Finding Solutions To Avoid Small Business Bankruptcies

The trouble in the business world is not just confined to big companies and banks which get covered on the front pages of newspapers. Small business in America is officially in trouble.

A study by Jupiter eSources says that "the numbers show a 49% increase in commercial bankruptcies over last year, with an average of 235 daily filings last month compared to 158 in April, 2007," according to BusinessWeek.

No one should be surprised by the spike up in the numbers, or the causes. Most small businesses face the same tight credit and rising costs of commodities that consumers do.

But, there are some potential solutions:

1. Banks are not passing along low interest rates which they get from the Fed to business borrowers. The Fed and IRS should set up a systems whereby banks get a tax break on loans made to companies with fewer than 500 employees. Banks are not going to make credit more available without an incentive.

2. The federal and state governments should give tax breaks to companies which have seen the core price of their most essential expenses pick up by more that 15% year-over-year. That means a trucking firm would get tax abatements on the cost of gas. Restaurants and bakeries would get credits on food items made from wheat, corn, and other rising commodities.

3. For people who have to travel 20 miles or more to and from work at companies with under 500 employees, there should be a commutation credit. This will encourage people to stay with smaller companies. In areas defined as those with adequate public transportation, the credit would not apply.

4. A one-time tax abatement check from the IRS. People who file personal income taxes got a rebate this year. That may be good for the economy, but it does not help if small businesses are going down left and right. The size of the check should be based on the company’s 2007 revenue.

Douglas A. McIntyre