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Stimulus Package Includes Incentives For Small Business

February 17th, 2009 · 23 Comments

            Today, President Obama will sign the American Recovery and Investment Act of 2009.  I thought that it might be helpful to state what is in this Act for small business.  Here is a run-down of some of the larger items:

 

·      $720 million to help support a number of programs at the U.S. Small Business Administration (primarily reducing fees on 7(a) guaranteed loan guarantees);

 

·      $400 million in support for economic development and entrepreneurship, particularly in distressed rural, urban, and low-income communities; and

 

·      tax incentives for small businesses, including a continuation of section 179 expensing up to $250,000 on new capital investments, loss carry back for up to five years, a delay in the three percent withholding tax for businesses having government contracts, and a reduced capital gains tax for small business investors holding stock for five years or more.

 

            Small firms can take advantage of other parts of the stimulus package, as well.  For instance, there are major investments in infrastructure, broadband, green technologies, home winterization incentives, etc., which can benefit large and small businesses alike.  Here are some dollar figures for these expenditures:

 

·      $27.5 billion for road construction projects;

·      $26 billion to local school districts to enable them to have “21st century classrooms”;

·      $7.2 billion for broadband access to underserved areas;

·      $15 billion for scientific research;

·      $19 billion for health information technology investments;

·      $30 billion for improving the nation’s electricity grid and other energy improvements; and

·      $5 billion to help weatherize homes for low-and moderate-income homeowners.

 

            Hopefully, small businesses will be able to capitalize on the contracting opportunities just mentioned.  In addition, to the extent that the economy starts to improve, small businesses, which account for half of our real GDP and tend to recover quicker from recessions than their larger counterparts, will see indirect benefits from passage of this bill, as well.  For more information, refer to the sources below.

 

Sources: Speaker of the House, House Committee on Appropriations, House Committee on Rules

 

 

– Chad Moutray, Chief Economist

Tags: Regulatory Policy · Research & Statistics · State and Regional

23 responses so far ↓

  • 1 Tom Hood // Feb 19, 2009 at 8:40 am

    Chad,

    Congratulations – it is great to see the SBA getting more resources to help small businesses. We met with your Baltimore District team and are working to educate the Maryland business community and CPAs about the resources available from the SBA. Like you, we believe that small businesses are the way out of this recession. I also want to thank you for agreeing to speak at our upcoming MDBIZEXPO on June 16th & 17th at the Baltimore Convention Center where we will feature a group of workshops about these new opportunities and programs. Keep advocating!

  • 2 james // Feb 27, 2009 at 8:12 pm

    We have run a small retail store for 30 years, and seen many up and downs. Over the last two years sales have declined and expenses have escalated. Conventional lending is NOT available and we’ve been hoping that the new Stimulus Package will bring some fast need relived to small business that need cash to keep employees and build inventories. We exhausted our personal funds so as not to layoff employees that have been with us for over 20 years. Now sales are still off, cash is gone and no one wants to loan money. Yesterday my banker was brutally candor, “yes we’re making loans but it only to companies with perfect credit, little debt and it needs to be collateralized.
    And when we find that customer we’ll loan him/her all they want. The bank blames the government regulators for not loosening their underwriting standards. I her opinion the SBA package is not going to do much except offer some tax credits to companies that make it through theses tuff times. What good will tax credit due companies that layoff their workers and close their doors after 30 years? Can someone come up with a better plan? How about a very simple model for qualifying business that is directly funded by the SBA and loan amounts are based upon the number of employees they’re going to keep and giving us some relief by refinancing our existing SBA debt. But they have to take the banks out this process, they’re all in turtle mode. Moving slow with their heads tucked in their Shells!

  • 3 How the new Stimulus Plan could affect your small business | The Small Business Competitive Index (SBCI) // Feb 28, 2009 at 12:11 am

    [...] Chad Moutray covers the small business impact of the stimulus package at a high level on the SBA’s Small Business Watchdog blog. Here is a great nerdy (I have a degree in Accounting so I can tease) summary from the Journal of [...]

  • 4 Shaun G // Mar 8, 2009 at 3:55 am

    Wow, I guess some of the stimulus is actually pretty good. I’d hate to see SBA succumb to this downtown so this is great. Through adjustments in the housing market and small businesses our economy will rebound.

    -Shaun G
    http://www.ShaunsHouses.com

  • 5 Ann R // Apr 15, 2009 at 1:46 pm

    DEFINITION OF SMALL BUSINESS

    During Campaign season and now that the election is over you have heard a lot about “Small Business” and from a particular group (Republican’s) it’s emanate destruction. Their message is that there is an all out war on small business owners and free enterprise in America. With all of this relentless rhetoric it may interest you to know the Federal Definition of a “Small Business”; I think you will be shocked. As a matter of fact I may have discovered the real “Shock and Awe”.

    Whenever I hear the term Small Business, I think of the small mom and pop shops and businesses in all of our communities. The painter with one or two employees, the Mechanic with his own shop, the little flower or coffee shop and I think I am safe in assuming you do too. Now in realty I was not quite that naïve and did assume it also included small manufacturing company’s or the corner Automobile dealership. Maybe anyone with less than 100 employees, or gross revenues in the 1 or 2 million dollar range.

    Go to the Federal SBA site and you will find the definition is a complex structure based not on how big you are but what you do. Some businesses are based on number of employees others on gross revenue, still others on their percentage of market share and then there is the “0” employee Small Business which is not based on any of the above but strictly on what they do and appear to have no cap on revenue or market share, farmers for instance fall in this category.

    The average on this chart with its bizarre breakdowns and categories seems to be 500 hundred employees or $7,000,000 in gross revenue. However there are a multitude of exceptions. If you are a New Car Dealership you can have gross revenues of $29,000,000 and still be a small business. A Used Car Dealership your gross revenues, a mere $23,000,000. If you are a Petroleum Company you can have 1500 hundred employees and no gross revenue cap. Hmm? If you’re in the Residential Construction business, your in luck, your gross of $33,500,000 still fits the SBA definition of a “Small Business”. Hospitals, $34,000,000. Physicians Clinics, $7,000,000. Convenience Store, $14,000,000. Hair Care or Pet Care, also $14,000,000. I don’t personally know any hair dressers making $14,000,000 but remember these categories are rather generic and I am certain that there are several Product distributors or manufactures in both of those categories that sell $14,000,000 in product.

    For years, with 2005 being a notable attempt, there has been a push by some more sane and rational Politicians to redefine a “Small Business” and they have all fallen flat. Why? Billions of dollars in government contracts are at stake. Federal and State Governments must award a certain percentage of all contracts to “Small Business”. Billion dollar and Multimillion dollar corporations would lose out on those lucrative contracts. Remember the market share classification? If the SBA redefined the Small Business, these wealthy and politically influential companies would no longer be eligible to bid on this lucrative percentage of Government contracts.

    This ridiculous definition has a dual negative impact on the real small business owner. First of all they have absolutely no hope of being able to compete on the same playing field with these Billion and Multi Million dollar corporations so you can imagine where the Government contracts go. As well as so many of the contracts issued by other major companies and Publicly held corporations such as Utilities, that also must meet a small business quota.

    But secondly, and to me even more damaging, they are being buried by regulation and requirements they can not afford to meet and in most cases that really do not apply. Because we have chosen to make the “Small Business” definition so “Big Business” friendly it is without a doubt necessary to regulate their behavior and protect their employees. Unfortunately this means all small business must meet these requirements. After all we can’t discriminate can we?

    By current definition 90 to 98% of all businesses in America are “Small Business’s”. This varies depending on which read you are looking at. And of this percentage 98% are in the less than 100 employee group and as you can imagine revenues are much less than the $7,000,000 average. Based on the most current information I could find, 2% of the “Small Business’s”, again I take great exception to the definition, make 98% of the revenue.

    So when hear the Politicians reference to Destroying Small Business in America I want you to remember who they are really talking about and keep the following two things in mind. First, just like the definition of Poor or Rich varies widely between those that are poor and those that are rich, the definition of Small and Big must also be based on how “Big” you are.

    And number two, all of these Politicians that say they want to protect small business owners have the power to do so already in their hands. For the last several years though they have been given the choice numerous times they simply have chosen not to do so. Have the SBA definition of a “Small Business” based on reality and change the regulations to properly reflect actual needs. Do not force the majority to again pay the bill for the profit of the minority. Do this and maybe you (the GOP) can add some credibility to your public assertion that you (the GOP) care about the average American Business Owner.

    (You can find a complete list of the breakdowns for all businesses at the SBA web site.)

  • 6 Chuck Blakeman // May 29, 2009 at 10:39 pm

    Ann R’s comment is spot on. The whole of research related to “small business” is of no value, because the definition of small business is no more relevant than the set of all short people. The range is so broad as to be meaningless. The actual stats from the SBA Office of Advocacy and 2005 census is 99.93% of all businesses fall into the SBSs useless definition of “small”, only 00.06% (2/3rds of 1 percent) are “large”. There is no mid-sized business in America.

    The fact is that the SBA has never served small business, but has been used as a vehicle for mid-sized businesses to grow into large businesses at the expense of true small businesses. The SBA is really the MLBA – Mid to Large Bus. Admin. Reforming it will not be possible. The great triumvirate in Washington is 1) Govt. 2) Big Business and 3) Unions. Small Business is not on the radar.

    The best we can do is expose the silliness of the SBAs use of the word “small” and continuously challenge the research that portends to reflect whats going on in small business. 96%+ of all businesses have less than 50 employees. The SBA serves the small wedge of 51-499 employee businesses that make up only 3.9% of all businesses.

  • 7 Factory Service Manual // Aug 14, 2009 at 1:57 pm

    These are some great news for small business owners. Even tho I currently have a full time job already, but I still manage couple small business of my own during off work hours. Hopefully I can use some of the incentives and benefits later on.

    Thanks,

  • 8 Shawn Gray // Aug 16, 2009 at 11:15 pm

    It seems as though the stimulus plan has made some small businesses thrieve, however after visiting with every qualifying bank that works with the SBA they seem only to be interested in one thing; my Credit score. I currently have a good score but they could care less about the business only my credit report. I prepared a 22 page business proposal and not one bank asked for it… All they wanted to get was my credit score. So what the hell does this ” GREAT SBA” institution do for us small businesses? Absolutely nothing……. my business is positive for over 5 years with over $ 70,000 in revenue but not one SBA bank is interested in that, it all depends on my personal credit score. I am so sick of everyones life being hung up on one number all the SBA is a waste of goverment money and time. They certify nothing and help you only waste time in preparing documents that mean nothing to a lender…. What ever happened to judging a person on the sweat and hard work they do for their business? The countless hours advertising and developing new ways of doing business. I guess that means nothing if you have a 680 or less credit score. However I was offered help by a SBA bank with a small loan with a 680 score for 9%, what a deal I should jump right on that… My recommendation for any small business, don’t waste your time in preparing documents or asking for a loan, go back to square one and begin finding private investors that care how you run your business and the hard work you put into everyday to make it run.

  • 9 Esaul Daris // Aug 30, 2009 at 11:29 pm

    I have one quick ask, “How to get a grant for any type of business?”

  • 10 Bill Bartmann // Sep 16, 2009 at 12:45 pm

    Great site…keep up the good work. I read a lot of blogs on a daily basis and for the most part, people lack substance but, I just wanted to make a quick comment to say I’m glad I found your blog. Thanks,

    A definite great read…

    -Bill-Bartmann

  • 11 Answering Service // Sep 20, 2009 at 1:13 am

    I am happy to hear about the investment in broadband development. It must be available everywhere.

  • 12 Bill Bartmann // Sep 21, 2009 at 5:34 pm

    This blog rocks! I gotta say, that I read a lot of blogs on a daily basis and for the most part, people lack substance but, I just wanted to make a quick comment to say I’m glad I found your blog. Thanks, :)

    A definite great read..

    -Bill-Bartmann

  • 13 discount auto parts // Sep 24, 2009 at 1:43 pm

    thanks for the post! There will always be an alternative solutions for small business owners.

  • 14 BloggerDude // Oct 8, 2009 at 8:40 pm

    I don’t know If I said it already but …Hey good stuff…keep up the good work! :) I read a lot of blogs on a daily basis and for the most part, people lack substance but, I just wanted to make a quick comment to say I’m glad I found your blog. Thanks,)

    A definite great read….

  • 15 Web Hosting // Oct 11, 2009 at 7:55 am

    The fact is that the SBA has never served small business, but has been used as a vehicle for mid-sized businesses to grow into large businesses at the expense of true small businesses. The SBA is really the MLBA – Mid to Large Bus. Admin. Reforming it will not be possible. The great triumvirate in Washington is 1) Govt. 2) Big Business and 3) Unions. Small Business is not on the radar

  • 16 Ben G. // Oct 30, 2009 at 11:09 am

    I currently own a small shipping business and have been utilizing some help from government services. However, the help I have received was archaic in nature. I would much prefer a hand out like many of these other organizations are receiving.

  • 17 public disgrace // Nov 7, 2009 at 5:26 am

    These are some great news for small business owners. Even tho I currently have a full time job already, but I still manage couple small business of my own during off work hours. Hopefully I can use some of the incentives and benefits later on.

  • 18 Kenny // Dec 30, 2009 at 8:17 pm

    I have been in business for myself for 20+ years. This is great news for small business if we are able to capitalize on the opportunities and dollars available.

    - Kenny Morris

  • 19 Robert // Feb 19, 2010 at 7:08 am

    Small business
    4) Small Business owners are largely forgotten. Thats why I only focus on them. I have experience several members of my family file bankruptcy due to small business failures. I also I suffered through 2 destroyed businesses due to failure however, in my failings I have learned some of the secrets to success. (Who can say they know it all?)
    What I like about small business owners is that they are not afraid to take huge risks and lay it all on the line. But, I agree they do need a lot of help with their marketing. I think having them go the social media and email route is not only the least expensive but its also the most effective. Thanks for the stats!

  • 20 The Internet Time Machine // Apr 13, 2010 at 9:08 am

    I think the people who own small businesses and what small businesses actually benefit from government programs are two totally different things. To many people, a small business is sitting in their home office in front of their computer doing marketing, writing and customer service type businesses. Small business used to be that small grocery store down the street, but with the digital age, the face of small business has changed.

  • 21 L.A. // May 18, 2010 at 1:48 am

    Is the June/2010 talks & planning true regarding a small business stimulus package?, will we finally see stimulus backing for small businesses?, hope such talks are true so we small businesses could soon get some sort of financial help down here.

  • 22 GreenEnergy // May 20, 2010 at 7:54 pm

    Information about the different kind of renewable energy.http://www.communitysmarts.com

  • 23 teeth whitening // Jun 18, 2010 at 12:07 am

    Speaking of small business, what happened to banks lending money to small mamas and papas businesses across the country who are suffering from lack of capital. I mean, these banks got bailed-out, why can’t they bail-out the small business owner who are struggling to make payroll.

    We said no body is hiring, but have we forgotten that most hiring done in this country are done by small business owners.