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Will the Sequester Squelch Small Businesses?

04.04.2013


Financial Fitness April 2013 logoAs a number of government spending cuts take effect, many of the nation’s small businesses will be impacted. Karen Stern, partner in charge of BSW Small Business Services, addresses ways your small business can mitigate the effects of the sequester in the firm’s Small Business Monthly  “Financial Fitness” column.

As a number of government spending cuts take effect, many of the nation’s small businesses will be impacted. Karen Stern, partner in charge of BSW Small Business Services, addresses ways your small business can mitigate the effects of the sequester in the firm’s Small Business Monthly “Financial Fitness” column.

According to whitehouse.gov, small businesses create two-thirds of all American jobs. Yet, these businesses now face another economic hurdle: the sequester – a host of automatic government spending cuts totaling more than $1 trillion over the next decade. Designed to lower the national debt, certain automatic cuts took place as of March 1.

Small Business Health Care Tax Credit. These mandatory cuts include a reduction of 8.7% to the refundable portion of the Small Business Health Care Tax Credit for certain small-tax exempt employers. The reduction rate will be applied until the end of the government fiscal year (September 30, 2013) unless there is some intervening congressional action that causes a rate change.

Cuts in Loan Guarantees. While small business owners continue to be cautious about borrowing, Small Business Association loan guarantees could be cut by up to $902 million. Small businesses are also suppliers and vendors to federal contractors, which will be heavily hit by other cuts. And reduced federal and private sector payrolls will affect small businesses, such as retailers and restaurants, in the consumer economy.

What can a small business do to prepare?

• Understand how the sequester affects your customer base

• Conduct a tough competitive analysis to maximize your competitive pricing

• Work with your accountant for a complete financial analysis of your business to ensure all available tax benefits are considered

Is the sequester a problem? Sure, but it’s also an opportunity to further strengthen your customer relationships and analyze your position for future success.

Team

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