The 2009 Stimulus Package – What’s in it For My Small Business?

We’ve all heard about it: the American Recovery and Reinvestment Act of 2009, also known as the ARRA. But what exactly is it, and how can it help your small business? To begin with, the ARRA is essentially a $787 billion dollar bill passed in February 2009 by President Obama in order to provide for various tax relief and investment opportunities. More specifically, the full title text of the ARRA is as follows:An act making supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, assistance to the unemployed, and State and local fiscal stabilization, for the fiscal year ending September 30, 2009, and for other purposes.While many of the benefits of the ARRA are readily available for small businesses and individuals to utilize, it is important to note that the advantages are not automatic; in other words, they require that you as a small business or individual be proactive in applying the benefits and fully utilizing them to assist in putting more money in your pocket (or at least having to shell out less!) With that said, let’s take a look at a small sampling of the benefits that the 2009 ARRA has to offer for small businesses:1. Utilization of Current Losses to Offset Profits: Typically, as a business incurs losses, these can be used to offset taxes on profits for the past two years. However, this ARRA provision allows companies to use losses to offset profits for three, four, or even five years, depending upon circumstance. Given the financial hardship that the current economic situation has inflicted on many small businesses, this provision may provide much-needed financial assistance to small businesses in need.2. Increased Depreciation: You may recall the Economic Stimulus Act of 2008 as the Act which provided individual taxpayers with a one-time tax rebate of anywhere between $300 and $1,200. Another aspect of this Act included a “50% bonus depreciation provision for ‘qualified’ property purchased, manufactured, constructed or produced in 2008″. The 2009 ARRA provision essentially provides for a carryover of this depreciation benefit for 2009, fundamentally providing an accelerated depreciation schedule for fixed asset purchases. Thus, this provides an incentive for businesses to make purchases of necessary or desired assets, such as equipment and computers, as businesses are now able to utilize this benefit into 2009.3. Credit for Work Opportunity: Employers will have the opportunity to take advantage of a credit in the amount of up to 40% of the first $6,000 in wages paid to certain new hires. The catch is that these hires must come from one of nine specific “target groups,” including ex-felons, disabled veterans, “disconnected” youths, and food stamp recipients. The great part of this is that the benefit is available in 2009 and 2010.Another area of opportunity for business is partially included in the “Credit for Work Opportunity” discussed above and is a program I’ve had the privilege of utilizing recently. My local county (San Bernardino) has been appropriated ARRA funds for providing youths to work for businesses of all types and in various capacities. As long as your company has room for an entry-level employee where honing a skill or learning a general business practice is afforded, this program covers both wages and worker’s comp insurance for youths ages 18-21 for up to 180 hours. This is a summer program, but is going to be carried over into a year-round opportunity as well. While the details of this program may vary by county or municipality, please visit the Career Institute at http://www.careerinstitute1.org/ for information on this program in San Bernardino County. The helpful staff there will be able to assist you in either locating youths for hire (for free!) or in locating a similarly appropriate organization for your company.While there are many areas of assistance for small business, the ARRA is also focused on assisting individuals with some very interesting programs as well. Even though the focus of this article is on small business, since we are all individuals, let’s also quickly take a look at a few of these benefits as well:1. Payroll Tax Credit (the “Making Work Pay” Credit): Similar to the Economic Stimulus Act described above, this credit will provide $800 for joint filers and $400 for individuals. This credit will phase out for individuals earning an AGI of over $75,000 and for couples with an AGI of over $150,000. Unlike last year’s payout by check, however, this credit will be given in the form of a reduction of tax withholdings.2. New Homebuyer Credit: This credit will provide first-time homebuyers an $8,000 credit for home purchases made between January 1 and December 1, 2009.3. Home Energy Credit: Homeowners who make financial outlays to increase the energy efficiency of their homes in 2009 and 2010 could receive up to a 30 percent (or up to $1,500) credit for such purchases.Clearly, there are numerous other areas of benefit that the American Recovery and Reinvestment Act of 2009 has in store, benefits for both small businesses and individuals. A great place to begin to further explore these opportunities is at the official ARRA site, www.recovery.gov. From there, you can investigate various aspects of the ARRA, including information on the unprecedented level of accountability and transparency included in the Act. Furthermore, as a great deal of the funding from the ARRA is going directly to individual states, you can use the site’s State, Local, Tribal and Territorial Information portal to locate more detailed information on programs available in your area. I personally encourage you to explore the Wikipedia entry pertaining to the ARRA, and more specifically a breakdown of the provisions of the Act, by clicking here. While Wikipedia is by no means a scholarly source of information, this page does give an excellent (read: simple) breakdown of the Act and where its monies will be focused and spent, giving you a great springboard for further conducting your own research and for areas of benefit to discuss with both your business and personal accountants.Overall, however, one of the best ways you can prepare yourself to take full advantage of the ARRA is to arm yourself with knowledge of the benefits that the Act has to offer, and take this information with you as you consult with your accountant or financial planner. As he/she is intimately familiar with you and your business, press this individual on the topic of the ARRA, and encourage them to do their due diligence in discovering how the numerous ARRA benefits can help both you and your organization!

Can a Goat Herder Teach Banks How to Loan to Small Business

Small businesses and entrepreneurs need to be able to get loans from banks to grow and or expand their businesses. Entrepreneurs and small businesses go to banks to get loans to make capital improvements, large purchases, buy a business, and generally expand their business. Basically small business have financing needs that go beyond the immediate cash flow generated by their business.Imagine driving to the bank in your new Lexus, dressed accordingly, meeting with a bank loan officer and discussing your 5 years old business, your college degree, OK credit score, net worth of $500k and your business generating $50k a year in cash flow and asking to borrow $10,000. Do you think you will get that loan?Now- For a moment pretend that you are a poor goat herder walking to town to get a loan, you don’t have any money to open a savings account with, you don’t have any normal collateral to secure a loan with, you don’t have a credit record as you have never been formally employed and you’ve never taken out a loan before. Also consider that you might even be unable to complete the necessary paperwork as you are illiterate. You earn about $1/day, and you want a loan of $250 to buy more goats to grow your business. Do you think you will get the loan? – Due to Micro financing the the goat herder may get the loan before the Lexus college graduate.Many of us Entrepreneurs and Small businessmen/women donate time and or money to various causes or needs. I have been involved with Kiva since 2007. Kiva provides microfinance to Third World Entrepreneurs to help them grow their business. Kiva was founded by 2 former 20 something year olds that were former employees of TIVO and PAYPAL. Microfinance is the supply of loans, savings, and other basic financial services to the poor. As the financial services of microfinance usually involve small amounts of money – small loans, small savings etc. – the term “microfinance” helps to differentiate these services from those which formal banks provide. Why are they small? Someone who doesn’t have a lot of money isn’t likely to want to take out a $5,000 loan, or be able to open a savings account with an opening balance of $1,000. Hence – “micro.”These are small loans, multiple lenders will “pool” their loans to come up with a lump sum to provide to the Entrepreneur. Again most of the Entrepreneurs I have loaned money to over the last 4 years earn less than $1/day. When an entrepreneur pays off a loan, I reloan those moneys to another. So far I have loaned to 18 different entrepreneurs and repayment of loans have been 100%. Since 2005 Kiva as a group has loaned almost $150,000,000 to almost 400,000 Entrepreneurs and repayment has been 98.27%. Why can this organization have such success in getting loans repaid from those with so little and banks in our “developed nations” loaning to those with abundant resources have problems so significant that these banks need a “bailout” from their government and ultimately taxpayers. Is it the conventional bank that is doing something wrong? Are they loaning to the wrong people on a consistent basis? How much of the blame falls on those that are requesting the loan?.Currently how many good entrepreneurs and small business are not able to get loans as a result of mistakes made by conventional banks in the past. It seems to me that banks tend to over respond to problems. Obviously if you are a lender and want to have no loans default and you loan no money- you can achieve your goal. As a business broker I see the need for lending to allow buyers to finance the acquisition of buying a business. I also see income statements and balances sheets of reasonable small businesses that are using credit cards to help finance their businesses. It is hard for me to understand how our economy is benefiting by having small business owners take these “whatever is necessary” financing steps when traditional prudent lending to small businesses could truly be our fastest way to our economic recovery. The banks reduce/tighten their lending, the need for small business financing continues, higher interest is being paid through credit card financing, non-conventional means, and when does that higher expense cause employee reductions. Small business could divert money from high interest payments to investments and improvements that actually improve their business and create jobs.Why can the goat herder get a loan and the Print Shop owner not? Or maybe if I were a banker I could ask why does the goat herder pay off his loans and the Lexus driving College Graduate Default? I understand there is a lot more that goes on between the comparison of a conventional bank and micro finance- but maybe conventional banks could learn something from Micro finance groups such as Kiva.