2016 was a strong year for small businesses. According to an annual report released by the Kauffman Foundation, it was the second straight year start up activity had increased since falling during the recession. For factoring companies like Security Business Capital, economic growth in the small business sector is important. The National Federation of Independent Business also found that the election of Donald Trump boosted optimism to levels not seen earlier in the year. Moving into 2017, many are wondering what the new administration will mean for the estimated 28 million small businesses in the U.S. Specifically, how the administration’s major upcoming policy changes will affect the issues small businesses currently face.
The following list includes several key areas business owners should watch closely moving forward:
According to the National Federation of Independent Business (NFIB), the top issue for small businesses in 2016 was the rising cost of health care. In fact, 70 percent of small companies cited these costs as their top concern. The National Small Business Association revealed that 42 percent of small businesses have contacted lawmakers concerning these health care costs. President-elect Donald Trump has repeatedly stated his intentions to repeal the health care overhaul, even going so far as stating that it is a top priority.
The Affordable Care Act (or “Obamacare”) is a government-mandated healthcare program that requires companies that have 50 full-time employees or more to provide affordable coverage to both the employee and their dependents. Many small business owners are saying that the high costs of healthcare premiums are overwhelming. For many, these insurance costs have risen by 25 percent. Enduring such increases is simply unsustainable for a business of any size.
According to The Wall Street Journal, Mr. Trump has not only favored lighter restrictions across industries, but he has also criticized the Dodd-Frank regulatory overhaul. The reason given is that it is unnecessarily harsh on smaller banks. The expectation is that Mr. Trump’s more lenient regulation policies will benefit both big and small banks. In turn, this will make it much simpler for entrepreneurs to secure loans so they can grow and expand their businesses. This can also benefit small businesses interested in using factoring services to expand their business.
The new administration has also shared its plans to reduce or remove some of the restrictive regulations industries are currently burdened with. Some of these changes include the U.S. potentially withdrawing from the International Climate Change agreement, removing environmental regulations placed on companies in certain industries. Some of the industries most likely to experience the effects of policy changes include: infrastructure, banks, real estate, defense, oil and coal, retail, telecom, health care, among others. So, depending on the industry or field you are in, keep in mind that your company’s daily operations could change very soon.
Under the current law, sole proprietors, partners and corporate shareholders (whose business income is reported on their personal returns) can be taxed at rates up to 40 percent. In addition, corporate tax rates range anywhere from 15 to 35 percent. Mr. Trump has shared that he will not only lower taxes, but that he will also compress the current seven tax brackets into three simplified brackets. In addition, rather than the current top individual rate of 39.6%, top earners would pay 33%. Corporate taxes would be decreased to 15 percent, and S-Corps and LLCs would have a top tax rate of 15 percent.
According to Fortune Magazine, this tax reform would also “close inversion loopholes that let corporations defer taxes by banking funds overseas. Instead, companies would pay taxes on income at the time it is earned.”
Mr. Trump’s administration is not the only voice advocating for lower income taxes for all companies. The National Federation of Independent Business (NFIB) has also expressed its position that there should be greater tax cuts. While the tax law cannot be changed without Congress, many feel that with a Republican president and Republicans holding the majority in both chambers of Congress the approval of these tax proposals is a strong possibility.
With the current total U.S. federal government figure fast approaching an astronomical $20 trillion, one of the biggest challenges the new administration faces is reducing the trade deficit – especially with China. According to Forbes, the trade deficit with China reached a new high of $365.7 billion in 2015. With plans to rebuild the U.S.’s manufacturing base, Mr. Trump has suggested penalizing U.S. companies that move jobs overseas. Some other changes that will likely be implemented to achieve this include new tariffs on China (45%) and Mexico (35%), along with an abrupt end to the pending Trans-Pacific partnership (TPP).
During a visit to Carrier Corp. furnace plant in Indianapolis December 1, President-elect Donald Trump firmly stated that “Companies are not going to leave the U.S. anymore without consequences. Leaving the country is going to be very, very difficult.”
Based on Mr. Trump’s recurring criticism of the North American Free Trade Agreement (NAFTA), the assumption is that the new administration will thoroughly evaluate and revise existing trade deals, including NAFTA. If your business is in anyway involved in overseas trade, expect to see some adjustments in the near future. In the words of Mr. Trump himself, “It’s going to be changed. We have to bring our jobs back.”
Security Business Capital Helps Small Businesses Grow and Expand
Regardless of the many changes taking place, one of the biggest challenges small businesses face remains: securing the working capital necessary to cover operational expenses and/or continue to expand. Security Business Capital specialize in helping companies secure the funds they need to operate smoothly, grow their business, and take advantage of opportunities - minus the high interest rates and costs. The team of experts at SBC have years of experience in providing alternative financing solutions for startups and small businesses (e.g. invoice factoring and PO funding). The application and set up process is fast, simple and hassle-free. Temp staffing, oil and gas, transportation, manufacturing and distribution, business services and government are just a few of the industries SBC provides services to.
If you would like to learn more about Security Business Capital’s alternative business financing options, simply contact SBC for a free quote and/or consultation.