How to Prevent Foreclosure of Businesses and Companies

One of the biggest fears in any business and corporations is on bankruptcy. Since most companies would not have a plan and assessment method for checking financial matters, their companies would be filing for foreclosure in just a couple of years. This is because most corporations are lax on their financial responsibilities. For example, they would not monitor their taxes and they would forget to pay for certain bills that are associated with their business. If such payments are not completed, then a company would have a surcharge according to the percentage of arrears. Companies should always have an auditor or assessor in order to check up on the payments for loans. There are also accountants who can compute for net value and profit loss for companies and they can be used by business owners to detect any losses in their respective companies. There are a lot more techniques to prevent foreclosure of a company and owners should just be aware of such techniques in order to prevent losing their companies.

In terms of loans, there are certain listings for people who are planning to loan money. For instance, there are certain loans that cover tax free coverage and no annual increase. Since there are now laws which cover loans, financial institutions are now strict in providing laws. They may impose a lot of requirements and people would first need to complete such requirements before they can get their loan. There are also new laws that are imposed for foreclosure prevention and employee management so business owners should always be aware. The government also has the right to increase taxes that is why business owners should always compute for tax surcharges or annual payments so that they can be aware if they would need to increase their prices. In terms of services, most companies like hotels and condominiums would increase their prices according to the trend of the government. If the government would impose more tax on private properties, then most companies would also increase in price. The work of the business owner is to assess for the changes with the government so that they would prevent the foreclosure of their respective companies.

Professional Associations and Governments

Professional Associations are usually nonprofit organizations consisting of member companies and a governing body, who are elected members, according to rules and bylaws. They act as a representative of industry sector companies.

Professional Associations have an essential role in the industry sectors. They help the companies to become more competitive in promoting their sector and try to affect policies in their member’s favor. They also have enormous potential when it comes to acting on behalf of their industry in communicating with government bodies. They have the capacity to pass messages and information about policies and laws to their represented members. A productive and effective relationship between government and Associations is a crucial concern for the policy making process.

Professional Associations are sources of information about industries and can provide valuable information to governments. Next we are going to explain why this information can be beneficial for governments and why governments should consult with them.

Reliable Communication

Communication between parties is not an easy task, especially when it comes to a group of companies. Associations are the most reliable and effective way for communication between government bodies and their represented companies.

Economy and Employment

Associations represent private and public businesses that are the backbone of the economy and these businesses create jobs and profits. They will contribute to the economy by paying taxes and this will cause economic growth.

Policy Affects

The Professional Association finds out how a policy or law will affect their sector and measures the results. They should also act as an independent resource ensuring that the desired and proposed results would be achieved from the government actions.

Extensive Industry Knowledge

Professional Associations are experts at developing strategic plans, setting standards, and building policies in their field. Associations have access to extensive industry and sector knowledge through their members and officers. This knowledge helps to have more transparency, identify any issues and develop practical solutions to problems. Their knowledge can also be passed to government bodies and policy makers who will need this information in the decision-making process. A Professional Association and Government bodies can form partnerships to avoid any gaps in understanding.

Market Intelligence

An effective Professional Association is trusted to speak on behalf of its members. Being a representative of their members’ interest, Associations should have an effective market intelligence network. They should find out what issues are arising among policy makers and businesses and gather all reputable market information. They are also important in organizing and have a place in the policymaking process. Market intelligence gathering shall be accompanied by the knowledge, sharing culture, within the Association.

Practical Information

Professional Associations have access to the best available information gathered by their members. Therefore passing this information to government bodies will help them assess the cost and benefits of policies.

Collaborative Cooperation

Professional Associations are flexible when it comes to working with other groups. They are able to work closely with governments to minimize the differences and find more common grounds. When it comes to their member benefits, they will exert extra efforts to create alliances and additional networks to deliver the results.

Small Business – When Government Stacks the Deck Against You

We expect a fair degree of corruption, arrogance and drooling self-interest from our elected officials. After all, in the last 206 years, we have fallen a great distance from the days of the “virtuous republic” that existed-or was thought to exist-in that first decade after the Revolution. Yes, we expect it, but I would have more respect for the operatives, the party-men and the politicos themselves if they could be just a little intelligent about it. The current issue with the Bush Administration, Congress, the SBA and the awarding of a great deal of money earmarked for small business, is a case in point.

When Big Business Seems Small

It is illegal, a felony that comes with fines and a prison term, to try to pass your big business off as a small business to get one of the 23% of Federal contracts reserved for small businesses. Yet, it happens all the time. According to the American Small Business League, a non-partisan watchdog group, some $60 billion in Federal contracts go to major corporations each year. How it happens brings us to the question of how you decide that a business is truly small.

Counting Heads

What is a small business? How do you measure it? Is it revenue? Sales? Staff size? Any one of these could be a viable measure, but for the most part the matter is decided with staff size. Depending on the industry, you can have a maximum of 1,500 employees and still be considered a small business! (Federal Regulations Title 13, Part 121, Section 201)

These larger “small businesses,” with 1,000 to 1,500 employees, deal in oil, aerospace, rail transportation, textiles, and chemical and rubber products. Wholesalers, regardless of their products, are capped at 100; information technology value-added resellers are capped at 150 (a very recent change) while the rest are capped at either 500 or 750. In 2005 (the most recent data available), there were 5,966,069 firms in the U.S. with 500 or fewer employees and they employed 58,644,585 people out of a total employment of 116,373,003. That is 50.3% of the working population working in what could easily be described as legitimately small businesses. If you add up the firms with larger numbers of employees, you find that there are 11,546 of them and that they employ 9,475,180 people, 8.14% of the workforce.

Call me crazy, but a firm with 1,000 employees doesn’t seem to be very small to me! It may be small when compared to the giants in its industry, but it is a giant compared with the vast majority of small businesses. In 2004, there was an effort to bring the number of employees down from 500 to 100 for a business to be classified as small. In spite of a great deal of support for the measure-including U.S. Representative Lynn Woolsey (D-CA), who said: “By working to change the definition of a small business for government contracts from 500 to 100 employees, federal contracts specifically designed to ensure the success of American small business would go where they belong – to support Americans, not big companies dressed in sheep’s clothing.”-the effort was killed by the SBA itself. That, however, is only the beginning. Another has to do with how small businesses are certified.

Finding a Certified Small Business

The question of how many employees a small business can have is complicated even further when we see that the government has been rather lax in enforcing the contract award rules for small business. In fact, in 2005, some $49 billion in Federal contracts that were set aside for small business were actually awarded to the 13 largest government contractors. This lax enforcement has led to cases where the small business in question is actually a subsidiary of a much larger company, where businesses have outgrown their small business status, where big business misrepresents itself as a small business and where government procurement offices, such as with the military, simply disregard the rules and do business with who they like.

The Small Business Front

Two of the most prevalent ways that large companies can maintain a small business front are through the legal loopholes that allow a small business to retain its status throughout the life of its original contract-and bid on new business as a small business-no matter how large it grows and even after it is bought out by a large company.

In either case, what the company in question is doing is, in fact, legal. Their actions are also limited by the fact that the loophole is based on the length of the small business’ initial contract. For example, if a small business wins a 10-year contract to provide computer hardware, it maintains its small business status for the full 10 years of the contract regardless of how large it grows or if some huge conglomerate buys it. This has been an issue for some time. Consider the following:

According to a 2006 report on the U.S. Government Accountability Office: Commerce Information Technology Solutions (COMMITS) Next Generation Governmentwide Acquisition Contract, “We found that many of the 55 COMMITS NexGen contractors have grown significantly or have been acquired by larger businesses and may no longer meet small business size standards. We also found that a significant portion of the task orders intended for the smallest contractors were issued to larger, incumbent contractors.”

Incumbent contractors tend to get the lion’s share of the government’s business. A 2004 SBA Office of Advocacy: Eagle Eye Publishers’ Report said that: “Of the top 1,000 small business contractors in FY 2002, Eagle Eye Publishers’ analysis found 44 parent companies it identified as either large firms or ‘other’. Contracts to these two groups taken together had a total value of $2 billion.” The report continued, saying that: “The Department of Defense and the General Services Administration accounted for 79 percent of the contract awards found to have gone to large businesses.” One of the conclusions drawn from the report was: “As a result of this lack of transparency, many awards that should be reserved for small firms go to large firms unchallenged.”

Disregarding the Rules

Rules can be broken either directly, by a willful disregard on the part of those the rules were intended to regulate, such as a company that purposefully misidentifies itself as a small business in order to get a contract; or they can be broken indirectly by a lack of oversight and enforcement that creates an atmosphere in which the rules can be ignored. One of the problems sited against the SBA is oversight. “SBA did not review the majority of reported bundled contracts that we identified, though procuring activities must provide, and SBA must review proposed bundled acquisitions. As a result, 192 contracts identified by procuring agencies as bundled were awarded without SBA’s review. If all of these are actually bundled contracts, a minimum of $384 million would be potentially lost to eligible small businesses, based on minimum dollar reporting requirements of $2 million.” (SBA Office of Inspector General: Audit of the Contract Bundling Process, May 2005) And consider this from the SBA Office of Inspector General: Audit of Monitoring Compliance with 8(a) Business Development Contract Performance, March 2006:

“Though SBA delegated 8(a) BD contract execution authority to 26 procuring agencies, SBA did not ensure that procuring agencies monitored whether companies complied with 8(a) BD regulations when completing 8(a) BD contracts . . . SBA has ultimate responsibility for ensuring that companies comply with 8(a) BD regulations”

The SBA is the final oversight authority for these contract awards and yet through their lack of enforcement efforts, it is easy for large businesses to slip through. Why is this? There are two likely reasons. The first is that the Bush Administration, when it came into office, cut funding for the SBA. At the end of the Clinton Administration, the budget for the SBA was about $1.1 billion. By 2006 it was down to $456.5 million. Funding has increased since the 2006 low; for 2009, that number has increased to $657 million, mostly due to funding for disaster relief loans; but the agency has nowhere near the budget it used to have. Generally speaking, if you cut funds to an agency, certain things start to slip and that is not a message that the SBA, or the Bush Administration for that matter, want going public.

However, it already has.

An audit by the American Small Business League (ASBL) and two independent experts showed that even while the SBA was saying that it is a “myth that large companies, including large, multi-national corporations are taking away federal contracts specifically intended for small businesses,” it was discovered that the Bush Administration had in fact included billions of dollars in awards to Fortune 500 corporations and other large businesses in the United States and Europe in its small business contracting statistics. Also, the Bush Administration failed to comply with the congressionally mandated 23% small business contracting goal by including such corporate giants as:

  • Dyncorp
  • Battelle Memorial Institute
  • Hewlett Packard
  • Government Technology Services Inc (GTSI),
  • Bechtel
  • Lockheed Martin
  • General Dynamics
  • General Electric
  • Northstar Aerospace
  • Booz Allen Hamilton Inc.
  • Raytheon.
  • British Aerospace Engineering Systems
  • Buhrmann NV (Dutch)
  • Thales (French)

More than that, ASBL’s research also found that the government was forced to systematically increase the volume of contracts awarded to small businesses in order to balance out those that were going to inappropriately large companies. In addition, awards to legitimate small businesses were systematically inflated to equalize the reduction of small business contract dollars awarded to Fortune 500 corporations. The ASBL found that according to SBA numbers, Circle B Enterprises Inc. received $887.5 million during 2005. However, the government’s own figures indicate that Circle B Enterprises Inc. received $287.5 million during 2005, which represents a discrepancy of $600 million. The ASBL audit found several other instances where the contracting numbers of legitimate small businesses were also significantly inflated.

The Bottom Line

The government decided to play fast and loose with small business contract money and they got caught siphoning it off to some of the largest companies on Earth. There are those that will only see the damage that this will do to McCain in the fall, yet another Bush Administration failure/debacle/betrayal-whatever you like best. That, however, is not the point. The point is why was the SBA hamstrung and placed in the position it has been in by the Bush Administration? More than that, why has this abuse been allowed to go on for so long? Call me a political cynic-I am from Chicago so I come by it honestly-but the only thing that makes sense to me is that government officials are paying back the people with deep pockets who helped to get them elected and they are doing it at the expense of, well, YOU. True, paybacks are a time-honored political tradition, but by stealing the money from small business, the U.S. Government as a whole turned its back on the overwhelming number of U.S. employers and employees in favor of a handful of major corporations. I urge you, as a small business owner; and you as an employee of a small business, to write your senators and congressmen, and to write to each of the presidential candidates, McCain and Obama, and their respective party chairmen-Republican and Democrat alike, and tell them that you want this to stop. Remember, small business contract set-asides are for YOU, not major corporations. It is time to remind Washington of that.

Franchisee Compliance With Law and Government Licensing Issues

A franchising company must always be a Stickler for details when it comes to government licensing and compliance with Law of their franchises and franchised outlets. If a franchisee fails to comply with Law or secure the proper government licenses to operate their business it could become a public relations nightmare.

Not only must franchising companies monitor their franchises, they should also address this issue prior to the commencement of the franchise in the franchising company’s franchise disclosure documents and franchise agreements. It is for this reason that I added a clause into all of my franchising companies franchise agreements. Below you’ll find a clause;

3.24 Compliance with Law

3.24.1 Government Licensing

Franchisee will comply with all national, federal, state, regional and local laws and regulations pertaining to the operation of the Franchised Business and will timely obtain and maintain any and all permits, certificates, registrations, insurance or licenses necessary for the full and proper conduct of the Franchised Business. Franchisee will pay promptly, as they become due, all national, state, city and county licensing, registration and permit fees and charges in connection with the operation of the Franchised Business.

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Now then, you must consult your own franchise attorney to determine how best to address this issue for your company and to make sure that you are protected as a franchisor to insure the integrity of your brand-name. I hope you will consider this in 2006.

We Need Continuing Education for Politicians, Bureaucrats, and Government Regulators

It is amazing how many rules and regulations are put forth by government bureaucrats and regulators demanding various professionals who hold licenses to go to ongoing education classes. Most of these classes are mundane, and more about demanding that the professionals submit to authority to maintain their licenses, than anything that will help the consuming public with important safeguards. In many regards as a business owner this totally irks me because we have bureaucrats in Washington DC, and at the state level making more and more rules and regulations each and every year.

It seems that they just can’t help themselves, and they assume that anyone that violates one of their rules or regulations is unethical, an evil doer, or trying to dodge their responsibility in protecting the public. That’s just not the case, often their rules and regulations don’t fit the circumstances, and the entrepreneur or business person is just trying to service their customers despite all the bureaucratic nonsense in the way.

I’ve come to the conclusion over the years, and I’ve even brought this up at our think tank, that politicians, bureaucrats, and government regulators need to have ongoing education for themselves. This is because many of them have never run a business, or participated in the free market system, therefore they don’t understand it.

Rather than the business community getting angry at all the nonsense, why not just make it mandatory that these people working in the government learn the ropes of the real world. What should we be teaching them? Well, here are three items below that might be a good start;

1. Free Markets
2. Constitutional Refreshers
3. The Inefficiencies of Government Bureaucracies

First of all, maybe they need some on-the-job training, and actually work in a business, and mirror as a temporary tagalong with an actual small business person to see how difficult it is to run their operation with all the nonsensical regulations that are put forth. Then I believe they need to read Milton Friedman’s “The Right to Choose” and DeLorenzo’s “How Capitalism Saved America,” and of course Ayn Rand’s classics.

Finally, I believe these bureaucrats and politicians need to take constitutional refresher courses so they don’t promote laws which impede our rights as citizens, business owners, or our right to free contract. You see, these folks need to understand that bureaucracies are by their very nature inefficient, and therefore every time the government does more, they create inefficiencies not efficiencies in free markets. Yes, we need ongoing education classes for politicians, for bureaucrats, and for government regulators. That’s only fair.