Now that the Small Business Jobs and Credit Act of 2010 is finally law, it's time to take a look under the hood and see what-all is in there. Last week, I discussed the $30 billion in funding that goes to community banks -- hopefully to lend to small businesses, but no guarantee there.
Some have noted that calling it a jobs bill is kind of a stretch. There's nothing that explicitly creates a job in here. The hope is that more funding will allow businesses to do more hiring. We'll see how that pans out.
In the meanwhile, here's a look at the rest of the Job Act provisions...some of which offer at least a glimmer of hope of getting more funding into small business owners' hands. Higher SBA loan limits. The maximum size of an SBA-backed 7(a) loan rises from $2 million to $5 million, and 504 loans rise from a maximum of $1.5 million to $5.5 million. Loan fees for these stay gone for the 2010 tax year now, after earlier being eliminated for '09.
These changes were sought by many entrepreneurs' organizations. Clearly, the prime beneficiaries here are bigger small businesses, if you follow me. But those are important to the economy and can be big job creators.
At lender CapitalSource's small business lending group, managing director George Harrop put out a release proclaiming, "This is a very big deal for small businesses -- and for small-business lenders."
We'll see. Let's hope this isn't another ARC loan situation, where there's funding, but rules and paperwork burdens keep much of the money from reaching businesses.
Funding for state small-business investment programs: State venture funds have been drained in the recession. The bill allocates $2 billion in new funds for established and new state small-business loan programs. This one's a savvy move, as the state funds are public-private partnerships that use their own money to leverage bank guarantees and additional funds. So this $2 billion is expected to help catalyze $20 billion in lending.
Tax breaks: Once again, I think these help more medium-sized than really small businesses. There's a 100 percent exclusion from capital gains tax for angel and venture-capital investors on small business investments. This is intended to get more investors putting money into companies again. The Administration says over 1 million small businesses may benefit, receiving investments that won't bring the investors any capital-gains tax as long as they stay invested in a company for five years.
The deal where you can take any credits your business has and apply them against any of the previous five years lives on in this bill, as does Section 179 (depreciation) expensing of up to $500,000 in the year of purchasing business equipment. The "bonus depreciation" of another 50 percent of the equipment cost also got renewed.
Two for the smaller fry: A write-off of up to $10,000 of startup expenses for new businesses, and a new deduction for health-insurance costs for the self-employed.
The dark side:The jobs bill isn't all sweetness and light for small business owners, either. One of the provisions many were hoping to see struck that survived is the new requirement that small businesses fill out 1099 tax forms for all their substantial contractors. This paperwork-making pain remains.
What do you think of the jobs bill? Is there something in it that might help you hire more workers? Leave a comment and let us know your reaction.