The federal government has often been criticized for not doing enough to help small businesses, whether that’s not meeting legally mandated minimums for contracting with those companies or passing laws that benefit larger competitors instead. Now, new data shows that another issue is arising: A lot of the contracts and deals made between governments and small businesses don’t actually involve small businesses at all.
Many large companies, with recognizable brand names and a national or even global reach, have been receiving loans from the U.S. Small Business Administration for some time now, according to a report from Watchdog.org. From 2007 to 2013, a number of larger companies, such as Holiday In Express, were able to receive millions of dollars in loans from the SBA, which are specifically supposed to go to smaller companies. However, it should be noted that the SBA’s definition of what constitutes a small business can vary from one industry to the next.
Consequently, in the hotel and motel industry, a “small” business is one that has less than $32.5 million in annual revenues, the report said. But what this ignores is that Holiday Inn’s parent company had about $1.9 billion in revenues in 2013, meaning that even if an individual location may qualify for the financing, the larger entities do not.
A common plan
Of course, large companies understand this, and as a consequence are able to divide themselves in such a way that they can often skirt some rules related to small business laws, the report said. This is especially common in the hotel industry, as big-name companies like Best Western, Comfort Inn and Suites, and Super 8 all received billions in SBA loans during a similar period as well.
“Taxpayers are subsidizing the national roll-out and distribution plans of large companies across America,” said Adam Andrzejewski, founder of OpenTheBooks.com – which compiled the data – and chairman of the American Transparency Organization, according to the site.
This may be problematic for entrepreneurs nationwide, but the fact of the matter is that these owners can probably also do more to improve their own financial standing as a means of positioning themselves to receive financing. That might include cutting costs for things like small business insurance – such as policies for liability insurance – to possibly save thousands of dollars annually.
