Obama offers small business boost
A plan to help small businesses by freeing up credit and providing a few tax
breaks was announced by the Obama Administration last month.
The federal government will buy up to $15 billion of securities that are linked
to small business loans, President Obama told an audience of small-business
owners at a March 16 meeting at the White House.
Small businesses are “one of the biggest drivers of employment that we have,” Obama told the audience. “You deserve a chance. America needs you to have a chance.”
Under the terms of the plan, the government will buy securities backed by the
most common type of Small Business Administration loans, known as 7(a) loans,
in an effort to help banks move the assets and generate funds for new lending.
The administration also wants to ease the secondary market for loans backed by
the SBA, which has been frozen since last fall.
The plan calls for increasing loan guarantees for small business to 90 percent
of the loan value, up from the current 85 percent, encouraging banks and other
lenders to extend credit, and waiving SBA loan fees.
Treasury Secretary Timothy Geithner said banks will be monitored to make sure
they’re lending to smaller businesses. The 21 largest banks receiving government
funds will be required to report their volume of small-business lending each
month; all banks will be asked to report quarterly on lending to small
businesses.
Another part of the initiative includes tax breaks for small-business owners.
Businesses with gross receipts of up to $15 million can apply current operating
losses to tax bills going back five years, a provision known as a carryback
that effectively offsets past tax liabilities.
The plan also includes tax write-offs and a reduction in the estimated taxes
paid by small businesses.
The plan, small-business experts say, could help companies that rely on the SBA
for funds and generally qualify for bank loans.
But lack of financing is not the biggest problem facing small businesses,
according to William Dunkelberg, chief economist for the National Federation of
Independent Business.
Only three percent of NFIB members cited a lack of financing as a top problem.
Halting job losses and restoring consumer confidence are more important,
according to NFIB.
The Small Business and Entrepreneurship Council said that while the
administration’s plan may help small businesses that are in a position to borrow money, many
firms are not in sound financial shape or don’t want to increase their debt at this time. Political leaders should focus on
policies that allow small firms to survive and self-finance with their own resources, the council said.
“Rather than fiddling with various government programs, the Obama Administration
would accomplish much more in terms of boosting confidence and getting the
economy moving by, at the very least, moving away from imposing higher personal
income, capital gains, dividend and estate taxes on investors and business
owners, not to mention increased energy costs through a cap-and-trade
regulatory scheme,” said Raymond Keating the council’s chief economist.
