A federal bill aimed at expanding financing and tax incentives for small businesses as a spur to jobs creation could bring needed relief to struggling business owners in this region.
The U.S. Senate this month passed the Small Business Jobs and Credit Act and the House of Representatives was expected to approve the Senate”™s amended version of the legislation sponsored by Rep. Barney Frank. The bill creates a $30-billion small business lending fund, administered by the U.S. Treasury Department, to be tapped by eligible banking institutions and community development loan funds. The small business program will be separate from Treasury”™s Troubled Asset Relief Program for banks.
Eligible lenders with assets of $1 billion or less may apply for a capital investment from the fund of up to 5 percent of their risk-weighted assets. Institutions with assets between $1 billion and $10 billion may receive funding of up to 3 percent of their risk-weighted assets.
The bill also establishes a seven-year State Small Business Credit Initiative to allocate federal funds to participating states with capital access programs.
Among its tax-break provisions, the law increases the deduction for trade or business start-up expenditures from $5,000 to $20,000 in 2010 and 2011.
Under the law, the U.S. Small Business Administration will create a Small Business Borrower Assistance Program that provides lenders with payments of principal and interest on qualifying small business loans of up to $300,000. The SBA payment will cover 6 percent of a borrower”™s qualifying loan.
The bill”™s supporters in Congress and a 55-member coalition of business groups across the nation
hailed provisions that will enhance the SBA”™s ability to support larger loans and provide more options to small businesses. While many other financing sources have dried up, SBA-guaranteed loans have increased since lending changes were included in the 2009 American Recovery and Reinvestment Act. According to Congress, SBA lending in its two largest programs has increased 79 percent since the federal stimulus bill was passed, supporting $19 billion in loans to more than 40,000 small businesses. Supporters said the legislation could increase SBA small-business lending by an estimated $5 billion this year alone.
The law provides these boosts for small business owners:
- Increases limit on SBA 7(a) loans from $2 million to $5 million.
- Increases limit on SBA 504 loans for fixed assets ”“ buildings and equipment ”“ from $1.5 million to $5.5 million.
- Increases limit on SBA microloans from $35,000 to $50,000.
- Allows the 504 loans to refinance short-term commercial real estate debt into long-term, fixed rate loans.
- Extends the SBA”™s 90 percent guarantees on 7(a) loans and eliminates fees for borrowers on 7(a) and 504 loans through the end of this year.
- Directs the SBA to create a website where small businesses can identify lenders in their communities.
Rep. Nita Lowey, D-Harrison, introduced in the legislation the measure that raises the ceiling on SBA microloans to $50,000. “This increase is essential in high cost of living areas such as here,” she said at a recent appearance in Pelham Manor to announce the bill”™s imminent passage.
Lowey”™s host, Leslie Allicks, in 2008 left what had become an unfulfilling career as a health-plan executive to open Lola”™s Teahouse in the village”™s Fifth Avenue shopping district. Vacant for eight years, her store”™s basement plumbing had been removed, Allicks discovered after signing a lease. She could not afford the cost to replace it.
“My contractor walked out on me,” Allicks said. “I couldn”™t finish the work. I couldn”™t open up.” The distressed business owner turned to Community Capital Resources in Hawthorne, a nonprofit agency that provides SBA microloans and technical assistance to small businesses in Westchester, Putnam, Dutchess and Rockland counties. “Within six weeks, I had a check for $25,000,” she said. “Had it not been for CCR and this SBA loan that I have, I would not have been able to complete construction.”
Kim Jacobs, executive director at Community Capital Resources, said since the recession the agency”™s clients have included “displaced workers from corporate America who decided this is their opportunity to become self-employed. Sometimes bad news also gives people a chance at a fresh start.”
The regional microlender, Jacobs said, also is seeing “business whose traditional lines of financing have been cut off” in the credit crisis. “I think in general since there”™s been such a tightening of credit from traditional lenders, we”™re seeing established retail businesses who can”™t get a loan or who have had their lines of credit pulled,” she said. Increasing the microloan limit to $50,000 “will help those existing businesses that are in a position to grow.”
Jacobs said that boost to small businesses by Congress could prompt her agency”™s board to raise CCR”™s self-imposed ceiling of $25,000 on those SBA loans.
