ACA affecting small business lending? Not really

A Wall Street Journal article (Health Law Stirs Lending Worries for Small Business) caught my eye, since it seemed to report that the Affordable Care Act (ACA) was making it hard to raise money. But as I read further into it there seems to be nothing really there.

The story’s angle is that lenders want assurances that businesses –especially those seeking growth capital– will be in compliance with the ACA by the time it is fully implemented in a couple of years. Some borrowers report hearing this, others say it hasn’t come up. To me it seems like a standard diligence item –one of dozens or hundreds that might go into a loan approval or equity financing.

On second thought, there is something interesting about this item and if I were a lender I would inquire about compliance plans and listen for more than just the facts of the answer. If I heard someone say they planned to cut workers’ hours to avoid paying for health insurance or chop the business up into small divisions to qualify for insurance exchanges it would be give me second thoughts about the owner’s judgment and about whether they were more interested in ideology than the nuts and bolts of revenue, margin and cashflow that would be needed to pay me back.

October 16, 2013

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