The New York Times has a helpful article today on a few tax breaks that small business owners are in a special advantage to exploit--provided they act on them soon, since most of them apply to this year alone.

Foremost among these special one-time-only rules is a deduction of up to $250,000 on new equipment--that's twice 2007's ceiling--and 50% depreciation on equipment purchases after that.

The same law that provided the equipment deduction--which was also the law that told the government to send you that $600 check you got a few months ago--also established an extra-high first-year depreciation allowance on business vehicles, allowing you to write off over $10,000 on a car bought for your business.

Not entirely small business-related but still a great deal, and again applicable this year only, is the $7500 tax credit for certain first-time home buyers. And we hear housing prices are lower than ever! (A bit of gallows humor.)

Finally, the Times points out this may be the final year before the capital gains tax is raised from its current, historically low rate of 15%. Sen. Barack Obama has pledged to raise it if elected, and popular attitudes right now likely will go along with him, given the general lack of sympathy for people who derive their prime income from capital gains, who tend to be hedge fund managers and other professional investors. So small business owners may want to pay out dividends or even consider selling altogether under this advantageous tax circumstance.

The one thing we'd add, though, is that just as these various tax breaks were passed in response to what looked to be a sluggish year economy-wise, so next year--which could make the economy of the first half of this year look like a boom time--will likely see a push for more legislation along similar lines. And, oh look! The version of the bailout plan that the U.S. Senate will attempt to pass today includes extensions of several expired tax breaks. We predict that won't be the last such extension.

Just yesterday we asked, of the proposed bailout, "What's In It For The Small Businesses?" The answer, among other things (firming up the credit markets, as the $700 billion asset-purchase program is intended to do, would most definitely be good for small businesses) is a raised cap on federal insurance of bank deposits. In the bill being considered today by the U.S. Senate, the Federal Deposit Insurance Corp. would be required to insure, for now temporarily, all bank deposits up to $250,000--a sharp jump from the current $100,000 limit.

And what sort of depositor frequently has over $100,000 in one account? That's right, small businesses.

In fact, this provision--which has been full-throatedly endorsed by FDIC Head Sheila Bair--is the prime result of extensive lobbying by the Independent Community Bankers of America, which represents 8,000 community banks, those locally-focused institutions that have under $1 billion in assets. And, as we've written before, what's good for the community banks is likely good for small business: many entrepreneurs were looking to them as being able to provide small amounts of credit without the punitively high rates typical of, say, credit card loans.

The idea behind bolstering the deposit cap is to help these banks, protect small businesses whose deposits are that large, and generally work to restore confidence in the country's banks. According to the Times, companies that rely on investment vehicles other than bank accounts--investment firms, mutual funds, and the like--oppose raising the deposit insurance ceiling, arguing it gives banks an unfair advantage.

The other prime thing the bailout plan appears to have for community banks--and therefore, by extension, for small businesses--is a tax break designed to help these banks where they were hit hardest: the preferred shares of Fannie Mae and Freddie Mac that community banks (especially, for some reason, Massachusetts community banks) disproportionately own. Specifically, according Rep. Roy Blunt (R-Mo.), the House Minority Whip and lead House Republican negotiator on the plan this past weekend, community banks will now be able to consider their losses on preferred shares of Fannie and Freddie as business losses rather than capital losses. This alteration, Blunt estimated, will reduce the ultimate damage that these preferred shares' collapse caused to these banks by roughly 25%.

Probably one of the reasons why the National Federation of Independent Business, the National Small Business Association, the Small Business Administration, and others have all endorsed the plan.

"Small Businesses Frozen by Crisis" is the headline. “Small businesses are sitting on their hands. Either they can’t get the capital or they don’t want the capital. They read what is happening, and frankly they are scared,” is what the Small Business Administration's chief economist has to say.

Read it and, er, well don't weep anyway. We'll get through this. It's just going to be lean for a bit.

The American Small Business League, a nonpartisan group (it has endorsed Sen. Barack Obama for president) that represents 100,000 small businesses nationwide, has been hammering away at a very specific aspect of the $700 billion bailout bill, which was passed yesterday by the U.S. Senate and now heads back to the House, which rejected an earlier version of it this past Monday.

Though the ASBL has not come out straight and said the bill ought to be defeated, period, it has made a substantial critique of the bill, asserting that its vague language could disadvantage small businesses in terms of receiving federal government contracts. According to the ASBL, the bill would authorize the Secretary of the Treasury to waive provisions of the Federal Acquisition Regulation that stipulate that some federal contracting go to small businesses, minority-owned businesses, veteran-owned businesses, and woman-owned businesses. "The federal government’s ability to exclude small businesses could last years, and middle-class firms could continue to lose billions of dollars in government contracts and subcontracts," the group said. It also ties it to what it said is a larger pattern of the Bush administration's trying to circumvent the law in order to steer maximum government contracts to big corporations.

Wisely, the ASBL advocates not just taking the damaging language out and securing the relevant provisions of the Federal Acquisition Regulation, but also changing an important aspect of the current law so that it more accurately reflects its initial intent: to ensure that an adequate percentage of federal contracts are awarded to small businesses. The problem appears to be that, right now, the government can award contracts to large businesses under certain circumstances and still report them as small-business procurements. The ASBL's proposal would adopt the Small Business Act's definition of a small business as one that is "independently owned" and would include in the bailout bill the sentence: "As of January 1st, 2009, the federal government will no longer report awards to publicly traded firms as small business awards." The addition of that one sentence and its subsequent enforcement could redirect as much as $100 billion per year in federal contracts to true small businesses, the ASBL estimates.

Given that, according to ASBL President Lloyd Chapman, a number of reported small-business procurements have recently gone to such tiny firms as Home Depot, John Deere, and Starwood Hotels, this proposal seems sensible to us.

"I had heard that there was not much in the bail out bill for small businesses, so I hope you are right," a commenter writes on our earlier post, "How The Bailout Would Help Small Business". A good post on Independent Street confirmed the small business community's ambivalence about the bailout proposal, especially when contrasted with the enthusiastic embrace it has received from big corporations across industries. Certainly there appears to be little, if anything, in the bill that was clearly put there precisely to help out small businesses specifically. As the bill passed Wednesday by the U.S. Senate goes to a House vote today, it's worth adjudging whether small business owners should support it.

On the one hand, we were able to highlight the raising of the federally insured bank deposit ceiling to $250,000, which should disproportionately help small businesses, who are more likely to have accounts that large; we could also point to the tax break for community banks that were hard-hit by the collapses of Fannie Mae and Freddie Mac and that are going to be an important source of small business loans in the coming months.

On the other hand, these are all things that, even in a best-case scenario, would help small businesses at most indirectly: it is hard not to feel that small businesses have been overlooked, especially when the small business lobby's concerns, such as those having to do with federal government contracting, have apparently gone unaddressed. The one exception here is the help being sent to community banks, which frequently would themselves qualify as small businesses; and indeed it is worth pointing out that, fundamentally, though the bailout is ultimately intended to boost the economy as a whole, its target is pretty specifically the financial industry.

Still, in the end, we would echo the title of a statement recently put out by National Federation of Independent Business CEO and President Todd Stottlemyer: "This is Not About Wall Street, It's About a Firewall for Main Street". Now, of course, it is also about Wall Street: put simply, some workers and executives there and some companies there are getting a better shake than their performance probably deserves. And while Stottlemyer does mention the community bank tax break, the change in deposit insurance, as well as an Alternative Minimum Tax patch and a couple of other items, these are secondary items in terms of the bailout bill--it is not the community bank tax break that involves the addition of $700 billion to the national debt.

But fundamentally, we are all in the same economy. And due to the mechanics of the current situation, something needs to be done to create a market for the toxic mortgage-backed loans that remain held by Wall Street firms. Dealing with that problem should help loosen the credit markets, and that should in turn help, well, you. A failure to deal with it would hit Wall Street first, it is true; but the fire would spread to Main Street, and it would burn no less ferociously there.

So in answer to our commenter: you didn't exactly hear wrong when you heard that there wasn't much in the bailout bill for small businesses, at least specifically. but we don't think we're exactly wrong to say that, ultimately, it is good for small businesses nonetheless.

And we, too, hope we're right.

Just because it's harder to obtain credit now--and, by the way, the bailout bill passed the House and was signed into law today--doesn't mean you won't still owe your pre-existing lenders for your pre-existing loans. (This dynamic is sort of the root of the whole problem, in fact.) The first prong of how you should deal with your credit situation is to branch out and find alternate ways of borrowing money: we've given some suggestions on this score.

The other thing you can do in these tough times, however, is more wisely and rigorously manage your cash flow in order to make the same amount go a little longer way in terms of satisfying the bank. Via Independent Street, cash-flow software analysis firm SurvivalWare has some tips; so does the National Federation of Independent Business.

Our favorites:
Make sure your credit report is accurate. There are only three major credit rating bureaus--Equifax, Experian, and TransUnion--so this shouldn't be too difficult. Having a solid credit score is pretty much the be-all end-all, so if there is anything you can do to make yours better immediately, such as correcting an erroneous one, that should be first on your priority list.
First, payroll; negotiate the rest. You can't put payroll off. But maybe you can schedule a later rent payment with your landlord; maybe you can get away with putting off utilities for a little bit.
Collect what you're owed, early and often. This is both a matter of sending out invoices as soon as you can--hey, why not simply invoice more frequently?--and enforcing on overdue payments from customers. Better yet, call up customers whose payments aren't due yet and just remind them, friendly-like, of their impending obligations, and maybe ask them if they could possibly get you their payment earlier.
Get cash upfront. Whether this means changing your policy altogether or just increasing the percentage of a purchase that must be paid money-down, this will help you make your payments.
Trim your workforce. Yes, we mean what you think we mean. We're not in favor of you shirking what payroll expenses you do have(see above). But you may need to cut back on payroll expenses altogether, and there tends to be only one simple way to do that.

The NFIB's first piece of advice is, as Douglas Adams fans know, the motto of The Hitchhiker's Guide to the Galaxy: Don't Panic. Well, don't. Or try not to, anyway.

A lot of you out there are not feeling overly optimistic right now (it's admittedly hard to blame you). According to Discover, 51% of small business owners said their business's conditions were getting worse; Silicon Valley and its attendant venture capitalists are freaked out by last week's events too, which from their perspective included Apple's losing over 15% of its market capitalization and AMD allegedly having trouble raising enough money for a planned spin-off.

MSNBC has put together a good, brief segment on what the economy of the next twelve months likely holds for small businesses.

(Our favorite interviewee is Fred Belinsky, a "Hat Shop Owner"--this appears to be his store--who is sporting a very natty, well, hat).

Takeaways:
-Pessimism is probably not inappropriate--which should clue you in to what your assumptions of what the next several months will be like should be.
-Keep up on stats, especially consumer confidence indices, retail spending, and the credit markets' statuses. So read the business section of your daily paper. May we also suggest a good blog for small business news?
-Hoard cash. To be frank and blunt: you need to operate on the assumption that revenues won't be what they should be, and that you can still fulfill your credit obligations.
-Apres le deluge, stronger companies and entrepreneurs. One person they talk to points to the aftermaths of the most recent severe economic downswings to demonstrate that at the other end of them, the fittest companies come out stronger than before and a ton of space is created for new entrepreneurs and new ventures.

Well, for one thing, a healthy dose of skepticism is what's next. Will it work--will we see a sufficient loosening of the credit markets? Many aren't so sure.

The Washington Post points out that where some have seen cause for confidence and hope in several recent consolidations as well as Warren Buffett's massive investments in Goldman Sachs and General Electric, others see an exposure of the dire situation: "One of America's premier companies couldn't roll over commercial paper without selling a big chunk of equity," said Peter R. Fisher, a former Treasury Undersecretary. "That means the cost of short-term borrowing for every company in America went way up."

In the wake of the bailout's becoming law last Friday, the National Federation of Independent Business, which had been a staunch supporter of the bailout on the grounds that it was "not about Wall Street, but a firewall for Main Street," unsurprisingly praised its passage: “Small business owners, whether or not they use credit to run or expand their own businesses, know that access to credit and a fully functioning financial market are important to them and to their customers, suppliers and vendors," the group said.

On the other hand, there was nothing in the bailout about some of small business's largest, and most fixable, concerns, such as those concerning government contracting, which we covered here.

Certainly talk of commercial paper and TED spreads (here's a good glossary), crucial indicators for where the credit markets are, are going to become common parlance over the coming weeks and months as everyone watches eagerly to see whether the bailout does what it was intended to: enable Americans, from the biggest corporations to individuals and, in between them, small businesses, borrow money more easily again.

It is worth taking an extended look at a new Forbes piece that showcases several companies who appear not to have a need to face the current credit crisis with too worrisome a countenance--who, in the magazine's words, "appear positioned to get through the borrowing crunch without too much pain."

Though this goes last on Forbes's list, in fact the type of company that it cites as sitting relatively pretty is, yup!, small businesses. The magazine speaks with the president of American Express's small business-serving unit Open--which, in case you hadn't noticed, is BizBox's sponsor--who points out that small business' being typically less leveraged compared to larger ones leaves them in a comparatively good position. (Michael Taylor made this argument on BizBox a few weeks ago.) “Entrepreneurs are nimble and have strategies in place to manage business challenges. They are decreasing investments, adjusting expansion plans to capital on-hand, cutting expenses and focusing on adapting to customer demand,” the president, Susan Sobbott, adds.

As for the large companies Forbes cites, we can extrapolate from some of the examples and derive some general lessons for how best to position yourself to survive a period during which borrowing will be incredibly difficult; in other cases, you can chalk the companies' enviable situations up to combinations of extreme luck and extreme skill.

Kohl's The "budget-friendly retailer" has continued with its plans to open several dozen new stores in 2008 and 2009. Lesson: as we've written before, discount to thrive during tough times (and don't forget to offer coupons!).

IBM The old giant--which was a tech company before you called them tech companies, yet has managed to remain in the game after the Silicon Valley boom--reports a secure fiscal situation despite a near-$200 billion annual balance sheet. Forbes has a company spokesperson swearing to a “very strong cash position, credit markets rate our credit profile highly, and that the company does not use overnight commercial paper markets." In other words, IBM isn't overleveraged, and you shouldn't be, either.

MetLife This seems like a surprising pick, since maybe the most spectacular corporate flameout of the past several months was that of AIG, MetLife's fellow insurance company. So what's keeping Snoopy's favorite business afloat? According to Forbes, the company says it's “financially sound and has high ratings from all of the major insurance ratings agencies” and is “fully able to meet all its obligations.” Probably it just played it smart and did not get enmeshed in partaking of credit default swaps against the defaults of bad loans and the securities made up of them--which was AIG's Waterloo.

Southwest Airlines This is a special case, of Southwest having possessed the foresight and savvy that probably deserves to be called "genius". Basically, it bet that the cost of fuel would rise, and won big. It hedged years ago by buying futures contracts that, essentially, allows it to buy about 70% of its fuel at a rate of $51 per barrel. By contrast, right now oil futures are trading slightly below $90 per barrel--and that price is, by leaps and bounds, the lowest it's been in months. So Southwest is paying significantly less for fuel than just about all of its competitors. Combine these lower costs with its pre-existing commitments to low fares, and you see Southwest able to underprice all of its competitors vastly. Those low prices would give it a leg up even in good times; in bad times, it's a checkmate move.

Calpine and Sun Healthcare Group Lesson: be an energy company or a healthcare company. You're talking about the two industries whose fortunes have gone into the stratosphere over the past few years. Incidentally, if you had a choice (which of course you don't--we all tend, and for good reason, do what we want and what we can, not what macroeconomic conditions tell us are best), we'd bet on healthcare, whose demand is only going to shoot up, over energy, whose long-term future is a bit less certain and which anyway is tied heavily to the unpredictable and erratic values of a few commodities.

We actually were waiting to post on this until we heard back from Sen. Chuck Schumer's office, which we called yesterday, but it's been a day and we haven't yet, so you should be aware that Schumer held a press conference Sunday calling for the federal government to make direct loans--"tens of billions" of dollars' worth--to small businesses through the Small Business Administration. The thinking being that, as we've written, even though the recently passed $700 billion bailout is aimed at loosening the credit markets, which should soon help small businesses as well as big corporations borrow money, in the meantime the small businesses are really feeling the hurt and need quick, short-term credit.

It's worth pointing out that Schumer is probably one of the top five most powerful senators: he's the senior Democrat from the third-biggest state, and has headed the Democratic Senatorial Campaign Committee, with much success, for several years. In other words, this is a loud voice advocating for this policy.

Obviously the direct loans would be great: even in a best-case scenario, it is going to take a month or two for the credit markets to respond to the bailout, and this is exactly what small businesses need to tide them over. From the government's perspective, establishing such loans could shore up the small business community's support for its broader policies, which has been shaky given the bailout legislation's failure to remedy problems with federal government contracting and other small business concerns.

Tell Schumer to keep fighting this fight.

We've written about the small business community's concern over the federal government's alleged failure to give the proportion required by law of its own contracts to small businesses. A New York Times article explores a more specific group that has allegedly been left out: small businesses owned by women, which have their own quota of federal contracts they're supposed to receive--5% of all federal contracts, to be exact. Instead, last year such businesses received only 3.4% of federal contracts. And, according to the U.S. Women's Chamber of Commerce, even that number is likely overstated since many companies with male CEOs were included in that data.

The Times as well as Sharon McLoone reported that the Small Business Administration has issued a final rule to expand from four to 31 the number of industries to which the 5% rule applies. While that's better than the four-industry status quo, the Chairman and Ranking Member of the U.S. Senate Small Business and Entrepreneurship Committee, Sens. John Kerry (D-Mass.) and Olympia Snowe (R-Maine), want female-owned small businesses in every industry to be eligible. The interest group Women Impacting Public Policy (WIPP) has endorsed that proposal.

Additionally, WIPP and American Express OPEN (which is BizBox's sponsor) have established Give Me 5 (as in 5%) to educate women CEOs on how to stake claim to federal contracts.

We're talking 10.1 million women-owned small businesses employing 19.1 million people and contributing nearly $2.5 trillion to GDP, and that's according to the Small Business Administration itself. What say we give those businesses 5% of federal contracts? It seems like the fair and right thing to do. Also the legally mandated thing to do.

BizBox is thrilled to be hosting Scott Cooney, author of Build a Green Small Business, our next BizBooks discussion tomorrow. If you have any questions about eco-preneurship, go post them now! And don't forget to check in for the responses afterwards.

by Jerry Kalish

Last week, BizBox advised you to get your tax breaks while you can. Here’s another one you that you may be able to take advantage of before 2008 becomes 2009. If you are a small business owner who has established a retirement plan this year, you may be eligible to receive a tax credit for the cost of implementing a plan.

And this tax credit can be better than a mere tax deduction. The same legislation that Congress passed in 2001 that increased retirement plan benefit and contribution limits - which the Pension Protection Act of 2006 extended - provided a tax credit to encourage small businesses to establish retirement plans. This tax credit is in addition to the tax deduction you may receive for the contributions to the plan. The tax credit may be claimed for a maximum period of three years for retirement plans established for the 2002 plan year or later.

And as for the other questions you may have...

Who is an eligible employer?
The tax credit is available to employers with no more than 100 employees who earned at least $5,000 in the previous year.

How much is the tax credit?
The credit is limited to 50% of the first $1,000 in expenses; therefore, the credit cannot exceed $500. The credit is nonrefundable, i.e., you may not generate an income tax refund for the credit.

What expenses are eligible?
Expenses eligible for the tax credit include those defined as the plan's start-up costs, which are ordinary or necessary for the establishment of the plan. These include expenses incurred to establish the plan, administrative fees and costs incurred to educate employees about the plan.

What plans are eligible for the tax credit?
Eligible plans include SEP IRAs, SIMPLE IRAs and qualified plans, such as 401(k) plans, profit-sharing plans, and defined benefit plans. The plan must cover at least one employee who is not classified as a highly compensated employee.

How do you claim the tax credit?
You must file IRS Form 8881 - Credit for Small Employer Pension Plan Startup Costs. Check the fine print with your tax adviser to see if you are eligible to take advantage of the tax credit this year.

Jerry Kalish is founder and President of National Benefit Services, Inc., a Chicago-based employee benefit consulting and administrative firm that serves private-held companies, publicly traded companies, and public sector employers. He blogs at The Retirement Plan Blog and can be reached at jerry@nationalbenefit.com.