House Financial Services Committee Chairman Barney Frank announced his committee would not take up Interchange legislation this year.   However there are steps that small businesses, family-owned restaurants, local retailers and service providers can take to help themselves without waiting on the government.

Immediately switch to an Interchange pass-through pricing plan.  For example, effective October 2010, Visa will extend Small Ticket Interchange to most merchants.  This is an effective reduction in the overall Interchange costs for most merchants.  However, few merchants will benefit since there is no difference between a transaction over or under $15 in their current merchant account contract.  In fact this is just one example.  Most merchants are not getting the benefit of all the incentives Interchange rates available including credit voucher Interchange.  Bundled, blended, "rate as low as" pricing structures, where merchants pay non-qualified surcharges, are unable to realize lower costs on transactions that meet the specified criteria for certain Interchange categories.

Conduct a Google search using keywords "merchant Interchange rate quote" or visit http://merchantrates.com to get an instant quote.  Also consider the tips on how to lower your real rate to accept card payments athttp://myrealrate.com/lower-my-real-rate.aspx and while you are there benchmark your card acceptance costs with other businesses of your same size and in your same industry.  A little study will go a long way.

As far as Interchange legislation is concerned, I expect it will continue to be big business for lobbyist on both sides of the issue.  I however am concerned about government intervention. I have zero confidence that the politicians can come up with a better solution than the market.  Because there is money to be made, there are lots of innovative companies developing new payment technologies and more secure systems that are attracting venture capital within the payments space.  Now is not the time to overly regulate as this tends to benefit the incumbents and stifle innovation.  I am also skeptical that the small businesses will out negotiate huge national chains or community banks will out negotiate to big to fail banks when the lobbyist and politicians get together in the back room.

In November 2009, the US Government Accountability Office report indicated that new government imposed regulations on payment card Interchange fees would be difficult to implement, with any benefits hard to measure.   Merchants may be better off championing alternative payment solutions than risk the dangers of unintended consequences asking the government to get involved.

Tags: small business | credit lines

The House Small Business Subcommittee on Finance and Tax held a hearing on "The Effect of the Credit Crunch on Small Business Access to Capital" to hear testimonials from small business owners, an independent community bank representative, and a credit union representative.

Chairwoman Melissa L. Bean (D-Ill.) said credit is harder to access now for small businesses. David Schroeder, president of the American Enterprise Bank, speaking on behalf of the Independent Community Bankers Association, said that "the current turmoil in our economic and financial markets nationwide raises genuine concerns about the availability of capital and credit for small business." He suggested several policy recommendations to "ensure small businesses lenders and borrowers have an uninterrupted supply of capital," which included strengthening the Small Business Administration (SBA) loan programs and enacting the "Small Business Lending Reauthorization and Improvement Act.”

Carl Sorgatz, president of Hawthorne Credit Union, speaking on behalf of the Credit Union National Association, disagreed with the availability of capital being the chief obstacle for credit union business lending, but rather the chief obstacle is "the arbitrary statutory lending limits imposed by Congress in 1998 and the burdens associated with many of the SBA lending programs." He said Congress can help small business owners using credit unions by enacting any of the bills currently pending that "promote greater credit union participation in small business lending.”

Lawrie Hollingsworth, president of Asset Recovery Technologies, Inc. and speaking on behalf of the U.S. Women's Chamber of Commerce, said that because of the credit crunch, money is less available, and that when it is available, "it is at a new premium and cost for less money and more restrictive lending covenants." She has seen businesses choose to under-insure themselves to save costs, which she feels guarantees failure in the event of a disaster.

Vanessa Baugh, president of Vanessa Fine Jewelry, said that that she and other small business owners have "soft collateral" and can not get loans from banks. She said this forces them to rely on equity in real estate they own. She asked the committee to "hold the line on tax increases" so small business owners have an opportunity to grow their businesses, while at the same time asking to "enact business-friendly initiatives such as tax incentives for businesses who want physical and job expansion." Ranking Member Vern Buchanan (R-Fl.) also said that higher taxes on individuals would have a high impact on small businesses.

Tags: small business | credit lines

In a recent article on CNN.com, reporter Eileen Zimmerman interviews a recently laid off corporate worker, Paul Cardosi, who used retirement account facilitator Guidant Financial Group to invest his corporate 401(k) into the purchase of a franchise (see Raiding the Retirement Fund to Keep the Business Afloat). While the financing model itself is unique, so is the return Cardosi is already seeing on his initial investment.

Six months after making the initial investment, Cardosi's business is up 200% from when it was sold by the previous owner. "The 401(k) owns the majority of the business," he told CNN. "I haven't lost the money, I just invested it. When I sell, the money goes back into the 401(k)." Now, how many of you can say your 401(k) just made a 200% return on investment? We know that not many of us can.

Because the retirement funds are invested directly into the business itself, there is no expensive distribution and the retirement account stays intact – and, if your business goes well, it continues growing.
While the article itself leads off focusing on small business owners who took advantage of their retirement funds the old-fashioned – and expensive – way, it is interesting to hear that there are other ways to use the money already amassed in a retirement savings account for the benefit of a future business, and for the business owner's future.

Tags: small business | credit lines