Employee Benefit Newsletter The United States Small Business Administration states that, among the 25.8 million businesses in the United States, over 99 percent of employers are small businesses. In fact, small businesses are key drivers of growth in the U.S. economy, creating more than 66 percent of all new jobs each year. President Obama’s initiatives to create jobs reflect these statistics by including substantial assistance plans for small businesses to free up access to capital, ease the burdens of health care costs, and fund innovation and development.
According to Obama, “The true engine of job creation will always be businesses. What government can do is fuel that engine: by giving entrepreneurs and companies the support to open their doors, expand, and hire more workers. Today, we're taking another step towards assisting small business owners to get the capital they need to grow and hire.”
The Small Business Lending Fund and Other Financing Sources
The Administration has earmarked $30 billion in Small Business Lending Fund capital to assist community-based banks in increasing lending to small businesses.
Approximately 8,000 banks fit the mold, with assets of just under $10 billion and a customer base of local community businesses.
Small Business Lending Funds would provide these banks with the necessary liquidity to loosen the reins on small business lending and jump-start growth in this sector. This initiative would be funded by repayments from large banks that benefited from the $700 billion Troubled Asset Relief Program (TARP) bailout of Wall Street’s financial crisis that culminated in the fall of 2009. In addition, banks would receive a substantial cut in the dividend tax rate for up to 5 years. For small businesses, it provides new and expanded access to capital necessary to invest, hire, and grow.
In addition to government-sponsored programs to fuel lending to small business, other financing options include angel investors and venture capitalists, commercial bank loans, Small Business Administration loans, and home-equity loans.
Small Business Real Estate Refinancing
The President has also proposed a program to allow small business owners to refinance existing mortgages through a Small Business Administration 504 Loan Program that provides guarantees for loans for the development of real estate and other fixed assets. SBA Administrator Karen Mills states, “Thousands of good, creditworthy businesses find themselves caught by declining real estate values as a result of this recession. With many of them now facing mortgages coming due in the next few years, the ability to refinance into SBA’s 504 loan will give them the chance to lock in long-term, stable financing, as well as protect jobs by protecting small businesses from foreclosure.” Learn more about 504 loans.
Health Care Initiatives
Providing health care to employees without the bargaining power and leverage held by large corporations has made health care costs prohibitive to owners of small businesses. In response, Obama has proposed:
•A tax credit of up to 50 percent of the premiums paid to cover workers for firms with 25 full-time workers or less. The White House Council of Economic Advisers states that approximately 4 million small businesses will be eligible for this tax credit for providing health insurance to their employees.
•Creation of The National Health Exchange, a low-cost, high-quality source of health insurance that all small businesses can buy into, raising the collective purchasing power and spreading the risk and administrative costs.
•Reimbursement of catastrophic costs, or “reinsurance” for small business employers of those workers with chronic illness.
Keep up-to-date on the latest health care reforms impacting small business.
Tax Incentives and Additional Funds for Small Business
The Obama Administration has proposed the elimination of all capital gains taxes for small and start-up businesses to create incentives for investment in the small business sector. Last year’s Recovery Act instituted an exemption of 75 percent. This proposal would increase that exemption to 100 percent on investments in small business.
In addition, Obama states that he would like to double federal funding for research, alternative energy sources, continued advancement of broadband technology, and implementation of a research and development tax credit to help businesses invest in innovation.
By Jim Casey
Leader, Small Business Marketing, D&B
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