VerticalResponse Blog

Barack Obama This week our President talked about getting some much needed cash in the hands of struggling small businesses as soon as the end of this month. After all, a majority of all employers in the US are small businesses so they should be getting some help. But hey, we know that, we live it every day.

Hey, Obama needed to do something since he touts that he’s our guy for Main St. not Wall St. right? Yet AIG has already been given $170 billion and are now paying out Executive bonuses to the tune of $165 million. Not to mention that other large companies are being bailed out like Bank of America, Citigroup and JPMorgan Chase, many of which got us into this mess in the first place. It’s clearly time to get the country back to work and one way to do that is by helping small businesses. But will it happen?

So What Does It All Mean? First, Free Up Frozen Credit.

What had been happening is that the primary bank
lenders will try to sell the SBA (Small Business Administration) loans in the secondary market. Then they use the proceeds from selling these loans to make new ones for other small business owners. But since the credit crisis hit because of terrible ways that mortgages were being handled, investors have been scared off.

Now our government wants to step in to buy these loans to help unlock the current frozen credit
market. They’ll use some of the money from the massive $700 billion financial bailout package to the tune of about $15 billion in total.

I’ve read that as soon as the end of March the Treasury Department
would begin making direct purchases of securities backed by loans
guaranteed by the Small Business Administration. My fear is that it won’t happen in time for many small businesses and it will be a HUGE hassle to even get one of these loans.

What’s crazy is that small businesses
with good credit aren’t even able to borrow. I know that at VerticalResponse we have great credit yet all of our credit card limits from American Express to VISA were taken down overnight!

Tax Breaks and Reporting

With this new infusion the government would require that the top 21 banks that got federal funds will HAVE to give monthly reports that they’re lending to small businesses. The rest of the banks may need to report quarterly.

What’s more is that the Internal Revenue Service is going to issue tax breaks that will look something like this:

  • Small businesses with a net operating loss in
    2008 can elect to offset this loss against income earned in up to five
    prior years, instead of the usual two-year limit. The gives small businesses increased cash flow so they can invest it in their businesses.
  • Small businesses will be able to write off $250,000 on new
    capital equipment investments which is nearly double the previous amount.
  • They can reduce estimated tax payments to 90 percent of the previous year’s filing.
  • They can take larger depreciation deductions within the first year of property purchases.

So hopefully our government will act fast to get this money into the hands and hearts of small businesses that can get it and use it. But there is a concern that many businesses still won’t get loans from the banks. And, since so many employers are small businesses, is just 2.1% of the overall bailout enough? I don’t think so.

Our government needs to remember, small businesses infuse money into our economy. We need to buy things like supplies, contractors, computers, software and shipping to run our businesses which can crank up the economy. And we’ll likely hire more people here in the US rather than in another country unlike larger corporations.

From what I’m seeing and hearing, the government needs to help us out with health care, rising costs of insurance, employee
payroll taxes and federal contract awards. And, since we’re rewarding execs for not being successful at companies like AIG, how about rewarding small business owners who are successful by giving them a break on personal and business tax cuts ? Then maybe we’ll get somewhere!

What do you think? Weigh in.

© 2009 – 2012, Contributing Author. All rights reserved.

  • Centaur

    Despite seeking SBA loans or grants for my woman-owned (and thus supposedly due favored treatment) business for nearly 15 years, and federal and state contracts, I had to close it and lay off employees who were with us for 5+ years. No SBA office, nor bank commercial loan officer, ever helped me get any SBA GTD loan. In fact, they feigned ignorance or sent me on paperwork wild goose chases when I inquired.
    None of the “assistance” for small business in the Stimulus helps 99% of small businesses.
    – They can’t afford to invest a quarter of a million dollars in equipment to get the tax break. Most can’t scrape up the money to buy a new copy machine.
    – It costs more to have your tax accountant carry your losses back 5 years than most little businesses will gain in a refund.
    – The credit qualifications for the SBA-backed loans are not relaxed, so you still only get the $$ if you don’t need it.
    It would be revealing to learn how much of the SBA money goes to big company subsidiaries and mid-sized companies every year – NOT genuine small businesses.
    This is just lip-service window-dressing.

  • Linda McElrath

    I completly agree with you. I am a small business owner who has tried for years to get small business loans without success.
    I do not believe we’ll see any of that money. Maybe if your business does more than a million a year in sales!!
    I just do not have much faith in the SBA.

  • Kym Bolado

    I think this all goes back to who we elect to office and their believes and values. Our elected officials have all lost their way It’s just spend, spend, and bigger government. This Congress and newly elected President and not small business friendly and try to step on all of our constitional rights. We all need to move to less spending and smaller government if the small guy is going to get a break. Everyone needs to think about who they elect in 2010.

  • Carl Street

    Unfortunately, politics is more about show business than real business. In a world driven by media moments, politicians are much more interested in posturing by giving some perk to a Fortune 500 company than they are in giving REAL help to say, a small local manufacturer or retailer.
    Even though historically, small local companies are far more efficient, less wasteful, and hire and service in the local economy than multi-national giants it makes no difference — a classic case of perception trumping reality.
    After all, what politician would hang their re-election chances on having helped Joe Dokes Machine Shop in Nowhere, Nevada when he/she could say they helped General Motors in Detroit Michigan?

  • Lance

    “Hey, Obama needed to do something since he touts that he’s our guy for Main St. not Wall St. right? Yet AIG has already been given $170 billion and are now paying out Executive bonuses to the tune of $165 million.”
    Are you implying that President Obama had anything to do with either of the AIG gift from taxpayers or their despicable bonuses? The facts are that these were established by the Bush administration. So, to answer you question–yes, President Obama is doing something. He’s trying to right the financial ship while having to deal with the continuing storm that the last administration made for him. I wouldn’t call what President Obama says “touting.” I’d call it promising.

  • j.norms

    I think VR and the rest of America needs to stop with this populist outrage before people get killed. We all know it’s more complicated than a bunch of bad guys making their pockets fatter. And even if it is, that’s a result of the system. Reform is needed. Let’s not put our hands out and say we deserve government money more than the big companies because we behaved better. A good beggar and a bad beggar have one thing in common — they’re both beggars.

  • Julia

    A recent study found that access to capital is the most important factor in a small business’s success. The abridged report on this study is at (You can also take a quiz on the site to see how competitive your small biz is on the Small Business Success Index.)

  • Chris Timmerman

    I agree that stimulus like this will never get to the business owners that need it until WAY too late! Pres Obama needs to do things that put the power in the people hands instantly, not run it through some gauntlet of beauracracy. How about suspending the payroll tax for all business, employee and company match, for a couple years. That instantly puts the money where it need to go…

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