What's In the Stimulus

By Marc Tracy

Habemus Stimulus! Yesterday, President Obama signed the final bill--total price-tag: $787 billion--in Denver, making it law. When last we wrote about the matter, a number of provisions were up in the air. Now that it's set in stone: What's in it for small business owners?

(Good rundowns courtesy of Fortune, The Entrepreneurial Agenda, and, indeed, the Small Business Administration's Office of Advocacy.)

Well, for starters, there's about $730 million in spending and tax breaks that are clearly designed to benefit small businesses specifically--money that is hoped to have a multiplying effect that could create as much as $21 billion in new small business inveestment and lending--a prediction offered by Rep. Nydia Velazquez (D-N.Y.), who chairs the House Small Business Committee. What's that $730 million being spent on?

Expanded Community Express loans. The stimulus authorizes the SBA to guarantee $3 billion in bundles of SBA-backed Community Express loans on the secondary market. It does appear to be the new administration's policy to try to juice the small-business credit scene with the use of these loans, whose original purpose was to ensure that women and minority entrepreneurs could obtain sufficient financing. While we are happy for any help at this point, we were hoping the government would find another way.

Expanding 7(a) loans. To confront the alarming decline in SBA-backed 7(a) loans, the agency's flagship program, the stimulus provides a range of measures. The 7(a) program now allows for loans over $150,000 to be backed 90% (it was previously 75%). $6 million was appropriated for SBA microloans (which can go as high as $35,000 apiece). And, the stimulus has reserved $375 million to pay for borrower and lender fees associated with SBA-backed loans; there will be no fees until that money runs out. (At which point, if things haven't improved dramatically, you can be sure we and others will be clamoring for further fee-elimination funds.)

Expanding the SBA. The most common complaint surrounding the SBA, whether it's trying to administer its loan programs properly or ensure that federal small-business contracts are actually going to small businesses, is simply that it's woefully underfunded. The extra $55 million the stimulus provides should come in handy there.

Carry back for small businesses--and small businesses only. We first wrote about this here. The stimulus law allows businesses to "carry back" losses on their 2008 tax returns up to five years back and duly collect the appropriate refunds; normally, you may only carry losses back up to two years. This provision only applies to businesses that grossed $15 million or less in 2008.

Equipment expensing. Businesses may now deduct up to $250,000 in purchases of new equipment; the prior limit was $133,000.

Expanding hiring deductions. Under current federal law, businesses may deduct 40% of the first $6,000 paid to employees who fall into certain categories. The stimulus adds two categories: military vets and "disconnected youths".

Most of all, though, and as we have argued previously, maybe the stimulus's greatest boon to small businesses is simply the sheer amount of money the federal government is spending in an effort to get consumer spending off of the mat. For, ultimately, no matter how much is thrown at SBA lending programs and the like, it is only when the American people decide to start buying things again that the economy--and its myriad small businesses--are going to start getting in good shape again. For that reason, certainly, yesterday was a day to be thankful.

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February 18, 2009 12:20 PM