The SurvivalWare Jobs Act of 2011 – “100K, Here to Stay”

My Proposal to Help Small Business

By Rusty Luhring

Small Business Advocate

Founder, CEO of Luhring SurvivalWare, Inc.

Cash Flow Analysis and Projection Software

 The post mortems on Solyndra have been fascinating, to say the least.  I think what we are seeing is a growing mountain of evidence that Solyndra was doomed to happen when the loan guarantee program was created in the first place.  That perhaps expecting government workers to act like venture capitalists is no way to run a railroad.  I have an alternative to the American Jobs Program that I’ve started a crusade for.  It is called the “SurvivalWare 100K, Here to Stay” program.

But first, let’s talk about Solyndra.  It helps make my program all the more compelling. 

Here’s what we know, nearly 30 days after the bankruptcy filing August 31, 2011: 

  • The company may have had a better chance of surviving WITHOUT the loan than with it.  Wait, what?!  That was the gist of a Wall Street Journal Article on page B1, 9/16/2011, “Loan Was Solyndra’s Undoing.”
  • Solyndra Executives spent lavishly.  (“Solyndra’s ex-employees tell of high spending, factory woes” Washington Post 9/22/2011).  Let me do the math.  $500 million+  in federal loan guarantees.  Effective interest rate a little over 1% APR.  Did they sign personal guarantees?  Hard to tell.  And why are they pleading the 5th at the Congressional Hearing?  So who exactly is surprised they spent lavishly?
  • The encircling Republican partisans smell blood in the water, but they are not exactly blameless.  According to Dana Milbank’s column in today’s Washington Post (9/27/2011 pg A8) 

“What McConnell neglected to mention is that Solyndra was cleared to participate in this loan guarantee program by President George W. Bush’s Administration.  He also did not mention that the legislation creating the loan-guarantee program, approved by the Republican-controlled Congress in 2005, received yes votes from – wait for it – DeMint, Hatch, and McConnell.” 

  • Wait, it gets better. 

“Bush’s Energy Department apparently adjusted the regulations to make sure that Solyndra would be eligible for the guarantees.  It hadn’t originally contemplated using the photovoltaic-panel manufacturing that Solyndra did but changed the regulation before it was finalized.”

 You may call that highly suspect.  I call it good pro-active government relations strategy executed by a top notch lobbying firm.  They deserve kudos for early detection of the problem, and successful resolution.  They surely deserve a handsome payday.  And surely the dollar amounts will become published as the investigations continue. 

  • In no way am I absolving the Obama administration.  They are taking this tendency to enact grand plans and appear to “do something” for every ill – to unprecedented heights.  Rushing the Solyndra approval so the Vice President could speak at a photo op (via video feed at that!) was just plain wrong and revealing at the same time.
  •  Who in their right mind would put up with the uncertainty and the restrictions in order to snag one of these loan guarantees?  A year long period of time to negotiate the loan.  Tough luck if business conditions change.  I think it biases the applicant pool away from solid business people and more toward porcine operators used to feeding at the federal trough.
  • No scandal is complete without a mention of Goldman Sachs.  So guess who was Solyndra’s financial advisor?  I hope they were compensated handsomely, for I feel sure their advice on dealing with the Administration and Treasury department was priceless.
  • Final editing before publication: today’s Washington Post (9/28/2011) had a page 2 article about the “Foundation” connected to George Kaiser that was the principal investor in Solyndra.  It was not really a private foundation, and hence has no requirement to pay out 5% of its net assets per year.  Yet apparently gifts of cash and stock to this entity are tax deductible.  And it can use the word “Foundation” in its name.  This is getting off on a tangent – but I do hope we find out who voted for such a ridiculous law.  Thank you Solyndra for bringing this issue to the forefront, under the bright glare of publicity now associated with anything remotely related to your business or government dealings.

The SurvivalWare Jobs Act of 2011

Instead of doling out $500,000,000 at a time to the companies with the best lobbyists, how about chunks of $100k credit lines to any small business owner willing to sign personally.  Give a contract to Capital One to administer the program.  These would be credit cards.  Pre-approved.  Subject to the same penalties and collection efforts upon default as any credit card debt.  Healthy interest rates to cover a higher default rate. 

All you have to do is apply.  Swear under oath this is for a small business.  Agree that you will be a responsible steward and do cash flow projections on a regular basis so that you can avoid trouble and ultimately pay it back. 

As a business owner you would tap this debt only when you had opportunities that would return something higher than the interest rate.  The thing about small business owners in today’s economy is that they have to routinely pass up opportunities due to lack of capital.  If something has a 12 month payback, it doesn’t matter if there is insufficient cash to cover the wait. 

How much would The SurvivalWare Jobs Act of 2011 cost? 

Let’s say we want to help 4 million small businesses. 

At $100,000 each that would be $400 Billion.  Hmmm. That’s less than the President’s Jobs Act Proposal.  And that’s only if all 4 million borrowed the full amount right away.  And 100% defaulted. 

What would the impact of this?  Torrid investment, confidence, and growth.  That’s right, torrid. 

I don’t have an economic model to crunch the numbers and predict the exact number of jobs created, additional tax revenues collected, growth in the money supply, or impact on inflation.  I can tell you though what it would do for the vibrant, diverse, striving community of American small business owners and entrepreneurs.  It would build confidence.  It would show appreciation.  It would spur profitable investment and deliberate risk taking – what this economy needs to pull out of the doldrums.  It would unleash the animal spirits of American Capitalism like nothing else you can possibly do. 

Who am I? 

I’m just a small businessman, trying to make my dreams happen.  I’m trying to change the world, one small business at a time.  I’m trying to improve financial literacy and acumen among entrepreneurs and small business people.   So that their financial management skills become a competitive edge, not a cause for failure in a hostile business climate, stacked to favor heft and connections.  Being nimble financially is critical to our success. 

I want to help other entrepreneurs and small business owners succeed. 

We have a great country, a great economic system, a great democracy.  There are things we can do to unleash the American Competitive Spirit – our can-do attitude, our perserverance.  We want to make it easy for people to start new businesses.  To stay in business once they’ve started.  To add jobs, when appropriate.  To encourage innovation.  Not by prescription.  By reducing friction, and getting out of the way. 

And those things we can do to help do NOT include showering loan guarantees on politically connected companies with incredibly competent lobbyists. 

Frequently Asked Questions 

Q. What kind of paperwork to fill out? 

A. None.  Online applications only. Name, DOB, SSN# all that required.  Nothing about Income, Assets,  or  Debt. 

Q. How long to get approved? 

A. 3 minutes max.  This should be written into the Service Level Agreement with Capital One (or whoever). 

Q. How long before we get access to the cash? 

A. A week to 10 days.  Standard fraud protections and investigation apply.  So do standard upselling pitches by the issuer. 

Q. What are the costs?

A. I’d recommend a standard interest rate of 15.99% the first year of the program. (Re-negotiated annually by Treasury and the credit card company).  Capital One and the government should share in the profits.  The government at minimum earns interest at the rate it is paying on 10 year bonds for any capital tied up in the enterprise. 

Q. Can I start a new business tomorrow? 

A. We’d probably pick a start date to define when you had to be in business to qualify for the full 100K limit.  Start-ups would be treated like student loans – and maybe have a smaller limit initially. ($25,000 to $50,000) 

Q.  What can I do with the money? 

A.  Pay it back eventually.  Other than that, it is up to you.

Conservative vs. Liberal Approach to Weight Loss

The recent budget plans and debt ceiling battle have helped sharpen the debate between conservatives and liberals who each have their own world view.  I couldn’t help but think how radically different their approach to weight loss might be.  And shouldn’t there be a better way? 

Top 10 Conservative guiding principles for weight loss 

Conservatives’ approach to weight loss 

  1. You can’t eat cake. Or ice cream. Or doughnuts.  Or anything that gives you pleasure.
  2. Abstain from alcohol and drugs.
  3. Pray before every meal
  4. No more than 1800 calories a day.  Unless, of course, you have contributed money to the Republican National Committee.
  5. Avoid fast food, or restaurants without white tablecloths.
  6. Raising exercise levels is off the table – you have to focus on cutting calories.
  7. Accept random urine tests to detect excessive carb consumption
  8. Weigh yourself once an hour and report the results to your minister or block captain
  9. If you don’t lose weight, you get put on probation.  3 strikes and you are out: you get put behind bars where your caloric intake will be strictly limited.  Unless ,of course, you have contributed money to the Republican National Committee.
  10. Other than that, do as you please, you fat slob.

 Top 10  Liberal guiding principles for weight loss

 Liberals’ approach to weight loss 

  1. Government funded yoga classes
  2. Eat 3.7 servings of fruit each day, and 9.2 servings of vegetables.  Here are the specific fruits and vegetables you are permitted to eat. (See attached table pending final tabulation of campaign contributions)
  3. Buy only organic food transported in green electric vehicles to solar powered grocery stores or wind powered farmers markets.
  4. Abstain from most alcohol and fat, red wine and brie cheese excepted.
  5. Compost your fast spoiling organic fruits and vegetables.
  6. Recycle empty food and beverage containers regardless of how far you have to drive to drop them off in the proper bin.
  7. Drink 2 gallons of filtered water a day.  Perrier, Pelegrino, and other expensive and status conferring spring waters are also permitted.
  8. Weigh yourself at most once a month.  We’re not keeping score.  It’s the effort that counts.
  9. File a class action suit to remove vending machines that sell sodas from school campuses.  Replace with fruit juices of equal or greater caloric content.
  10. Exercise your collective bargaining rights to demand arugula and alfalfa sprouts in the company cafeteria.  Stipulate organic ketchup only for the burgers and fries station.

 SurvivalWare Common Sense Approach to weight loss 

  1. Burn more calories than you consume each day
  2. Keep track so you can monitor daily progress
  3. Post your weight and performance each day on Facebook or your Blog to provide focus and motivation.
  4. Buy the SurvivalWare Diet Book (It’s only $3.99 and includes a link to a spreadsheet to help you keep track)
  5. Throw the bums out of office.  We need some common sense in our government.

SurvivalWare Common Sense Approach to Business Survival and Growth

  1. Take in more cash each (day, week, month) than you ship out
  2. Be consistently profitable.
  3. Keep close track of cash and profits so you can monitor daily / weekly / monthly progress and Never Run Out of Cash.
  4. Join a peer group or franchise system that allows you to compare your performance to industry norms, and learn about best practices.
  5. Take the time to do cash flow projections, even when it is painful to do.
  6. Buy our Software!  Take our courses!  Engage our growing army of Skilled Developers!

Cash Flow Projection Software

The American Jobs Act – Take a Pass on it Now

Open letter to President Obama, Eric Cantor, John Boehner, Nancy Pelosi, Harry Reid, Mitch McConnell 

From:  Rusty Luhring, Small Business Advocate

Founder and CEO of Luhring SurvivalWare, Inc.

Entrepreneur since 1979 

Subj: The American Jobs Act – take a pass on it now 

Listen – there are 14 months before the next election, and I agree with the President that you all need to do your jobs now.  That is what we hired you to do.  Please listen to this small business owner’s point of view. 

I keep hearing from all sides of the political discussion that Small Business is the key to job creation and growth for this country.  Friday’s Wall Street Journal (9/9/2011) featured an article on page A7 with the title “Small Business Is Focus of Tax Cuts.”  A senior administration official is quoted from a briefing for reporters before last Thursday’s speech: 

       “We think economically there is significant differentiation between the largest companies that are sitting on significant cash, and many smaller companies who have faced a perfect storm in terms of more difficulty getting working capital.” 

I agree with that senior administration official in describing the nature of the problem facing small business, but I don’t see anything in the President’s proposal that remotely resembles a solution. 

I’d like to make five points: 

  1. I can’t see how a cut in the payroll tax is going to spur more hiring.  Think about it: payroll costs are typically 50% to 80% of a small company’s operating expenses in my experience.  So payroll taxes at 6.2% of wages represent about 3% to 5% of a company’s total operating expenses.  Cutting that in half is a net reduction in expenses of 1.5% to 2.5%.  And it is for one year only.  But not a lump sum – it is spread evenly throughout the year.  Hardly an incentive to hire a full time employee. 

2. I think perhaps that policy makers and economists have missed a web-enabled trend as significant as cloud-based computing and the internet itself:  the advent of the virtual company.  These are companies that rely on on-demand services from providers all over the world for all sorts of tasks that previously required adding to headcount.  This is not a bad thing.  I like to cite the example of AccountDepartment.COM.  They will do all of your book-keeping and accounting remotely through a well managed and extremely competent work force scattered around the U.S. working out of their homes.  They do not ship jobs overseas – rather they tout their 100% American work force as a key marketing advantage.  They allow small companies all over the country to get more done with less.  My take on the trend:  let’s make it easier for people to become entrepreneurs, even if they are providing jobs just for themselves initially.

  1. Focus on solving the “access to capital” problem for small business.  We have borne the brunt of the financial meltdown.  We are the collateral damage of the Dodd Frank act, the ill-fated stimulus program, and TARP.  That big sucking sound you hear is not jobs going toMexico, it is cash from our pockets going to institutions too big to fail.  Do you know how frustrating it is to read about interest rates being close to zero when we are lucky to get credit at 23.99% APR if we can get it at all?!  Listen, access to credit is what enables a small business to take risks.  It is a safety net.  Our thinking goes like this:  if we have some cushion, we can deploy capital to those opportunities with the highest return on capital.  The market sorts out the best uses of capital.  But if we have no cushion, we can’t afford to take risks, because even minor missteps can cause us to go out of business and lose everything.  Part of being in business is constant experimentation to see what works and what doesn’t.  It means that not every idea pans out.  We have to have room to fail, on occasion. 

4. Do you realize how totally ridiculous small business programs have been in the past?  Take the ARC Loan program cited by Karen Mills, head of the SBA, as an example of the good things they do for us miscreants (um – entrepreneurs).  This was in 2009 after the “unpleasantness” of the 2008 financial crisis.  You could borrow up to $35,000.  You had to show positive cash flow at least one of the previous two years.  (Funny – I don’t remember positive cash flow being a criterion for lending a helping hand to the auto industry, AIG,  or Fannie Mae).  You had to show hardship of some sort, like the reduction in a credit line or a drop in sales.  Fill out forms up the wazoo to document said hardship.  The SBA would guarantee 100% of the loan, and pay the banks prime plus 2% interest.  The banks gave the program a decisive yawn. 

5. Finally, this payroll tax cut is sending the WRONG message about the social security / entitlement problem.  What we are haring you say is this: “Let’s show we’re serious about solving the problem by cutting its funding in half for a year.”  I don’t think so.  Excuse me if that doesn’t make me more confident in the direction of the country’s economy, and the ability of our political leaders to put us on sound footing so that we can go about our business, hire more people, spend more money, and grow, baby, grow. 

What would I do?  I’ll have to make that the subject of another missive.  It’s Monday morning and I have to buckle down and do some planning so I can “put tacos on the table” the rest of this month and next.  Now that’s what I call a real economic incentive.

The Solyndra affair makes me want to vomit!

A peek into the real world of small business survival 

It’s time to give small business owners a voice

Why do I get physically ill when I read about Solyndra, the company that announced last week that it was declaring bankruptcy DESPITE $535 million in federal loan guarantees.  Maybe because I’ve just been through an 18 month long cash crisis where I’ve had to go to the mats to survive.  Federal policies didn’t cause my problems, but they sure didn’t help matters.  Take the small business credit crunch, which is ongoing and brutal for millions of small business owners who could use a little cushion. I believe its continuation to be an unintended consequence of stepped up bank regulation.  And I don’t think anyone in Congress or the Administration has a clue about small business.  Or truly gives a damn, except when the cameras are rolling.

What do I mean going to the mats?  Well, it starts with a commitment to never give up, no matter what the odds, or the amount of humble pie you have to eat.  (If humble pie were fattening, I’d weigh about 400 pounds!)  But a little of it is good now and again, it helps keep one grounded.  Too much gets tiresome, especially when you read about $535 million pissed away on a company that apparently doesn’t know how to do financial projections.

And then I learn that “a major fundraising bundler for Obama” – or rather George Kaiser’s family foundation – was a major investor in Solyndra.  In Saturday’s Washington Post (9/3/2011), there was an inside article about the George Kaiser Family Foundation issuing a statement that “George Kaiser is not personally invested in Solyndra and did not participate in any discussions with the U.S. Government regarding the loan.”  Translation: that’s what underlings are for.

Why the rancor?

I feel like I don’t have a voice.  There is a serious small business credit crunch going on, and the federal government just seems to make it worse.  Yet they find $535 million for a “green” company funded by a campaign contributor.  That’s just not fair.

Meanwhile, I have to fight American Express tooth and nail to get more time to pay a huge bill I ran up in anticipation of new sales that did not materialize.  It was a week after the 15 day grace period that I got the call.  I was dreading it, like you can’t believe.  This was mid to late December, 2010, just before Christmas of course.  I find that Murphy’s law is strongest when applied to matters of small business cash flow.  Two weeks earlier, my daughter Kelly, who had moved back temporarily with us because she lost her job (with guess who!) – totaled our only car and broke her pelvis.  She had no health insurance of course. 

She had driven my wife, Laurie, to work that day so she could have the car.  It was raining, and I assume she was late (operating on “Kelly time” as we family members affectionately call it).  She didn’t see the speeding (at least that is our contention) vehicle barreling down the George Washington parkway as she pulled out to turn left, and took the full impact in the driver-side door.  It was about 7:30 a.m., 2 or 3 hours into my workday, when I got a call on my office phone from a number I did not recognize.

I ascertained that she was alive and conscious, and then much discussion ensued about how to get me to the scene.  One of the good samaratans who stopped to help offered to pick me up (Kelly was driving our only car).  But traffic had been stopped in both directions on the parkway.  It was only two miles away.  I grabbed a backpack, my iPhone, and lots of reading material (ever been to an emergency room?!),  hopped on my bike, and pedaled furiously in the rain..

I’m happy to say that 8 months later, Kelly is fine and dandy, and living on her own.

Two weeks to the day after Kelly had her accident, my wife slipped and fell while leaving for work and broke her foot.  When she called and told me what happened, my second thought was “your poor thing, I hope you’re OK.”  My first thought was, ”Damn, who’s going to help take care of Kelly?!  What impact will this have on our family income?  Does my life insurance policy have a suicide clause?”
Within a few days of that, son #2 flew in from California, separated from his wife.  You guessed it – he was unemployed because his father had eliminated his work hours.

Then shortly after the new year, son #1 moves back home – also unemployed.  There are advantages and disadvantages to employing family members.

I finally worked out a repayment schedule with Amex.  One thing nice about doing detailed cash planning, is that it strengthens your resolve, and helps you avoid commitments that come back to bite later.  At first they let me get by with paying $100 every couple of weeks as a sign of good faith.  Of course, what really hurt was losing all the points I had accumulated.  I was tempted to use them up prior to becoming delinquent, but figured that would not look so good.

The Amex collection rep was professional and firm, but relentless.  She even suggested I skip a mortgage payment in order to pay them instead.  (I declined) Some time in January,  we reached a standoff, and finally she called in her manager who quickly offered me a work out plan to pay them over two years.  A ray of light at the end of the tunnel.  I tried not to sound too eager when I said yes.

I’m afraid I had to swear off employees for a spell, and hunker down.  This when my work day was constrained by driving my wife to work, my daughter to X-ray’s and doctor’s appointments, and cooking and (occasionally) cleaning for our suddenly un-empty nest.

And in my business, software and consulting, time is money.  So , yeah, I felt the strain.  Good thing I didn’t hear about Solyndra back then.

I won’t bore you with all the gory details.  A few highlights include getting turned down for a re-financing because I couldn’t document my income for the previous year.  I had a lousy year.  I had hardly any income.  My house value in relation to my two mortgages was such that in normal times, I would have been able to take another $50,000 or so out.  That was not to be.

I even called a micro-lender in late December.  They wanted several years of tax returns, a formal marketing plan, a long application filled out, and collateral.  They’d even accept cash as collateral.  Wait, what?  I wasn’t born yesterday.  I’m not going to give cash to someone so that they can turn around and lend it to me at a significant rate of interest.

I decided at the time that it was not worth the time it would take to apply.  The maximum loan amount was $35,000, and the guy I talked to seemed to have “writing grant applications” as a core competency vs. understanding the needs of a small business.

Then there was the email vendor I had stopped using in January.  Long story short: I let them know that I was not going to be able to pay them for the duration of the 12 month contract I had signed the previous May (one of several infrastructure building mistakes I made in 2010).  I suggested we work out a compromise.  They declined.  So I ignored their calls and emails until I received an overnight letter in May from their in-house counsel.  I waited a few days before calling them back – wanting to preserve at least a shred of dignity.  I dragged it out until June, and started making payments the end of July.  Just 10 more to go.  Again, the detailed cash planning strengthened my resolve, and gave me confidence.

But listen – I am not the only one.  These stories are repeated a million times over out there in small-business land.  I know – I talk to customers every day.  I see their financials.  I am not the only one who has war stories about business survival.

So you can see why we small business owners would be a little upset when we learn that a company received $535 million in federal loan guarantees, and then declares bankruptcy.  They found that selling solar panels for less money than it took to manufacture them was not a good business model.  Well, duh!  Apparently this “green” company wasn’t so good at bringing in the green.

I hope it turns out to be a case of corruption – because I would hate to think that it was mere stupidity on the part of policy makers in the federal government.

I guess I should be thankful.  The small business credit crunch is good for (my) business.  When sources of capital dry up, business owners just have to make do with less.  Good cash flow planning and decision making is critical.  SurvivalWare shines in this environment.

But let me say this:  we’re not going to put up with this incompetence much longer.  Remember who the front line tax collectors are.  That’s right: business owners with employees.  We are not totally without political power.  It’s time to give us a voice.