IN GARY HARPST'S neighborhood of Findlay, Ohio, business owners are up in arms about the government's $700 billion rescue package. "They are very angry about the bailout," says Harpst, the chief executive of Six Disciplines, a small-business consulting firm.

While the package is aimed at restoring confidence in the battered U.S. financial system and boosting banks' ability to lend, business owners are bracing themselves for much less promising results, including higher taxes and slower productivity growth. Some even believe the plan will give big businesses an unfair advantage over smaller businesses. In fact, half of U.S. business owners think the government’s offer to buy toxic mortgages, securities and related assets held by large financial firms is a bad idea, according to a recent survey from SurePayroll, an online payroll service in Glenview, Ill.

Either way, "the government had to do something," says David S. Waddell, senior investment strategist at Waddell & Associates in Memphis, Tenn. As credit standards continue to tighten, even business owners with sound financials have had a hard time securing loans or maintaining existing ones. "If credit freezes or gets to the point that it is way too expensive, we are not going to have any business originations, much less expansions," says Waddell. Such conditions, he adds, also threaten business owners' ability to operate on a day-to-day basis.

It's hard to determine whether the bailout will solve the nation's credit problems or even stave them off in the short run, but there are certain factors that we do know. Here’s what small-business owners should expect to face as the government's plan gets put in place:

A Tax Hit

"Our taxes will go up," says Matthew Arnold, founder of Matthew Arnold Architecture & Design, an architectural firm in Sterling, Va. And since so many resources will start getting pumped into beleaguered public companies, he adds that many important measures such as immigration and health-care reform may take a back seat.

According to Jim Harper, director of Information Policy Studies at the Cato Institute in Washington, D.C., who conducted an analysis of the government’s estimates of the bill's cost, if taxpayers fronted the whole bill for the bailout, it would cost an average American family nearly $3,000 or just under $1,000 per person in increased taxes. The Congressional Budget Office further expects that the U.S. Treasury would use most or all of the $700 billion within two years. (Click here for a link to other taxpayer cost estimates.)

Higher Prices and Lower Profits

The government plans to repackage the troubled assets it buys from U.S. companies as Treasury securities and sell them to foreign buyers, namely those in Asia, says Waddell. Eventually, he says, taxpayers may even see returns on those investments — but it will be a long time coming.

In the short term, "it’s reasonable to expect a higher [government] deficit," while the government seeks to unload those securities, says Mark Luscombe, a principal analyst for the tax and accounting group at CCH, a unit of Wolters Kluwer. An increase in the deficit, could lead to more inflation, triggering higher prices and potentially fewer profits, he says.

Sapped Productivity

No matter how the government plans to foot the bill, history shows that business owners can expect productivity growth to slow, according to a September report examining past financial crises from the International Monetary Fund in Washington, D.C. If companies are forced to pay higher taxes they'll be compelled to cut back elsewhere, resulting in fewer orders and lost sales. In turn, the report asserts, businesses will have less money to reinvest and grow.

How big of a productivity drain can businesses expect? According to the IMF report, losses from systemic banking crises average about 20% of gross domestic product during the first four years of the crisis. Put another way, says Waddell, "if our natural GDP growth rate is 3%, we should consider 2.4% as reasonable for the next four years or so."

Unfair Competition

In small-business owners' eyes, the government’s plan also promotes unfair competition, says Harpst from Six Disciplines. Say, for example, you have two financial companies. One decides to make risky but profitable bets while the other company participates only in conservative deals. Bailing out the risky company is like giving it a pat on the back for making bad choices, says Harpst. "Small businesses don’t get rescued or protected from their bad business decisions."

To Dan Barus, owner of TranslationSmart, a Tinley Park, Ill., translation and interpretation business, such a policy is not only uncompetitive, it’s unfair. "No one is coming to me and saying you screwed everything up and we’ll write that off or we’ll pass it on to taxpayers," he says.

Other recent Starting Up columns:

• Starting Up: Pricing Your Products
• Starting Up: For Entrepreneurs, Opportunity Still Knocks

("Starting Up," a weekly column written by Diana Ransom for smSmallBiz.com, follows entrepreneurs through the early stages of launching a business. Write to her at dransom@smartmoney.com.)