In a hail-mary attempt to garner main street support for Democrats before the elections put an end to the legislative season, President Obama finally was able to push the small business lending bill through the Senate, thanks to two retiring Republicans who crossed the aisle to vote for the stimulus package.
While I don’t believe that this bill is the right way to grow small businesses, and by extension, jobs, I want to let you know some ways that you can take advantage of this bill. Most importantly, keep in mind that much of the money behind this bill is designed to relax credit- reminiscent of banks loosening credit limits leading up to the real estate bubble. Trying to entice businesses into a loan just because it is available is just as bad as having tight credit. Keep that in mind as you consider these options.
Government created incentives for small banks to lend
Financially secure small banks will have access to $30 billion in funds to loan to small businesses. What’s in it for the banks? If they can increase their small business lending by ten percent over the previous year, they will have access to the funds at interest rates near one percent.
Write-offs for startups, long-term investors
The amount that new businesses can invest and consequently write-off will quadruple from $5000 to $20000. Companies who make eligible investments will pay nothing in capital gains taxes on those investments for five years. Businesses can also write-off qualifying business location improvements, property acquisitions, and health care costs for themselves and their families.
Bigger loans and increased support from the Small Business Administration
Those who have been trying to get a loan through the SBA will like this one- provisions which increased lending guarantee programs will be extended, in addition to bumping up maximum loan amounts in their microloan programs.
Increased incentives to stay on top of your IRS filings
By increased incentive, I don’t mean the IRS is going to send you a fruit basket for turning in your filings on time. Instead, they will bump up their fines for any business who files late. Nothing like a hearty dose of fear of financial ruin to get those pesky businesses in line. Most fines will be doubled for every violation, and yearly limits will triple and quadruple in some cases. Any failure to file 1099’s or W2’s will also incur steep fines.
If you haven’t figured it out by now, you are going to have to jump through a lot of hoops to get access to these benefits. Quite simply, get ready to be buried with paperwork and red tape. If you already own a small business, you know what I’m talking about. If you don’t, look no further than former Senator and presidential hopeful George McGovern, who opened a small inn in Connecticut after the conclusion of his political career. His experience will sound familiar to many of you.
Lacking experience, McGovern acted on the advice of an experienced friend and a lifelong desire to open a friendly neighborhood inn with good food and lively community. Before long, he found himself on the receiving end of several lawsuits, none of which stood up in court, but all of which required an expensive legal team. Before long, he was required to meet stringent fire code requirements, causing his manager to postpone marketing campaigns to deal with the increase in paperwork. The cost of meeting the code requirements put the inn over the edge.
At the end of it all, McGovern maxed poetically about the experience. “[I] wish I had known more firsthand about the concerns and problems of American businesspeople while I was a U.S. senator and later a presidential nominee,” he said. “That knowledge would have made me a better legislator and a more worthy aspirant to the White House.”
What we are seeing in the United States today is the infamous ‘death by a thousand cuts’ of businesses. Small companies simply cannot compete with the bureaucratic work force of the federal government that seems all too happy to pile on increased regulation under the guise of a lending bill. If the Obama administration really wanted to help small businesses, why not declare a payroll tax holiday across the board? Companies need more freedom to be successful, not more regulation. If only the government wouldn’t try so hard to help us, we might all be a lot better off.