Small businesses seek a little assistance

Susan Reynolds, right, owner of Alley Cat clothing boutique, says the kind of personal service she can offer customers like Carolyn Pearce has helped her survive competition from big discounters. OWEN RILEY JR./Staff e-mail this story print this story

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With a tax break in the vein of what some major employers get for setting up shop, small firms say they could create more jobs and pay better wages, thus providing long-term economic grist and more attractive options for workers displaced by a big-business shift to cheap-labor countries.

Leaders of the county Finance Committee say there may be a way for local government to level the playing field, though no one has offered a specific proposal.

Already, county and small business officials say as many as 70 percent of future local jobs will be created by small firms. The existing ones, meanwhile, say it's only getting harder to stay afloat.

Ask Michael Simpson or Padam Dhakad about the $2.3 million in new tax breaks that have been recently passed or are currently before the County Council and they're likely to start enumerating the things they could do with the money.

Among the agreements is a proposed $800,000 break for Piedmont Natural Gas that was delayed at last week's council meeting over concerns that it wasn't an incentive necessary to attract Piedmont's $25 million expansion plans. A Piedmont spokesman has said the company's local investment depends on a favorable return and that local expansion plans have been passed over twice before, although there's a "diversity of opinion" on the merits of its current tax break request.

Few advocate doing away with the kind of business rebates that help the region compete with lower-tax states for employment heavyweights like BMW Manufacturing. But newly minted business owners, many of them forced to start over after a government-recruited business laid them off, say it's time for the council to diversify their investment.

"I don't think we're over-invested in (big businesses)," said Finance Committee Vice Chairman Jim Burns. "We might be under-invested in the small business arena."

Susan Reynolds has made her Alley Cat clothing business stick for 19 years, 17 of them on Augusta Road. The last couple, however, have been the toughest, thanks in part to competition from big-time discounters. Her selling points are by necessity customer service and quality — not price.

"I wish people would connect that shopping with small business owners and shopping locally keeps the money in Greenville," Reynolds said.

Local government, she said, could use the same advice.

Sheer numbers are effecting some change.

Across the country, small businesses collectively employ more than half of all workers, according to the Small Business Administration. Burns said he's seen estimates that show 70 percent of Greenville's future jobs will be created by small enterprises.

"Unfortunately, small business people can't afford big-time lobbyists, and their voice is unheard," said Dhakad, a small business finance consultant for numerous Upstate start-ups. "They complain, but you know, that's how far it goes."

This month, the state Legislature cut small business taxes from 7 percent to 5 percent instead of passing Gov. Mark Sanford's original $1 billion proposal to provide relief to all taxpayers.

A separate measure that would provide job tax credits to businesses creating as few as two jobs has been passed by the House but remains in a Senate subcommittee.

There are still no tax-rebate incentives for smaller firms to set up shop and hire workers the way large corporations can qualify for the county's "fee-in-lieu-of-taxes," or FILOT, that gives industrial firms a 6 percent tax rate instead of the standard 10.5 percent.

Councilman Scott Case, a previous chairman of the county's Finance Committee and a self-employed CPA, said instead of providing small business rebates the county can be just as effective by keeping government fees low and refusing to implement legislation that would raise costs overall.

Jerry Howard, president and CEO of the county-funded Greenville Area Development Corp., said most small businesses simply wouldn't be worth a substantial county investment because more than half of small businesses fail within the first five years, while a major employer can offer 300 people a job in one fell swoop.

Burns said that by granting tax breaks for large employers the county is understandably "trying to bite off big chunks" but that its focus could be too one-sided.

Dhakad said applying tax breaks only to big firms amounts to ignoring those who work the longest hours, provide the bulk of the local economy's fuel and can least afford their basic costs.

Making life more difficult is that the cost of a popular Small Business Administration loan of less than $150,000 is poised to increase from 1 percent to 2 percent, Dhakad said.

The average small business loan from a major bank, meanwhile, isn't enough to start a shoe shop, he said. Ask for a bigger amount, and Dhakad said you will get charged six percentage points above the prime interest rate, or 11.75 percent currently.

Simpson said the harsh irony is that a booming economy means a shrinking profit margin for the little guy. "You can see it and you can feel it," he said.

Burns and Judy Gilstrap, chairwoman of the Finance Committee, say even though the state Legislature makes the tax code, there could be ways for the county to put money back in their pockets by cutting fees or agitating for lower requirements on job creation incentives.

"We can't just say that's a state thing," Burns said. "We need to be out there working with our state delegation" to reduce the burden.

Case said recent promises by Burns and council Chairman Butch Kirven to come up with a comprehensive growth plan for the county would do the exact opposite, effecting the kind of centralized regulation that will increase costs to small businesses.

Burns said that's "unfair" and that the kinds of better growth guidelines he has in mind won't entail any new fees or costs, only rules on what kinds of future development can take place on certain parcels of land.

Dhakad is prone to talk about his own ballooning health-care costs and then compare the loyalty of a small business with what he sees as the eagerness of some multinational corporations to employ cheap-labor workers in other countries. He said it's time the little guy started getting a share of the government's rewards.

"Big businesses are the same businesses that fire just as many people" as they hire, he said. "These are the people who are outsourcing to China. Your small feed store guy, what job is he outsourcing?"