The Washington-Wall Street Two Step!

As Congress nears votes on legislation that would overhaul the health care system, many small businesses say they are facing the steepest rise in insurance premiums they have seen in recent years.

Lets truly get to the bottom of the higher premiums debate. This is a setup that will crush small businesses and owners. At a time when we need to be lightening the heavy load that is currently being carried by small business, it appears we are making that load even heavier to bare.

Insurance brokers and benefits consultants say their small business clients are seeing premiums go up an average of about 15 percent for the coming year — double the rate of last year’s increases. That would mean an annual premium that was $4,500 per employee in 2008 and $4,800 this year would rise to $5,500 in 2010.

The higher premiums at least partly reflect the inexorable rise of medical costs, which is forcing Medicare to raise premiums, too. Health insurance bills are also rising for big employers, but because they have more negotiating clout, their increases are generally not as steep.

Higher medical costs aside, some experts say they think the insurance industry, under pressure from Wall Street, is raising premiums to get ahead of any legislative changes that might reduce their profits.

The increases come at a politically fraught time for the insurers, as they try to fight off the creation of a government-run competitor and as they push their case that they have a central role to play in controlling the nation’s health care costs.

What does that mean actually? It means, the insurance industry has been given a sneak-peak look at the forthcoming quiz;they got all the answers now. With this additional information they have decided to increased their premiums based on advice from the same Wall Street who we bailed out 11 months ago. What they understand is that Congress will pass legislation, Obama will sign it, forcing the insurance industry to lower premiums by 30% over the next 5-10 years starting in 18-24 months.

They will pad their pockets and then be forced to lower the premiums to the same pre-premium increase amounts thereby not actually reducing premiums for small businesses and entrepreneurs at all. Congress looks good, Obama passes out pens at The White House for signing sweeping legislation that will in essence change nothing. Small business takes another one on the chin.

President Obama, in his Saturday radio address, said the Democrats’ health insurance overhaul would help small businesses and stimulate the economy by providing relief from “the crushing costs of health care — costs that have forced too many small businesses to cut benefits, shed jobs, or shut their doors for good.”

The insurance industry has already been under sharp attack by Democratic lawmakers who favor creating a government-run insurance plan that would compete with private insurers. Without that competition, proponents say, insurers will continue to price coverage beyond the reach of many Americans.

Insurers say there is no need for a government-run insurance plan and argue that their health plans are already responsible for many of the initiatives, like programs to coordinate care for chronic conditions, that ultimately lower costs.

Insurers’ “profits are not responsible for increased health care costs,” said Robert Zirkelbach, a spokesman for the industry’s trade group, America’s Health Insurance Plans.

Like the insurers, Republican lawmakers, who portray themselves as champions of small business, argue that the proposed legislation would raise premiums across the board because sick people would be more likely to enroll than healthy people.

They also say the taxes and other ways of paying for the program would be passed on to employers in higher premiums, only making matters worse for small businesses.

The Senate minority leader, Mitch McConnell of Kentucky, said in a response to the president’s radio address, “We can’t support a bill that will raise premiums.” The big insurance companies declined to comment.

With negotiations over next year’s premiums still under way, data on rate increases are mostly anecdotal. Formal surveys have not yet been completed by the health benefits consultants who track the figures. And in some parts of the country, experts say rates are not overly high.

But benefits consultants say there is no doubt that premiums are soaring for many small businesses. Edward Kaplan, a consultant with the Segal Company, said his clients were seeing renewals for coverage at prices 15 to 23 percent higher this year. Last year, he said, they typically faced increases of 7 to 12 percent.

The brokers and consultants say the price jumps seem hard to justify. “Frankly, I’m mystified by the size of the increases,” said one broker, Charles J. Newman, who works with small employers in the New York area.

There is no question that insurers are under pressure from Wall Street. In recent years, insurers were often not quick enough to raise their premiums well above the rising cost of medical care.

Small Business Recovery on the horizon?

Retail sales are improving, but numbers overall are still very weak says MSNBC.com today. U.S. home mortgages are on a four month high says Reuters and Oil is back above $71 a barrel which is a strong sign of a recovery says the Associated Press. With all that said, and that's just in todays news, how can small business owners know when "change" is coming their direction?

Signs of a bullish recovery are abound just about everywhere, but is small business feeling the excitement yet? With the holidays approaching, will retail sales bounce back in time, its almost laughable because the answer is a loud and boisterous "ABSOLUTELY NOT".

The Denver Business Journal says "the economy is improving, but second recession is not likely". Family Dollar Stores show a significant rise in profits says the Wall Street Journal and Business Weekly says "Costco profits fall, but still above expected". The signs that small businesses need to be looking for are just under their own noses.

Unfortunately our economy is a "trickle-down" system and recovery will be seen and felt in your suppliers, wholesalers, and bargain shoppers. Surely we are still in a buyer's market and it will remain so for at least another 12-18 months. Although that may be great for those not necessarily affected by the recession, others will not meet this market with the same optimism.

If you own your own business, look around and you design your customer based structure on what it is your suppliers are able to do. As they are able, design your pricing to permit you to overstock in bulk items and drive that customer base. As those inventories change, review and accommodate accordingly. Move what you can.

Finally, if your business is a service related business, you are in the best shape of all. Services usually don't require much equipment to be purchased by you each month. For example, your lawn business already owns the lawnmower so no need to keep pre-recession prices, you will also need to adjust down to build that relationship with your customer. They will remember you and your efforts later on. They may not be able to afford you right now, but they also cannot afford to purchase a new lawn mower for the garage either.

Protecting Yourself with an LLC.

Forming an LLC (limited liability company) or corporate entity does not mean that your company cannot be sued. But it makes it possible for you to obtain some protection from personal liability if it is.

"The protection -- particularly for one-person businesses -- is not absolute but is better than no protection at all, which is what you will have if you conduct your business as a sole proprietorship," said Richard M. Leisner, an attorney with Trenam Kemker in Tampa, Fla.

To maximize the protection of a corporation or LLC, make sure you keep formal business records, file your withholding and other taxes on time and separate your personal funds from your business bank accounts. Put all the company accounts and financial transactions under the corporate name -- not under your own name.

"Often, business owners think these formalities are not important, but the details are important in order to avoid the risk of a court disregarding the corporation or LLC," Leisner said.

"If that happens, it's just about the same thing as operating as a sole proprietorship."

Make The Slow Market Work For You!

Got a wonderful friend who has begun to turn a downturned economy into his dream of a lifetime. He's taken low cost real estate, the bargain basement priced luxury items and has begun to turn it, or "flip" it for a small profit.

Don't be afraid to make a small profit; its either a small profit or absolutely no profit. As we say, "a win is a win". By improving some networking techniques and some strategy assistance, one of our recent success stories has created "Turn Town Realty, LLC.". Turn Town has found a way to take the Seller's bottom number and brokers that into the top number of the buyer with precision.

A fall of more than 10 percent in the average apartment price in Manhattan in the third quarter from a year earlier attracted buyers who pushed up the number of sales by over 45 percent in just one quarter, industry reports showed Friday.

Since peaking in the first half of 2008, Manhattan apartment prices have fallen an average of 25 percent to 30 percent.

The Manhattan residential real estate market had been largely unscathed during 2008 as other U.S. housing markets were floundering, but it hit a wall in September 2008 when Lehman Brothers collapsed and the financial sector fell to its knees.

About 20 percentage points of the 25-to-30 percent drop can be sourced to the months after September, said Jonathan Miller, president and chief executive of Miller Samuel appraisers and the author of the Prudential Douglas Elliman Manhattan Market Overview quarterly report.

Other once-hot U.S. housing markets have seen prices fall by more than 50 percent.

"We're not done yet," Miller said.

New York City is still wrestling with a Wall Street that is trying to reinvent itself, a disproportionate number of layoffs of high-wage earners and new condominium construction.

"There's a lot of unwinding to go," Miller said. "We're moving toward stabilization but we have a ways to go."

The average sales price of a Manhattan apartment fell 10.6 percent to $1,323,462 in the third quarter from a year earlier, the Prudential Douglas Elliman Manhattan Market Overview showed. But it rose 0.8 percent from the prior quarter's $1,312,920.

Prices per square foot fell 16.5 percent to $996 year over a year earlier and were off 5.7 percent from the second quarter, the report said.

The third-quarter median sales price -- in which half the prices were higher and half were lower - dropped 8.4 percent to $850,000, but rose 1.7 percent from $835,700 in the second quarter, the Prudential report said.

While the number of sales fell 16 percent from a year earlier to 2,230 sales, it soared 45.6 percent from the second quarter. Brokers attributed the rise to unleashed pent-up demand from the prior two quarters.

Still, deals are taking longer to complete. Buyers are cautious and mortgage lending is tighter than some brokers and experts have seen during their careers.
A for-sale apartment spent 167 days on the market, up from 134 days a year earlier.

An $8,000 federal tax credit for first-time home buyers helped fuel sales of studio and one-bedroom apartments, where prices fell 30 percent and 24 percent respectively from a year earlier, Corcoran Group's quarterly report said. The credit is scheduled to expire at the end of November.

"The credit is still too tight. We need more jumbo financing for New York City," Pamela Liebman, Corcoran chief executive said, referring to mortgages over $417,000.

Keys to Small Business Funding

There are a few things that an entrepreneur should consider to increase odds of securing a loan:

Business financing comes in all shapes and sizes these days so we want to ensure you leave no stone unturned when you are looking to secure funding and researching financing streams for your small business entity.

Be prepared to meet your banker: Make sure that you are thoroughly prepared when you go to your banker’s office to request a loan. You need to show your bankers that a loan to you is a low-risk proposition. Come to the meeting equipped with a well-prepared business plan and finance package.

Identify how much capital you need: Have you determined how much capital you need? Why do you need this amount? Have you calculated your start-up costs? Is it to purchase new equipment, down payment on an existing business or do you need start up funds to cover operation? This will help you determine what type of lender you should approach.

Have a good relationship with your local banker: The old saying people do business with people they know and trust. Well, if you have built a relationship with your local banker over the years, they are more apt to support you in your new business venture. Do you have your main business account with them? You should!

Take time to review your personal credit report and finances: Your credit score is sure to play an important role in your personal finances. If you think that your personal credit won’t affect your ability to get a business loan, think again!

Make sure your house is in order: Your credit score not only determines your ability to get credit, but also affects the interest rate. This includes paying down your credit balances and taking time to take care of issues prior to your meeting with the bank. If you cannot handle your own personal finances, he’ll question whether you can run a business.

Check out resources such as Small Business Administration: The U.S. Small Business Administration (SBA) is a federal agency, responsible for assisting and protecting the interests of American small business. The agency operates through a series of field offices around the country as well as in partnership with public and private organizations to offer technical assistance to small businesses. The Women’s Business Center is funded in part by an SBA grant., and we offer technical assistance to small businesses.