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July 02, 2015

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SMALL BUSINESSES ABUSED AND IGNORED: This is part of a letter I wrote recently to one of America's best known and powerful Congressional leaders.

As you know I have grave concerns for small businesses and this country. We are a nation of small businesses. We employ 70% of Americans. Today I was turned down by both Wells Fargo and Bank of America for my request for a Line of Credit. Keep in mind I have accounts receivable of more than $1M. I have no debt. I have been in business for more than 40 years. My clients are the most solid companies in the region. 70% of my business comes from repeat clients. I’m used to this so it is not really the subject of this note. I note it because you can imagine if these guys are turning me down year after year what is happening to the normal small business in America. In the meantime I am offered, several times a week, factoring lending at rates of 18-30% by these lending services springing up all over the country to take advantage of the lack of liquidity of small businesses. In essence they are offering credit card rates for lines of credit with huge interest rates. Not unlike the terms the mafia offers without the deadly consequences. So, here is the information that will shock you:

Prior to 2008 more than 100 community Banks specializing in small business lending were formed each year. Since 2008 only 1 bank in this category has been formed and it was formed by Ex Bank CEO’s who partnered with small business owners to try and meet the need. It is doing well. So where are the banks? Why would the Obama Administration after 6 years and Congress be so reluctant to help the companies who fuel the American economy and work force? Is it politics because we have no effective lobby? Is it a total misunderstanding of the American economic system? Is it because we do not employ union workers? Is it a view by Democrats that we are all Republicans? I know you have tried to address the problem through the SBA but that has not worked. SBA lending has not grown significantly and it is a drop in the bucket compared to the need of business owners to grow. Think of the lost tax revenues to the governments from small businesses who have to pay factoring companies and add the high interest to expenses reducing profits and taxes. Think of the lost employment due to the expense of high interest. Prior to these factoring companies most business owners were and still are using their credit cards for this purpose. For example if I were to factor my receivables it would cost me $275,000 a year. My average new hire earns around $70,000 a year –hardly minimum wage. So, it would keep me from hiring 4 new people a year with a nice salary and full benefits. Those 4 people would on average generate $220,000 each in revenues adding $880,000 in sales to my company. Over 6 years that is $5.4M in annual revenues and 24 new hires. Ironically, my sales in 2008 were $10M and today are $5.6M. In 2008 I had 36 professional recruiters and today I have 25. So, if you want to know why this is a fictional recovery with no middle class jobs there is the reason: Small businesses in the country are being crushed by increased expenses and no affordable credit. You want to do something that will establish your legacy in the next 18 months and turn this economy around? Unleash the power of Small Business by finding a way to get affordable credit available to them. Until Congress does this America will languish in slow to no growth.

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