Sunday, November 01, 2009
News, Atlanta

Local businesses feel regulatory crunch

As governments crack down to snare more revenue

Stephanie Ramage
"We have families that have lived and survived through this restaurant,” says Athens Pizza owner Sandy Papadopoulos in Decatur.

By Colby Dunn

Athens Pizza is a longtime Decatur resident, a popular pizza destination that’s been operating at its present location since 1977. It’s not a corporation, but it’s not a one-man show, either. As owner Sandy Papadopoulos points out, it is family-owned and family-run.

“There are some people we’ve had working here for 15 years,” he says. “We have families that have lived and survived through this restaurant.”
 
Even in the current recession, Athens manages to do a decent business, but the economy is dealing it an unexpected blow that's landing on many other small businesses in the metro Atlanta area: bigger regulatory costs handed down by the government.

Businesses small and large have always faced their share of hoops to jump through, most for the safety of the consumer's health, wallet or both. But as health codes tighten with emerging technology and governments at all levels seek to boost their declining revenue, small business owners are feeling the crunch of staying compliant.

“It's tough for us to keep up with what the environmental health department is changing on a regular basis,” says Papadopoulos. “It’s difficult for us, as a small business in this economy, to maintain.”
 
Doug Bachtel, a professor of consumer economics at the University of Georgia, is not surprised.

“The red tape is a killer for everybody, but it’s particularly hard for small firms,” says Bachtel. “In a larger firm, you have a person whose job it is to do that—like some sort of a compliance officer who has to shovel through all that.”

In a small business, that burden usually falls on the owner. The state offers several Web sites with resources for small business owners, and most have a link to a pretty complete listing of regulations they may have to follow; there are 137 categories. Though, not all of these will apply to every business, juggling the rules and regulations for any business is not only a full-time job, but an expensive proposition, as well.
 
As Papadopoulos notes, those regulations can and do change regularly, which may add up to a lot of overhead for a small business.

“Believe me when I tell you I understand it,” he says. “I understand that one of the most difficult jobs you have to do is be a health inspector, because no one looks at you in a good way. That's their responsibility, and we need and appreciate them. But we can't necessarily finance things like replacing the grease trap from 150 gallons to 1,500 gallons. That's $20,000. Hopefully we have that money saved, but what happens if you don’t?”

Many, in this economy, don’t. Historically, the answer to that question would have been a small business loan, like the long-popular “7(a)” and “7(b)” series of loans from the federal Small Business Administration that one SBA official describes as “our bread and butter.” But small business lending screeched to almost a complete standstill when the economy went into a nose-dive, with loans dropping from a $328 million monthly average in the first three quarters of 2008 to a paltry $86 million in January of this year, an unwelcome brick wall for many facing needs like those Papadopoulos cites.

“In order to do this, you’re either going to have to come from rich parents or you’re going to have to float a bank loan, so the problems of the financial sector are a double whammy for small businesses,” says Bachtel, who adds that this problem affects Georgians particularly harshly.
According to the U.S. Census Bureau, 55 percent of firms in Georgia employ four people or less, and 94 percent have fewer than 50 employees. So in Georgia, small business problems aren’t just an academic issue; they affect everyone.

ANY HELP?

But there is some help for small businesses in a bind, says Terri Denison, director of the Georgia branch of the Small Business Administration.

“We offer free counseling to existing businesses, as well as those who want to start businesses,” Denison says. The SBA also offers referrals to experts on things like tax problems and, of course, regulatory questions.

Denison says the organization has seen an uptick in queries since the recession came into full bloom, many from existing business owners. She says this marks a definite shift from years past, when most who contacted them were trying to start their own business.

“When times were better, people thought of the SBA as a resource for starting a business,” she says. “But now [we see] a lot of existing businesses that have been in business for a while but are running into challenges.”

President Obama’s Recovery Act includes provisions that increase the loan amounts for SBA guarantees, taking some of the burden from the business owner. The SBA’s microloan programs, which offer credit lines up to $35,000, could also be a boost.
 
Meanwhile, some experts say the market for small business loans—part of the secondary lending market—is on the mend. Indeed, Chris Laporte, chairman of Coastal Financial Holdings, told CNN earlier this year “the secondary market is back.”

But others aren’t so certain.
 
“The real story is that most big banks, Wells Fargo aside, have all but put the kibosh on small business loans,” writes Jim Kim, a finance writer for the online finance news source FierceFinance.

With this in mind, Papadopoulos is hopeful that changes can be made to help government agencies and small businesses like his see eye-to-eye and save some money.

“Everyone suffers in the process—my employees, my business, the people who eat here,” he says. “At what point can we sit down with each other and our commissioners and say, ‘This is what we need to do’? I think it’s a shame for anyone to come down hard on the health inspectors and the county, but I think they should know that it’s not as easy as they think for us to do this stuff.” SP
For small business help, call the Georgia Small Business Regulatory Reform Initiative at 877-734-7442 (REGS4GA).