Lately it seems as though the U.S. government is jumping in to help all kinds of big businesses with bailouts and other initiatives. However, some small business owners are left wondering if the government will be there to assist them as well. There may be some hope for these small businesses which includes businesses which are operated from home and businesses which are run solely online. On Feb. 17, 2009 President Barack Obama signed a $787 billion economic stimulus package into law known as the American Recovery and Reinvestment Act of 2009.
Unlike the Economic Stimulus Act of 2008, this stimulus plan extended beyond just providing tax rebates. There are also a number of provisions in the packages such as tax cuts for individuals and companies, healthcare, education, investment in infrastructure, energy, housing and even scientific research. With a wider scope of assistance offered by this act, small business owners can capitalize on a number of different tax credits and incentives. In fact, $730 million of the funds in this bill were earmarked for the Small Business Administration (SBA). While there are no grants available from the government for starting a small business there are a number of provisions and tax credits available to small business owners under the American Recovery and Reinvestment Act (ARRA).
The government recognizes the fact that small businesses are an integral part of our economy. Not only do small businesses account for roughly half of all of the employees in the United States but small businesses are also responsible for generating the majority of new jobs in the private sector. With this in mind, business owners who operate small businesses out of their home or online can turn to the SBA for a number of different incentives under the current stimulus package. Find your local branch of the SBA by visiting http://www.sba.gov/localresources/index.html and learn how you can take advantage of the current stimulus package to grow your business.
1. Section 7(a) Guaranteed Loan Program Recovery Plan – Small business owners can profit from a number of different provisions of the stimulus package which relate to loans for small businesses. This stimulus package allows the SBA to offer higher loan guarantees on 7(a) loans until the end of 2009 or until the funds allotted for this incentive are exhausted. Under this provision, loan guarantees of 90% are allowed which is an increase from 85% for loans of up to $150,000 and 75% for larger loans. Loan applicants who qualify include those who are unable to obtain loans elsewhere.
2. Section 7(a) Guaranteed Loan Program Recovery Plan – As another part of this plan, the SBA can also now waive the fees for 7 (a) loans as well as 504 loans. Eliminating these fees, which are typically paid by the borrower, make it much easier for those who operate small online businesses or other small businesses out of their home to obtain a loan. These fees will not apply until the end of fiscal year 2009 or until the funds allotted for this usage are exhausted.
3. Microloan Program Recovery Plan – Small business owners who are in need of loans of up to $35,000 can benefit from the current stimulus package. These loans are referred to as microloans and the ARRA has allotted funds to enable to the SBA to provide more funding to the non-profit lenders who lend money to local small business owners.
4. ARC Stabilization Loan Program Recovery Plan – Under this plan the government is attempting to provide relief for small business owners who are struggling during difficult economic times. By providing increased funding to a program offering 100% guaranteed loans of up to $35,000 to small business owners for the purpose of repaying debt, the government is trying to give these business owners the opportunity to succeed.
5. Small Business Recovery Act Surety Bonds Recovery Plan – With this plan the SBA will guarantee up to 90% of surety bonds for small businesses. This plan also, on a temporary basis, raises the limit of the surety bond for small business to $5 million from the previous limit of $2 million. There are also situations in which this limit can be raised to $10 million. However, it is important to note certification from a federal contracting officer is necessary for the limit to be raised to $10 million. These higher limits will help smaller businesses compete with larger businesses for contract bids, in situations where bonding is an important issue.
In addition to the funding allocated to the SBA, the Department of the Treasury has also been awarded funds in the ARRA which can be used to assist qualifying small businesses. This assistance is typically available in the form of tax breaks. Information for all of the tax related benefits for small business owners under the current stimulus package are available on the Internal Revenue Service (IRS) website: http://www.irs.gov/newsroom/article/0,,id=204335,00.html?portlet=6. You can also review the Department of Treasury program plans at the following web address: http://www.recovery.gov/?q=content%2Fagency-recovery-plan&agency_id=015.
1. One tax provision of the stimulus act of 2009 allows small businesses with net operating losses (NOLs) for fiscal year 2008 are able to carry these losses back for five years as opposed to the previous limit of two years. Under this provision, small business owners will qualify for a tax rebate in previous profitable years. To take advantage of this tax provision, your small business must have gross receipts of less than $15 million.
2. Another tax provision of this stimulus package which benefits small business owners is the reduction of estimated tax payments. Under normal circumstances small business owners are required to pay 110% of their previous year’s taxes as their estimated taxes. However, the stimulus package signed into law in Feb. of 2009 reduces this percentage to 90%.
3. Bonus depreciation deductions are another way in which small business owners are benefiting with the current stimulus package. Through this initiative, the IRS is allowing small business owners to take larger deductions. This initiative is applicable for small business owners who have purchased a property within the last year. The ability to take this larger deduction will last throughout 2009.
4. Investors in small businesses can also benefit from a break in capital gains tax under the current stimulus packages. This tax break allows investors in small businesses to exclude 75% of their capital gains from taxation. However, in order to qualify for this tax break, the investor must hold the investment in the small business for a minimum of five years.
5. Small business owners can also qualify for a tax break on 179 properties under the current stimulus package. The current stimulus package enables small business owners to expense up to $250,000 for 179 properties beginning in tax year 2009. Prior to this stimulus package the limit for expensing 179 properties was $133,000. Although this tax break can be financially beneficial, it is important to note the limit of $250,000 will be reduced if the value of the 179 properties placed into service during the tax year exceeds $800,000.
6. Under this stimulus package additional categories were also created which would allow small business owners to qualify for a work opportunity tax credit. These two categories are unemployed veterans and disconnected youths. To qualify for this tax credit by hiring an unemployed veteran, small business owners must hire a member of the military who was discharged in the last five years and who has collected unemployment benefits for four or more weeks in the last year. To qualify for the tax credit by hiring a disconnected youth, the small business owner must hire someone between the ages of 16 and 25 who has not attended school regularly in the past six months or been employed in the past six months. Additionally, these youths must be shown to lack the basic skills which make them readily employable.
One of the general misconceptions about the SBA is that they offer grants to start a business. However, this is not true. The SBA can offer assistance in the form of training and loan programs to individuals who wish to start a business but will not provide a grant for this purpose. There are; however, a limited number of grants available through the SBA for the purpose of expanding or improving organizations which offer assistance to small business owners.
Regarding grants, it should be noted that these will be difficult for a small business owner to obtain. It should also be noted that none of the grants under the ARRA are specifically created for small business owners. However, there may be some grants for which you will qualify and will be eligible to apply but this will largely depend on the type of business you operate. For this reason, this section will focus on helping you to learn to navigate the Grants.gov website instead of pointing to specific grants for which you may be eligible to apply.
Small business owners in search of a government grant should expect a long and tedious process. The starting point for learning more about grant opportunities under the ARRA is the following web address: http://www.grants.gov/applicants/recovery.jsp. Here you will find links to each of the recovery sites for the grantor agencies. Through these links you will be able to learn about the programs being offered through these agencies.
There is also a, “Find Recovery Acts Opportunities,” link. This is where you need to start if you hope to obtain a grant under the ARRA. This link will bring you to the first, of many pages, listing the grants being offered as a part of the current stimulus package. The information included in these tables includes the closing date, opportunity title, agency and funding number. The first column which lists the closing date will eliminate a number of these grants from your research efforts because you will notice they have already closed. This means you are automatically not going to be eligible for any of these grants because you did not submit an application prior to the closing date. Now you can move on to opportunities which are still open and accepting applications.
Although the opportunity title column comes next, you might want to skip over to the agency column in this phase of your search. This is because this column may provide some insight into whether or not a particular grant opportunity may apply to your business. For example, if you operate a food based business opportunities from the Food and Nutrition Service agency may be of particular interest to you. Likewise if your small business provides health related products or services, grant opportunities from the National Institute of Health are ones you should consider investigating further.
Finally, from the opportunity title column, you can usually get a vague idea of what type of business, organization or individual will benefit from this type of grant. However, you will not get the full scope of the grant opportunity until you click on the title itself. Once you do this you will be redirected to another page which lists basic details relevant to the grant opportunity. Here you will find a synopsis of the grant opportunity which includes information such as the closing date, the expected number of awards, the estimated total funding, the award limit, who is eligible to apply for this grant and a brief description of the purpose for awarding the grant. You will also find a link to the full announcement on this page.
The full announcement for a grant opportunity is a detailed document providing a wealth of information. Reading through this full announcement will not only provide you with background information on the reason for awarding the grant but it will also provide information on the type of information which must be provided in order for your application to be accepted and a grant awarded. Here you will also learn how to submit your application. Care should be taken to follow the instructions carefully because failure to adhere to these procedures will result in your application being withdrawn from consideration regardless of how worthy your business is. The full announcement is also where you will find information on where you can submit your application once it is completed.
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