An Exclusive Interview with U.S. Congressman Dana

                                      Rohrabacher

 

                    GETTING GOVERNMENT OUT OF THE WAY AND OFF YOUR BACK

 

              By Marcus P. Meleton, Jr.

 

              Congressman Dana Rohrabacher, winner of the Legislative Visionary Award of the National

              Association for the Self-Employed (NASE), gives some straight shots on how government

              can make life easier for home-based entrepreneurs.

 

              The setting is a rustic surfer's pub in Huntington Beach, California. Congressman Dana

              Rohrabacher is in for the weekend before making another cross-country trip back to

              Washington D.C. I’m early. The Congressman is dressed casually, playing pool with a local

              as I enter the pub. Two things are immediately evident to me as we start the interview. One,

              he is not a very good pool player. Two, he is forthright and honest about his beliefs and

              intentions in Congress. Most politicians I interview analyze your questions and provide an

              answer that will displease the least number of people or use terms that soften the meaning

              of words (i.e. "contributions" = taxes). Congressman Rohrabacher made surprising remarks

              about the role of government and the Small Business Administration (SBA) that were eye

              opening and far seeing. I came away convinced that he is a true home business

              representative.

 

              HBM: As you know, HOME BUSINESS Magazine® specifically serves the home business

              entrepreneur. Our readers are probably first interested in your knowledge or experience as it

              relates to working from the home.

 

              Congressman Rohrabacher: My career started as a home business and you could say that

              my job as Congressman is run from the home. I started out as a journalist, freelancing and

              working for various publications. My typewriter at home was my primary place of business.

 

              HBM: How could your current job be described as a home business?

 

              Congressman Rohrabacher: I run my congressional campaigns from my home. My

              campaign headquarters is literally run from a desk-top computer on my back porch where we

              run mailing lists, keep up with our constituents, and develop promotional material.

 

              HBM: Your job as a freelancer meant you were a writer for hire. What did you find as the

              most difficult part of operating from home?

 

              Congressman Rohrabacher: Just understanding the rules and regulations. Home office

              deductions and rules on contracting were a mystery. Most everyone is breaking one rule or

              another because the regulations come from federal, state and local governments. There is no

              way for an individual to keep up with regulations unless they can afford an office of

              personnel to track them.

 

              Many people believe regulations are made to prevent "Big Business" from taking advantage

              of the little guy. I believe they are made with full approval and for the benefit of large

              companies. Regulations, monitoring, and paperwork requirements make it difficult for a

              budding small business to break into the mainstream. The more regulations you have, the

              larger your company must be to monitor and comply with them.

 

              HBM: I guess that brings us to the next question. What can Congress do to alleviate the

              constraints on home businesses?

 

              Congressman Rohrabacher: In most cases, we just need to get government out of the way.

              This Congress is trying to clean up old legislation that puts you at a disadvantage against

              large companies. While big-government people complained about the lack of health

              insurance, they refused to let home businesses deduct medical insurance. Big corporations

              could deduct 100%. They also have savings and retirement plans that were not available to

              you. The IRS, Environmental Protection Agency (EPA), and OSHA make rules that squeeze

              the life out of small businesses.

 

              We made changes so that you can deduct 50% of your medical insurance costs. It needs to

              be 100% and we are working for that. We are also looking into allowing purchases of

              insurance across small and home businesses to get group discounts. The IRS, EPA, and

              OSHA can now be challenged by individuals if new regulations are too constraining.

              We are making IRA and KEOGH savings plans accessible to home business. Our new tax

              bill with higher exemptions for children and elimination of death taxes will give you

              breathing room to grow and allow you to pass the business onto your children. The

              reduction of capital gains taxes will allow you to keep more of investment earnings so you

              can fund the growth of your business.

 

              HBM: What can we do to improve Congress’ response to the needs of home businesses?

 

              Congressman Rohrabacher: Elect less lawyers for a start. Putting lawyers in charge of

              making laws is like putting morticians in charge of hospitals. More seriously, you as

              individuals must utilize the phone and letters to let your representatives know your needs

              and government barriers to your success. You should join organizations such as the NASE

              to get your needs presented.

 

              HBM: And the Small Business Administration (SBA). What can this agency do to improve

              its support of small and home businesses?

 

              Congressman Rohrabacher: Ultimately, the SBA should be disbanded.

 

              HBM: That won’t be a very popular stand with many home businesses.

 

              Congressman Rohrabacher: Anyone who gets an SBA loan will be in support of the SBA

              because it saved them 2% on a loan that is easily available to large corporations. But the

              ultimate purpose of the SBA is to be a bandage to cover the wounds and complications

              created by government regulations, paperwork, and restrictions. Large businesses, through

              their size, can survive what government throws at them but home businesses can’t. We

              need to cut regulations, paperwork, and restrictions. Furthermore, if we balance the budget

              we will do more for home businesses than the SBA ever could. Loan interest rates will drop

              and it will be easier to obtain funding because the government will not be competing with

              you to get the loan. But weaning those who feed off the government nipple is not easy.

 

              HBM: What about all the changes going on with taxes? I know you’re trying to cut them

              and modify them but what about an overhaul of the whole system?

 

              Congressman Rohrabacher: Our tax system is too difficult to understand, again putting

              small businesses at a disadvantage because it forces you to be an expert at something that

              does not further your success. A National Sales Tax or a Value Added Tax may be the best

              solution.

 

              HBM: What about the Internet and restrictions that are being looked at?

 

              Congressman Rohrabacher: The Internet is the marketplace of the future. I want it to

              remain a free trade zone because it lets the little guy in. Government intervention will only

              screw it up, complicate it, and create a new bureaucracy of people we pay to watch over it.

 

              HBM: Any final words?

 

              Congressman Rohrabacher: My objective is always to get the government out of your way

              and out of your pocket. Allowing you to achieve your goals requires less government and

              less taxes. That is the ultimate freedom. HBM

 

              Dana Rohrabacher got his start as a freelance journalist and reporter. His home

              typewriter was his place of business. Through his work he was noticed and hired by

              Ronald Reagan, serving seven years as one of the President’s senior speechwriters. He

              returned home from Washington D.C. to run for Congress. Now a 5th term Congressman,

              he is Chairman of the Space Subcommittee and a member of the Energy and Environment

              Subcommittee. Congressman Rohrabacher, a surfer from Huntington Beach, California,

              works to change Washington and how it deals with the individual. His record of fiscal

              restraint and pro-growth policies have won him acclaim from the National Taxpayers

              Union, Citizens Against Government Waste, and the National Federation of Independent

              Business (NFIB).

 

 

              Home-based entrepreneurs in need of business capital have many different, often

              unconventional, ways to raise money. After reading this article, there will be no room for

              doubt in the mind of even the most ambitious pessimist about raising business capital. Any

              business owner can raise money if he or she is willing to put in the effort. Here we introduce

              you to some creative ways to raise money for business capital.

 

              Trade Credit

 

              Credit on a good or service that you require for your home business - known as trade

              credit - is a common way to increase cash flow. Standard terms for payment are usually

              between 30 and 90 days. To get trade credit, provide a marketing plan for generating

              revenue from your inventory or other business purchase during "float" time (the period of

              time between order date and the date payment is due to the supplier). You may be surprised

              to see how many suppliers will give your business credit if you present a credible,

              home-based image.

 

              Use a Contract, Purchase Order or a Letter of Intent

 

              Convince your supplier or other person whom you do business to grant you credit by

              showing your own customers' written expression of desire to purchase. The best documents

              to substantiate this are legally binding contracts or purchase orders. If not obtainable, you

              can ask your customer to write a letter of intent to purchase an approximate amount of your

              product within a specified time period. Bottom Line: Convince your supplier you can move

              their goods or services and that they will get paid.

 

              Factoring

 

              Firms or individuals called "Factors" convert your accounts receivable into working capital,

              either immediately upon invoicing or when invoices come due. Here's how it works: You

              submit your customer's order information to the factor for credit approval. Typically, the

              factor will purchase your receivables and advance you 80 percent of their face value. The

              remaining 20 percent is held as a reserve to offset uncollectable amounts. The reserve is

              released after the bill is paid, less any deductions for uncollectables and the factor's service

              fee, known as a discount (usually 1.5 to 5 percent).

 

              Bank Financing of Receivables

 

              The major difference between banks and factors is that banks don't purchase receivables;

              they lend against them. Since you remain the owner of these accounts, you must do your

              own credit checks and absorb any collection cost. Most banks forward 80 percent of the

              receivables face value while holding 20 percent as a reserve for uncollectible amounts.

 

              Tap Personal Resources and Credit Cards

 

              One obvious way to raise money is to sell personal or business assets. The process is

              simple and it works. A personal resource available to just about any entrepreneur is a credit

              card. Few successful businesses have not had to, at one time or another, tap credit cards for

              cash advances and business purchases.

 

              Defer Payments

 

              Pay a personal visit to the accounting or loan department of your bank or mortgage servicer

              and tell them you would like to defer next month's payment, and just pay interest on the

              remaining principle. The net effect is that principle payments are deferred, the creditor earns

              more interest, and you face longer payoff dates and higher final payment amounts. But you

              will have more money up-front.

 

              Ask For Refunds

 

              Stiff competition has caused most retailers to adopt liberal return policies. Many will bend

              their "No Refunds Without Receipt" policy on merchandise they carry. Look around for

              unneeded items you have recently purchased or received. Take it back to the retail outlet for

              a refund. At a minimum, you can at least exchange the item for something you would have

              had to spend money on soon, such as a piece of office equipment.

 

              Request Access To Deposits

 

              If you are a prompt paying customer, many utility companies will allow you to apply utility

              deposits towards your next bill. That deposit then becomes capital for a growing business.

              If you're a renter, try to get a portion of the rent deposit or the pre-paid last month's rent

              payment applied against a future payment.

 

              Dip Into The Pension Plan

 

              Although bedeviled with penalties and taxes, when in a crunch you can borrow against a

              pension or retirement plan. When comparing several financing options, it might be the

              lesser evil. The best option is to borrow against the "cash value" of your retirement fund.

              You, in effect, are borrowing your own money, so the interest rate will be low. Talk to your

              employer or financial advisor to get more information.

 

              Barter For Goods and Services

 

              Bartering is becoming stronger and stronger each year, with $1 billion traded annually

              through 300 American trade exchanges. Member ship in an exchange typically starts around

              $100 and provides two major benefits. First, they complete a form 1099-B at the end of the

              year to tell the IRS how many trade dollars changed hands. (The IRS says that trade dollars

              must be treated as actual sales dollars.) Second, you can accumulate trade credit until you

              need to barter for goods or services.

 

              Borrow Against Patents, Trademarks And Copyrights

 

              It has always been challenging to establish credit using intellectual-property assets

              (patents, trademarks, or copyrights). Yet it is still feasible, however, with the right approach

              and right type of intellectual-property. Before approaching a lending institution, get your

              intellectual-property asset appraised by someone who specializes in intangibles.

 

              Turn A Loss Into A Gain

 

              If you suffered a major loss this year in your business, you may be able to turn the loss into

              cash flow. Find someone in a higher tax bracket who is looking for a tax reduction, and get

              them to invest in your company before the end of your accounting year. You gain their cash

              infusion and they take advantage of a tax break on the business loss. Locate suitable

              investors by advertising in the newspaper under the "Money Wanted" or "Partners

              Wanted" sections of the classifieds. Use a heading such as "Tax Credits & Cash-Flow."

              HBM

 

              Lecturer and author Ted Wooley also serves as president of the Horizons Unlimited Group,

              a seminar/publishing company he helped found in 1987. HUG's popular line of resources

              known as the "Insider Reports" is tailored to fill the personal and business financial

              information needs of the budding entrepreneur. Visit HUG's huge web site at

              http://www.InsiderReports.com (Selected a "Top 10 Sites for Small Business" by Direct

              Marketing Magazine 4/97) or call toll-free 888-985-8585 for a free resource catalog.