Small businesses receive help too!
There are many things that the Stimulus provides to small businesses that may be beneficial: five-year carry back provision, loan guarantees, accelerated depreciation of capital expenses, low tax payments for small businesses and small business owners, and finally, an incentive to invest into small businesses. Talk about a lot of HELP!
Five-Year carry-back provision: This provision allows small businesses to carry-back their 2008 and 2009 losses for 5 years (2003-2004) instead of two years.
Carry-back simply means that small businesses may carry net operating losses back to offset past taxable income. The definition of a small business in this case is a business that does not exceed revenue of $15 million per year; if this applies to your business, then you are eligable for the five-year carry-back provision. Other businesses that exceed the $15 million per year limit will still be able to utilize the two year carry-backs.
Loan guarantees: In order for banks to regain confidence and begin to lend money to small businesses, the stimulus act increased its guarantees on loans backed by the Small Business Administration (SBA), and reduced/eliminated administration fees for certain kind of loans. Small businesses that are eligible to receive SBA loans would apply for these loans directly through its lending company, who will ultimately determine whether a small business receives a SBA guarantee or not. With the Stimulus provsions, small business loans up to $1.5 million are eligible to receive 90% of the requested amount from the SBA- the previous percentage small businesses were allowed to receive was 75%. This larger guarantee will likely lead to more small businesses receiving a loans, which the government will fund with $375 million. To view the eligibility for SBA and the different types of loans visit SBA.
- Fun fact: In 2008, small businesses that were start-ups accounted for 35% of all loan guarantees; minority owned or women owned businesses accounted for 32% and 23% respectively. Basically if you are a one of the three: start-up business, a minority owned, or women owned business, you receive more loan guarantees than other small businesses.
Capital Expense Write-off and Increased Depreciation Expense: To help small businesses with their tax liabilities, small businesses will now be able to write-off up to $250,000 in capital investments in 2009. In addition, small business are now allowed to accelerate the depreciation of capital purchases made the previous year. Translation: Small businesses can depreciate items faster, which allows them to receive greater tax deductions now, instead of later.
Lower Estimated Tax Payments: This will require individuals who are small business owners to only pay 90% of last years’ tax liability as estimated taxes, instead of the current /100%110% rate. This will allow small business owners to retain some extra cash, which does not hurt to have during this economic crisis.
Incentive to Invest In Small Businesses: Investors that help fund small businesses will now be allowed to exclude from taxation up to 75% of their gains if they agree to maintain their investment for a minimum of five years! By allowing this it should increase the amount of investors willing to invest in small businesses, and the intent is that confident investors will help others, regain confidence in the economy.
