Slow payments stymie entrepreneurs’ expansion plans

  • By Kurt Batdorf SCBJ Editor
  • Thursday, February 23, 2012 2:16pm

EVERETT — Local small-business owners are ready to lead an economic recovery, if only the companies they supply and the federal government would pay their bills faster.

Calvin Goings, assistant associate administrator with the U.S. Small Business Administration, and Rep. Rick Larsen, D-Wash., heard from a dozen small-business owners and entrepreneurs in a roundtable discussion at civil engineer Reid Middleton’s offices in south Everett on Feb. 22.

While there was general consensus that SBA is doing a great deal now to help small businesses succeed as the economy recovers from the 2008 recession, many of the entrepreneurs said they’re hamstrung by slow payments from federal agencies, other small businesses and even the Boeing Co.

“A business lives and dies by its cash flow,” said Dallas Meggitt, co-owner with his wife, Judith, of Sound &Sea Technology, an ocean engineering firm in Lynnwood. The company specializes in undersea projects, primarily with the U.S. Navy. They’re also working with the Snohomish County Public Utility District on a tidal power project in Admiralty Inlet west of Whidbey Island.

Judith Meggitt said their 50-employee company has persistent trouble getting timely payment from the Navy. While President Barack Obama has touted an executive order that calls for all federal agencies to pay invoices to small businesses within 15 days, the Meggitts said they haven’t seen any sign of agencies following that rule.

“What happened to 15-day pay?” she asked.

Meggitt said she’s been waiting for a nearly $1 million payment from the Navy since Dec. 22. Now, she said she can’t even get an answer on the phone.

“We’re just so frustrated we don’t know what to do,” Meggitt said.

Goings said he would talk to the Meggitts specifically about their problem with the Navy. He also said it’s incumbent on federal agencies to follow their own contracting and procurement rules, and that’s an area where SBA can help.

Dallas Meggitt said it’s routine for the Navy to wait a full 30 days to pay. He said the Navy often goes beyond 30 days, accruing interest charges that government auditors don’t like to pay, but there appears to be little consequence for the Navy’s slow payments.

He also said their firm, of which his wife is the majority owner, has yet to see any action from the Department of Defense on preferential bids for woman-owned businesses. As a result, he said, “we’re precluded from participating on relatively small contracts.”

Goings and Larsen said they would look into that, too.

Even though a narrow majority of the roundtable group said they believe the region’s economy is gradually improving, Jerry Murphy, owner of Greenshields Industrial Supply in Everett, said he’s seeing slower payments on his invoices “across the board.”

So does Dale Newman, founder of Industrial Massage in Everett. His business provides massage treatments to Boeing employees, which has helped the company reduce the number and cost of its worker compensation claims.

But Newman said Boeing’s arbitrary switch from 30-day to 60-day payments has forced him to use his family’s savings and retirement accounts to cover his business’ reduced cash flow.

“It really affects a small vendor with an extra 30 days waiting for payment,” he said.

Eric Archer lost his construction sales job as the recession deepened. He said he was able to start his new business, BundlePix Action Photography, thanks to six months of training from the Self-Employment Assistance Program that paid unemployment benefits and development of a business plan with Peter Quist, director of Edmonds Community College’s Small Business Development Center.

Archer said Quist’s business plan and counseling helped and the program was useful, but when it ended he was cut loose without any resources.

“Starting from nothing is very, very difficult,” Archer said. A longer transition period “would have been helpful.”

Andy LeVeque of Backdrop Sports in Everett echoed Archer’s experience. LeVeque took the same training program and hit the same shortcomings when it ended. He broke his collarbone and paid the bills himself since he had no health insurance, but that hurt his ability to get a loan to expand business because he couldn’t show he had enough cash on hand.

“If I had proper funding, I could hire three people tomorrow,” Archer said. “SBA needs to spread the word. It needs to improve its marketing and awareness.”

Goings, until recently the administrator for SBA’s Seattle-based Region X, agreed with Archer and promised to talk about it with his bosses in Washington, D.C.

Kurt Batdorf: 425-339-3102, kbatdorf@scbj.com.