in order to protect your business from job applicants who have illegal recreational activities, may potentially embarass you and your business, or just have a poor work ethic.

Here are five tips that you can learn for yourself and pass along to your employees in order to put your business' best face forward on Facebook.

The New York Times does a great job of outlining these tips.

Small Business Social Media 103

As we wrote about in previous post called Small Business Social Media 101, keeping an eye online about what people are saying about your business is crucial.

Two of the main social media sites right now are Twitter and Facebook. However, a lot of small business just don't have the resources, skills or patience to tap into the large potential in those sites.

According to the Wall Street Journal, "While business owners across the country have glommed onto social networking as a marketing tool, there are thousands of entrepreneurs who can't seem to "get" social networking.

Small Business Toymakers May Be Hurt By New Law

Small business toymakers are having a hard time with new safety legislation that requires extensive testing of toys.

Congress passed the laws after a rash of tainted toys manufactured by large toy companies in China forced recalls of over 45 million toys.

The law passed is called the Consumer Product Safety Improvement Act. It was passed in August 2008 and sets out mandatory safety standards for products used by children under the age of 12, such as levels of lead in toys. It also requires toy manufacturers to test their toys in order to ensure that they are safe.

Small toymakers argue that the laws are simply not feasible for them. The New York Times reports that the legislation is made with big toymakers in mind and that big toymakers have more money to stay compliant.

CIT Group Bankruptcy Affects Small Businesses

CIT Group entered bankruptcy this past Sunday. The group provides lending to a large number of mid sized and small businesses.

According to the New York Times: "On Sunday, CIT entered what it called a different kind of bankruptcy, one that will let it reemerge from court protection by the end of the year under the ownership of its creditors, who widely supported the reorganization plan."

CIT argued against bankruptcy this past summer by stating that being forced into Chapter 11 protection would be disastrous to the small business sector.

SBA Revises Size Standards for Small Businesses

The Small Business Administration has proposed to revise its size standards for small businesses.

If the revisions are put into place, more than 120,000 additional companies would be counted as small businesses. These businesses would become eligible for SBA loans and government incentives granted to small businesses.

The Washington Bureau reports that: "The SBA is reviewing size standards for all industries in order to accommodate changes in industry structure, market conditions and business models. The agency's last comprehensive review of size standards occurred more than 25 years ago.