Q&A with the Small Business Administration on Recovery Act Opportunities for Small Businesses
The economy is recovering, but it often takes longer for that recovery to trickle down to small businesses. To provide relief and encourage continued growth, the U.S. Congress recently passed the Recovery Act—legislation that offers economic help to small businesses to help them to survive and thrive.
BizWise sat down with the Michael Stamler, director of the Press Office for the Small Business Administration (SBA) to find out how businesses can take advantage of stimulus funds.
BizWise: How will the Recovery Act help small businesses overall?
Michael Stamler: One of the biggest hurdles small businesses have faced over the last several months is the lack of access to capital that resulted from the "credit crunch."
Through the Recovery Act, the federal government guarantees certain SBA loans up to 90%, to help restore that access by making it easier for lenders to offer more small business loans, reduce lending costs, and provide assistance for businesses owners who are facing immediate financial hardship.
The Act also established what's being called the "America's Recovery Capital, or ARC loan program, that offers viable small businesses that need help making payments on an existing loan for up to six months the option of taking out deferred-payment loans of up to $35,000. These loans are fully backed by the SBA.
The idea is to give small businesses some temporary financial relief to keep their doors open and get their cash flow back on track so they can maintain existing jobs and ultimately create new jobs. Qualifying businesses can defer repayment for up to 12 months, there are some conditions. For example, ARC loans can't be used to repay any existing loan that was guaranteed by SBA before February 17, 2009, the day the bill was signed into law.
The Recovery Act also helps provide some relief in the form of reduced loan fees. For example, it establishes a temporary reduction, and in some cases elimination, of certain fees associated with SBA loans that were approved on or after Feb. 17, 2009.
These fees are known as 7(a) upfront guarantee fees, and 504/CDC participation and processing fees. If a small business owner received an eligible loan and paid these fees, he or she can now get a refund.
BizWise: What type of business typically qualifies for an SBA loan, and what is the process for applying?
Michael Stamler: To qualify, the business has to be for profit, generally can't be larger than 500 employees, has to be independently owned and operated, and has to demonstrate need, meaning the business can show it doesn't have the resources internally.
Then, of course, the business has to demonstrate its ability to repay the loan. There are a few businesses that aren't eligible for SBA loans, though, such as real estate investment companies and dealers in commodity futures.
To get the loan, business owners will go through the same process they would for any other kind of loan—apply through bank, credit union or other lending institution. It's actually the lender who would decide whether or not to finance the loan itself or turn to the SBA for a loan guarantee.
BizWise: Are there tax incentives included in the Act that could help small businesses?
Michael Stamler: There are a number of them. The Reinvestment act gives small businesses both tax relief and incentives in the form of generous bonus depreciation terms and an extension of Section 179 expensing—which allows a business to fully deduct the cost of property or equipment in the year it was purchased—through 2009. If a business has had net operating losses in the last three to five years, under the Recovery Act, the owner will now be able to carry those losses through as a deduction against current earnings.
The Act also lowers estimated tax payments for individuals with adjusted gross incomes under $500,000, provided at least half of that income is earned through a qualifying business.
And these are just a few examples. Tax credits are available for businesses who hire disadvantaged employees, such as unemployed veterans, as well as some specific tax credits around the sale of original stocks. Small businesses should work closely with their accountants or accounting teams to make sure they're taking full advantage of the tax relief now available.
BizWise: In addition to loans, there are other business opportunities available through the Recovery Act, such as contracting opportunities. Can you elaborate?
Michael Stamler: The Recovery Act actually requires federal agencies to provide opportunities for small businesses to compete for contracts.
The contracts are federally funded, with the funds distributed through state and, local governments, municipal utilities, and school districts, who will award contracts using their normal procedures.
Top-priority projects are those considered "shovel ready"—ready to be rolled out quickly. This means that small businesses should be "contract ready"—certified to do business with the state and local entities that most likely will be the primary contractors for Recovery Act-funded projects.
Right now, we're working to make sure small businesses know what's available and how to pursue contracts. For interested business owners, there's a lot of additional information available on the Recovery Act website, as well as links to opportunities at the federal, state and local level.
BizWise: What assistance can the SBA offer to help me understand and take advantage of the provisions in the Recovery Act? Is there a one-stop, online resource?
Michael Stamler: Check the SBA's Recovery Act website to find up-to-date information about our Recovery Act programs.
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