On Sept. 27, President Obama signed the Small Business Jobs and Credit Act into law. Aimed at small-business owners, the act is designed to provide improved access to financing, as well as tax incentives. How, then, might it impact you, if you’re not a small-business owner?
While the direct impact will certainly be felt among small businesses, the broader intent of the legislation is to buoy the economy. The bulk of jobs in the United States are created by small businesses, so helping these smaller shops improve their bottom lines may also bolster employment opportunities and additional business growth — which could impact your bottom line as well.
These are certainly lofty goals, but they aren’t necessarily out of reach. Understanding the act’s two basic sections — financing and taxes — may shed light on how it will put more money into the hands of business owners and other entrepreneurs to ultimately benefit the economy.
Loan provisions. Here are a few highlights of the many provisions designed to loosen lending standards and maximums, as well as to incentivize bank lending to small businesses.
The 2009 Recovery Act Loan provisions have been extended with an additional $14 billion in lending support.
The original act allowed for $30 billion in loans (impacting more than 70,000 small businesses); this addition has already supported 1,400 businesses.
Maximum loan sizes in top loan programs have increased.
Certain types of loans have permanently increased their caps from $2 million to $5 million, and micro loan caps for start-ups and newly established businesses have increased from $35,000 to $50,000.
Small community banks that go above and beyond their 2009 small business lending amounts will be provided with low-cost capital from the fund. Incentives like these are designed to offer tax breaks to businesses.
Capital investments made by a small business can immediately be written off as expenses, and the maximum amounts that can be written off will increase.
This expands the limits from $250,000 in 2010 — and only $25,000 in 2011 — to $500,000 for each year.
Key small business investments will be exempt from capital gains taxation for the rest of 2010.
The elimination is only on investments held for five or more years.
New and simpler deductions for business expenses, such as health insurance and cell phones, are included for 2010.
A call to action
Whether they take advantage of improved lending or tax cuts, it’s clear that many small businesses have the opportunity to see an infusion of capital into their businesses, which may encourage them to do some spending of their own. Time will tell if this ultimately acts as a stimulus for the economy in the form of new jobs, greater business spending, or other improvements.
Nevertheless, it’s a good reminder to take a look at your own financial situation to ensure that you are taking advantage of any taxation and investment strategy opportunities.
As the administration seeks ways to improve the health of our economy, you can keep tabs on your own financial well-being with the help of professional advisers. This is even more pertinent if you are a small-business owner, so be sure to contact your tax and investment professionals to learn about your options.
Kevin Dick is president and investment adviser representative practicing at Kevin Dick Investment Management Group. He offers securities and advisory services as an investment adviser representative of Commonwealth Financial Network, a member firm of FINRA/SIPC and a registered investment adviser. He can be reached at 928-474-4350 or at firstname.lastname@example.org.