How the Recovery Act Encourages Small Businesses to Increase Hiring

Incentives include additional funding, fee reduction

Reduced SBA Loan Fees

The Small Business Administration (SBA) reports that minority- and women-owned businesses are three to five times more likely to receive an SBA-backed loan than a conventional bank loan. As part of the recovery act, the fees for this type of financing have been temporarily reduced.

In addition, the SBA is temporarily increasing the guarantee on some 7(a) loans up to 90%, making them less risky for banks. This should spur more lending.

The cost of this legislation will run into the billions of dollars, but officials say it’s necessary to help small businesses get back on their feet.  In a released statement, SBA acting administrator Darryl K. Hairston said:  “With these critical steps by SBA, and the Treasury Department’s commitment of up to $15 billion aimed at getting lending markets flowing again, we are standing up with small business owners across this country and telling them how we are going to put much-needed capital in their hands.”

Ability to “Carryback” Losses on Taxes

The legislation provides tax help for struggling companies, which may free up more money for hiring. Small businesses that have a net operating loss can carry back those losses for five prior years on their returns, instead of the customary two years. The provision applies to small enterprises that have gross revenue of up to $15 million.

Increased Funding for Local Projects

Money is being budgeted for various community initiatives, particularly in the areas of public construction and “green” science.  Related small businesses may be able to expand if they’re tied to these projects.  To find what funding is available in your geographic area, visit Recovery.gov.

Small businesses are responsible for employing about half of all workers in private industry.  If they’re hiring, then the economy can recover.

Pages: 1 2
ACROSS THE WEB