March 3, 2021

Small Business: Young Entrepreneur Sees Little Help in Washington

Mr. Blumenthal said he made the trip to learn more about how the federal government viewed entrepreneurship. Like a lot of founders of start-ups, he has little interest in hiring a lobbying firm, but he is all too aware of the impact government and politics can have on business. For one thing, his New York-based company, which he says has 40 employees and produced more than $1 million in revenue in its first six months, is subject to regulations that vary widely from state to state.

The following is a condensed version of a recent conversation in which Mr. Blumenthal spoke, among other things, about what politicians don’t understand about business, what he had to promise the Small Business Administration he wouldn’t do with his borrowed money, and what the Bloomberg administration is doing right.

Q. What was it like trying to get an S.B.A. loan?

A. Finding a bank that did S.B.A.-term loans was a challenge. We were surprised that they needed two years and that banks had absolutely no flexibility. Many of the loan officers said we had a reputable business that was cash-flow positive and we had the most sophisticated business plan they’d ever seen, but they can’t provide loans to people who don’t have two years of tax returns.

Q. Isn’t that a reasonable request when you’re talking about using taxpayer dollars to guarantee a loan to a private company?

A. I understand where the banks are coming from. It probably was necessary to implement hard and fast rules to stop the bleeding when the crisis hit, but they should be looking at the policies and thinking: Does this make sense now?

Q. Was the application process difficult?

A. We had to sign so many documents that my hand hurt after I was done. I had to pledge not to open a zoo, swimming pool or aquarium. It struck me as strange. Yes, it’s the bank’s duty to do due diligence, but this was just a silly restriction.

Q. But there was a happy ending, right?

A. Yes, after being turned down by 15 banks, it was a personal relationship that introduced us to a regional bank in New Jersey that gave us a $200,000 loan.

Q. What reasons did the 15 banks give for turning you down?

A. They didn’t have the authority to bypass the rule that you have to have two years of tax returns.

Q. Was your company profitable at the time?

A. Yes, we were profitable and we had a ton of traction. We had higher customer satisfaction scores than Zappos or Apple. A rational bank should have wanted to support us, even though we were a more risky bet than a company that had been around longer.

Q. What did the bank that lent you money do differently? Did it demand collateral?

A. We came through a personal relationship at a very high level at a regional bank in New Jersey that didn’t have the draconian guidelines because their management was empowered to make decisions. For the $200,000 S.B.A.-backed loan that we got, the bank wanted $100,000 in collateral in either cash or marketable products. The reason they wanted so much collateral was that if we default, the regional bank is not going to go through the process of getting the money from the S.B.A. because it’s so onerous.

Q. What did the loan allow you to do?

A. We were able to hire 20 employees. The loan also helped us with cash flow and to purchase inventory. If we didn’t get that loan we would have had to go to the equity markets. Between the four of us co-founders, we own 90 percent of the company and that, in our opinion, is a good thing.

Q. What could Washington do to help?

A. The first is streamlining regulation. The rules of optical dispensing vary from state to state. Dispensing eyeglasses is not that complicated and even if it were complicated, there should be uniform rules. I’d also do something about the dearth of technical talent — it is really difficult to hire Web developers and engineers. We aren’t educating enough of these people. It was refreshing to hear the politicians talk about the STEM — science, technology, engineering and math — subjects, but come on, let’s get some of the smart engineers into the country by granting them their H-1B visas.

Q. Are you involved in the political process?

A. We have never met with politicians. I don’t know the first thing about how to get heard. My suspicion is that it’s to donate a lot of money.

Q. Have you had any positive experiences with government?

A. What the Bloomberg administration is doing in New York City is nothing short of amazing. They are listening and problem-solving. The typical process to get permits from the Department of Buildings takes several weeks, and if you are in a landmarked building it takes even longer. The Bloomberg administration put together the New Business Acceleration Team that helps business cut through the red tape and get those approvals faster.

Q. You mentioned that some members of Congress didn’t seem comfortable talking about technology. One senator, for example, didn’t know what a Web developer is. Do you think members of Congress should be required to go to a class to get up to speed?

A. Who would design that class? I hope not members of Congress. I was pretty surprised at the lack of mastery.

Q. Do you think the government is doing enough to encourage entrepreneurship?

A. I was recently told a statistic that the majority of entrepreneurs are foreign-born or haven’t graduated from college — which means the best and the brightest and the most educated are not pursuing entrepreneurial paths. For whatever reason, we aren’t encouraging these people to start their own business.

Q. Why do you think consumers should be encouraged to buy from young entrepreneurs?

A. I think consumers should buy whatever they want. I personally try to buy the best-quality items at the best price that do the least harm and from companies that are striving to do good — many of those companies are run by young entrepreneurs. Still, I think it would be strange to be encouraging people to buy based on people’s age rather than the strength of their product.

Q. But isn’t that the cause that brought you to Washington?

A. I came to Washington primarily to meet other entrepreneurs. That being said, I was also curious to hear how our federal government was thinking about entrepreneurship.

Q. What do you make of the economic turmoil we’ve been experiencing?

A. It highlights that it might be too much to ask Washington to help with entrepreneurship when they can’t even get the basics right, like maintaining a decent credit rating.

Q. Is your company doing anything different because of the economy?

A. We are not right now, but we do fear our ability to get working capital and debt. It’s something we are monitoring closely.

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