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Expert Advice for High-Growth Businesses

The State of SMB Policy Moving Into 2019

Small-to-medium business (SMB) optimism continues to ride high. The strong economy, which grew at 3.5% in the third quarter (following 4.2% growth in the second quarter), is helping to sustain this historic optimism. Since policy can have a significant impact on the economy and business health, here’s a rundown on some key issues that may affect both as we move into 2019.

Access to Capital

The Democratic majority in the House following the 2018 mid-term elections has the potential to be very active on a number of bipartisan bills that could make their way to the President’s desk. One in particular, the JOBS and Investor Confidence Act (JOBS Act 3.0), is a package of more than 20 bills that modernizes and fixes various securities laws and capital-related regulations. The reforms will help to improve capital access for startups and small businesses, reduce the burden of buying or selling a business, and target research in key areas that will inform the direction of future policy. JOBS Act 3.0 passed the House in mid-July with a huge bipartisan vote of 406-4.  

The bill needs 60 votes in the Senate to pass, and one might think that would be easy, given the bipartisan outcome in the House. The results of the 2018 mid-term elections will affect the political environment, but deals will be made on a variety of bills. JOBS Act 3.0 is one that will be in the mix. Having this bill signed into law by the end of 2018 would be a big boost to U.S. capital markets, which will directly benefit startup activity and SMB growth in 2019. 

Regulatory Reform for SMBs

How federal government agencies make regulations is very outdated—in fact, the process is more than 70-years-old! Several pieces of legislation to update that process have passed the House and a key Senate Committee, which means they are poised for a full Senate vote. The Small Business Regulatory Flexibility Improvements Act (S. 584), for example, would give small businesses a bigger and earlier voice in the regulatory process, require cost-benefit analysis (including “indirect” costs), and waive first-time paperwork violations for small businesses, among other changes. 

While the regulatory burden has eased somewhat over the past two years, business owners want a process that is fair and transparent when new regulations are being made. It will be very tough to obtain 60 votes on these broad regulatory reform bills (including S. 584) during the new session, which means the effort will be pursued again in the new Congress. 

But progress can be made on individual regulations, like revising the “joint employer” standard. The National Labor Relations Board is already moving forward on a clear and more traditional standard, while the Department of Labor (DOL) is expected to release their proposed rule before the end of the year. This is good news for many types of businesses and for entrepreneurs who wish to franchise their businesses. Having certainty and predictability on “joint employer” is critical for many who want to move forward with expansion plans.    

One issue where SMBs will have to continue to wait is on the revised “overtime regulation.” The Obama-era rule that doubled the wage threshold (from $23,660 to $47,476) was blocked by a court from taking effect in 2017, but the DOL still must develop a new rule and that is taking a long time. The proposed rule could come early in 2019, and it may mean an increase, as DOL Secretary Alexander Acosta said during his confirmation hearings that mandated overtime pay “should” increase to $33,000.  Unfortunately, the uncertainty continues on this issue for business owners going into 2019.

By the end of 2018, tax rules from the “Tax Cuts and Jobs Act” should be done, but there will be other uncertainties in key areas for business owners as the New Year kicks off. Tariffs and healthcare costs are two issues that come to mind, and we will take a closer look at these (and other issues) in a future blog post. Business owners can also receive timely updates by visiting the SBE Council website or by following us on Twitter at @SBECouncil.   

For the latest SMB news and insights from Karen Kerrigan, join our LinkedIn group, Ask the SMB Experts. The Ask the SMB Experts group is a forum for growing businesses to come together with industry experts to discuss key issues, trends and more.

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