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Vice President Joe Biden with New York Govenor David Patterson speak during a rountable on the Recovery Act. June 2, 2009. Pace University Lubin School of Business. (AP Photo)
You have undoubtedly heard about the unreal amount of money each state has been awarded to assist in revitalizing our deteriorating economy. As a business owner, you have most likely heard of the tax breaks you could receive to help keep your baby afloat. You may have even heard that President Obama is determined to make small business lending more attractive by guaranteeing up to 90% on Small Business Administration (SBA) loans. But what you may not have heard is that banks are not lending the hundreds of millions of small business loan dollars as they once did due to their tighter lending standards and the overall creditworthiness of businesses. So is there anything in the Stimulus Bill for the struggling small business owner? In order to understand what will be, we need to understand how it once was.
Banks would sell SBA loans in the secondary market and then use the earnings to fund new loans to other small businesses. Now, in this great state of economic turmoil we live in, the purchasers (secondary market) are unwilling to buy the SBA loans. This means banks are virtually unable to lend as they have in the past. Here is the breakdown of how Stimulus money is being allocated to the SBA: The U.S. Small Business Administration will receive $730 million from the stimulus package–more than doubling their operating budget from 2008–to help assist businesses with financing.
According to a press release from the SBA, funds will be divided among many programs including; $375 million for temporary fee reductions or eliminations on SBA loans, and for increased SBA guaranteed shares, up to 90 percent for some loans, $255 million for a new loan program to help small businesses meet existing debt payments, and $30 million to expand SBA's Microloan program, enough to finance up to $50 million in new lending and $24 million in technical assistance grants to micro lenders. http://www.sba.gov/recovery/
How will we, the struggling small business owner, ever be able to chisel through the frozen secondary credit market to take advantage of these new loan dollars? The answer lies within The Treasury. The United States Treasury, “the executive agency responsible for promoting economic prosperity and ensuring the financial security of the United States”, is now going to invest $15 Billion buying securitized SBA-backed loans using funds from the bank bailout program. This will allow banks to fund new small business loans. http://www.ustreas.gov/news/index1.html
In addition to this boost by the Treasury, the SBA recently launched the ARC program. The American Recovery Capital loan program assists struggling small businesses that have faced hardship due to the economy. These deferred payment loans are for small businesses unable to pay current debt. These ARC loans are interest free with absolutely no fees to the borrower. http://www.sba.gov/idc/groups/public/documents/sba_homepage/news_release_09-30.pdf
· Among other provisions, the bill allows a delay of the 3% withholding tax on payments to businesses that sell goods or services to governments, and a cut in the capital gains tax cut for investors in small businesses who hold stock for more than five years.
· Businesses that reduce their debt will be allowed to delay some taxes, thus allowing them to obtain additional resources to invest in creating new jobs.
· Businesses that create jobs for unemployed veterans and youth that have been out of work and out of school for the 6 months will enjoy tax credits.
· Small businesses investing in plants and equipment during 2009 will be allowed to extend the bonus depreciation. http://usgovinfo.about.com/od/moneymatters/a/ecstimtaxes.htm
Don’t discount the largest single government spending bill in our nation’s history just yet. The recovery of our economy and the small business sector starts with only a Bill. The Stimulus Bill. Sitting on Capitol Hill.
For More Info:
The Small Business Administration
Comments
I too have written many articles on this for examiner.com (currently on sabbatical) as well as other outlets. I have loudly criticized Mr. Obama, as well as his predecessor Mr. Bush.
Both have ignored small business at the country's peril. Small business creates nearly every new job in America, yet, Mr. Obama's gives our money to big multi-national corporations. The "ARC" program unveiled by the SBA on 6/15 has been a dismal failure on many levels.
I urge you and everyone to check out the American Small Business League's (ASBL) website. Unfortunately I can not post a link to it in this comment box.
Sadly, in the next few months, you will see record failures of small businesses. On top of this, those that do survive, will be dropping, or greatly reducing their healthcare plans significantly. Who do you think currently pays for the healthcare in America? Big business? No!!!!!
How many small business people are on President Obama's board of economic advisors? 'Nuff said!
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