Your Bottom Line: A Small Business Approach to Accessing Credit and Navigating Health Reform in...
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A Small Business Approach To Accessing Credit
& Healthcare Reform in Illinois
January 11, 2012
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About Small Business Majority
• National public policy advocacy organization – founded and run by small business owners
• Research and advocacy on issues of top importance to small businesses (<100 employees) and the self-employed
• Areas of focus: clean energy, healthcare, access to capital, jobs and the economy
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Current Challenges Small Businesses Face in
Accessing Capital and Health Insurance
Marianne Markowitz
SBA Regional Administrator IL, IN, MI, MN, OH, WI
3
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U.S. Small Business Administration
Mission: Our mission is to help small businesses start and succeed
SBA’s 3Cs: Capital, Counseling, Contracting
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Small Businesses Concerns
Access to Capital
Healthcare
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Access to Capital
Small Business Jobs Act
Higher Loan Limits
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Access to Capital
Loan size raised from $2 million to $5 million
Microloans from $35,000 to $50,000
Record increase in Illinois lenders using SBA loan programs
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Access to Capital
President’s National Export Initiative
Export Express Pilot
STEP grants: $90 million competitive grants
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Obama Economic Policy
Affordable Care Act
---
Success of Jobs Act
22 straight months of job growth=2 million jobs
More private sector jobs created in 2011 since 2005
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Obama Economic Policy (cont’d)
American Jobs Act
Support for returning veterans
Payroll tax cut=tax cut for260,000 Illinois firm
Unemployment insurance reformation
Infrastructure Investment= $1.8 billion for Illinois
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Healthcare
Healthcare is a MAJOR concern for small business owners – in fact according to an NFIB study it’s been the number one concern of small business owners every year since 1986.
Small businesses currently pay as much as 18 percent more for the same coverage as big companies under the current system.
Job Lock
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Affordability and Accessibility
• Tax Credits
• Insurance Market Reforms
• State Exchanges
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Contact Information
SBA Illinois District Office 500 West Madison, Suite 1150
Chicago, IL 60661 (312) 353-4528 www.sba.gov
Follow us on www.twitter.com/SBAgreatlakes www.facebook.com/SBAGreatLakes
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Your Bottom Line: Access to Capital
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The Big Credit Squeeze
• Higher reserve requirements mean less money to lend for banks.
• Banks would rather lend to larger companies because the effort is the same, and a perception that small business lending is more risky.
• Traditional collateral assets have been degraded (real estate and receivables).
• FDIC used to approve 300 new bank charters annually replacing the churn of failing banks. FDIC has approved only three new national bank charters in the last two years.
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Who cares and why?
• Business and policy makers
• Banks are doing what’s right for them, but that’s hurting small business and the economy
• In many recessions, small businesses produce all of the jobs that lift the economy to recovery
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What should I do?
• Talk to your Bank
o Ask your bank if they have someone who has worked with clients to get loans from the Small Business Administration (specifically the 7(a) or 7(m) loan programs), and ask to be directed to that person.
o If your bank has refused you credit, tell them you will leave for a lender that offers credit.
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Who offers small business credit?
• Smaller banks and community banks with a more local or regional footprint are the place most small businesses access credit.
• Banks with dedicated SBA specialists.
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SBA Loans
• 7(a) - Lending Program
o Loan guarantee program o Financing up to $750,00 from qualified
lenders
o Working capital, asset purchases and leasehold purchases
o Personal guarantees required from owners with 20% stake or more
o 10-year term
o Available only to people with no other resources
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SBA Loans (cont’d)
• 7(m) - Microloan Program
o Loans funded entirely by SBA o The program not fully funded
o Smaller, microloans
o Funds are unrestricted and available to start-ups
o Typically loans come with required enrollment in technical assistance classes
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Small Business Lending Fund
• Treasury Department initiative to deploy $30 billion in small bank investment to free capital for lending (part of 2010 Jobs and Credit Act)
• Limited to small lenders
• http://www.treasury.gov/resource-center/sb-programs/Pages/sblf-map.aspx
– In Illinois, 22 institutions in 251 locations have received funds
– 78% of participating community banks have increased their small business lending
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Factoring
• What is factoring?
o Using your sales receipts as collateral for a loan, which the lender collects. This takes the focus of the loan off your business and puts it on your customer.
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What is Small Business Majority working on?
• Working with alternative lenders to find new sources of capital.
• Working with state and federal agencies to ensure smooth capital deployment.
– SBA
– Treasury Department
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SBA Resource Partners Women’s Business Centers (WBC)
SCORE
Small Business Development Centers (SBDC)
Illinois Small Business Development Center
Services -‐ one-‐on-‐one confiden)al business advice and technical assistance
-‐ up to date, relevant business informa)on and management training
-‐ strategic business planning and financial analysis -‐ access to capital iden)fica)on and prepara)on assistance -‐ marke)ng research and marke)ng plan development -‐ export development and interna)onal trade guidance
-‐ government contrac)ng assistance
-‐ technology, innova)on and entrepreneurship
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Illinois Small Business Development Center
Business Informa?on Center 800-‐252-‐2923
www.ilsbdc.biz
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Your Bottom Line: Health Care
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The New Health Reform Law
• Provides immediate tax credits for most small businesses ($40 billion in credits by 2019)
• Provides immediate access to a Preexisting Condition Insurance Plan for the self-employed
• Establishes a competitive marketplace for small businesses and the self-employed in 2014
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Small business tax credits
• Available to businesses with employees
• Takes effect immediately (tax year 2010)
• Which businesses are eligible?
Fewer than 25 full-time employees
Average annual wages <$50,000
Employer pays at least 50% of the premium cost
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Small business tax credits
Our report: 159,900 Illinois small businesses are eligible (78.5% of all IL businesses); 48,400 businesses eligible for the maximum credit
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Small business tax credits
• Tax credits on a sliding scale:
o Up to 35% of premium expenses for 2010–13
o Up to 50% of premium expenses for any two years beginning 2014
• Tax credits do not cover premium expenses of owners or their families
• Tax credits can not be claimed by the self-employed
• Still available for those who filled extensions or as an amendment to your 2010 taxes
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How to claim the small business tax credit
• Small employers (businesses or tax-exempt) will use new Form 8941, available on www.irs.gov
• Small businesses will include the amount of the credit as part of the general business credit on their income tax returns
• The credit can be reflected in determining estimated tax payments for a year
• The credit applies towards income tax, not employment tax
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Preexisting Condition Insurance Plan (formerly high-risk pools)
• Available to individuals -- incl. self-employed
• Takes effect immediately
• Eligibility: People who have been uninsured for six months and have been denied for a preexisting condition or have a letter from a physician
• Plans = lower premiums due to federal funding ($5 billion until 2014)
• Available until full implementation in 2014 (no gap in coverage)
• http://insurance.illinois.gov/IPXP/
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State Health Insurance Exchanges: Coming in 2014
• Large marketplace to shop for health coverage o Purchasing pool to increase buying power and reduce
administrative costs
o Small businesses with fewer than 100 workers eligible
• Private insurance plans will compete o Improved competition will increase employer choice
o Exchange will negotiate with insurers on behalf of small businesses to ensure higher quality and lower costs
• RAND Study
o Exchanges will expand coverage to 85.9% of small business employees, up from 60.4% today, an increase of 10.5 million workers
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State Health Insurance Exchange
• One-stop shop web portal
Small Business Exchange
INSURANCE PLANS
EXCHANGE Choice
Comparison Billing
Tax Credits
SMALL BUSINESSES
o Compare plans and get detailed information about price, quality and service
o Plans organized by category: bronze, silver, gold, platinum
o Calculator to compare costs across plan options
o Streamlined billing process
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State Insurance Exchange: Other Benefits
• Many small business workers and self-employed entrepreneurs will receive affordability tax credits towards their premiums
o Up to 400% of federal poverty level (approx. $90,000 for a family of four)
• Ensure that more $$ go to medical care – reduced administrative costs
• Other incentives for administrative efficiency and modernization
• Expanded coverage and individual responsibility requirement – reduce hidden tax
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State insurance exchange: Other Benefits
• States determine whether to keep the individual and small group markets separate or merge them
• Insurance will still be sold outside exchange
• Members of Congress must use the exchange
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What does this all mean for your bottom line?
Changes in average employer contribution per person covered
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Exchange – key issues
• Active vs. passive (can the exchange negotiate?)
• Regional exchanges
• Role of brokers
• Expanding exchange to large firms in 2017
• Incorporation of wellness and prevention programs
• Administrative issues: billing, payment, web, etc.
• Effective education and outreach
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• Businesses with fewer than 50 workers – 96% of all businesses – are exempt from any requirement to offer insurance
Shared responsibility
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Accessible
• Insurance plans must have a range of costs to ensure affordability. • Include provisions to help small businesses and their employees understand how to enroll, compare plans, and obtain personal assistance, as through a toll free hotline. • Is easy for small businesses, employees and providers to use and reduces paperwork
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Quality
• Must be a choice of several plans with different benefit levels. • Small business must be represented on the Illinois Marketplace Governing Board, along with a diverse mix of expertise related to health care. • The Governing Board must be independent • Ensure ethnic, racial and cultural diversity in the membership Governing Board.
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Contains Costs
• Must have the same rules for plans inside and outside of the competitive marketplace to ensure that risk sharing is fair for all. • Governing Board and all procedures must be created to protect against Conflicts of Interest • Transparency and consumer interests are fully integrated into the insurance marketplace, such as with a Small Business and Consumer Advisory Committee to the Governing Board.
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Questions and More Information Joyce Harant 309-648-3035 [email protected]
Small Business Web page: http://www.cbhconline.org/infocenter/small-business/
Your Guide to Health Reform: http://www.cbhconline.org/infocenter/your-guide-to-health-care-reform/
Illinois Legislation:
Amendment to SB 1313, Illinois Health Benefits Exchange Law: http://www.cbhconline.org/infocenter/small-business/sb1313/
Competitive Market Place- Senate Bill 1729 : http://www.cbhconline.org/action/advocacy-day/
Insurance Rate Review- House Bill 1501: http://www.cbhconline.org/infocenter/rate-review/
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Resources
• National HHS website: www.healthcare.gov
• Our website: www.smallbusinessmajority.org
o “What’s in Healthcare Reform for Small Businesses”
o Detailed FAQ
o Tax credit calculator
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Join Our Network
• Erica Dowell, Network Coordinator
• Email: [email protected]
• Direct: (202) 535-3244
Connect with us!
@SmlBizMajority
Small Business Majority
Ways to Get Involved:
Contact
• Receive a monthly newsletter
• Share your story for media requests
• Letters to the editor/Op-eds
• State events/Roundtables
• Fly-ins
• Webinars for business organizations