The President's 2013 budget seeks to reduce the federal deficit to $901 billion by increasing taxes on "the rich" -- namely, households making more than $250,000.
However, many small business owners pay taxes on their earnings at the individual level. An annual income of $250,000 might sound like a lot of money to some people, but in New Jersey or New York, it doesn't exactly put you in the "wealthy" category.
The good news for small business owners is that Mr. Obama has proposed 3 percent increase in the Small Business Administration (SBA) budget. The funding will go toward subsidizing government-guaranteed loans to small businesses. Without a greater government subsidy, the SBA would have to increase fees on borrowers and lenders, a move that could stymie the fragile economy.
While the president proposes a $16 billion cap on the size of the SBA's flagship 7(a) loan program -- lower than the current $17.5 billion cap -- the agency would receive an additional $7 million for a veteransâ€™ entrepreneurship training program. However, the SBA would have to reduce funding for its other counseling programs, including its nationwide network of Small Business Development Centers. These centers have proven valuable to the growth of small businesses. I believe this would be a mistake.
Mr. Obama has also proposed a Community College to Career Fund -- with an $8 billion price tag -- designed to bolster entrepreneurship. The initiative would train more workers for jobs in growing industries by offering six-week online courses, as well as a six-month entrepreneurship training program available to 100,000 small-business owners. Government programs usually come with bureaucracy.
We will have to wait and see if this effort will make a difference. So far, the StartUp America Partnership, of which my company is a participant, has yet to make a big impact.
The SBA 7(a) loan program is a proven winner. Small business owners would benefit more from building upon that program's loan guarantees than they would from new government-run initiatives.
Rohit Arora is co-founder and CEO of Biz2Credit, an online resource that connects 1.6 million small business owners with 1,100+ lenders, credit rating agencies and service providers such as CPAs and attorneys via its Internet platform. Since 2007, Biz2Credit has secured more than $500 million in funding for small businesses in New Jersey and across the U.S.