Undoubtedly, one of the biggest concerns for the majority of new
entrepreneurs is where to get money to start up. Venture capital is
not the answer for most start-ups, and even those who can tap into
this source will find the spigot dripping instead of gushing these
days.
To make matters worse, those who typically relied on bank loans
are also finding the going just as tough. This fact was recently
acknowledged in a hearing held on access to capital by Rep. Don
Manzullo (R-IL), chairman of the House Committee on Small Business.
"While stricter standards do not necessarily mean credit is
unavailable, the data suggests that firms once barely qualifying
for a bank loan will now seek other sources, such as SBA-guaranteed
loans," said Manzullo in his opening statement.
Several new pieces of legislation coming down the pipeline could
alleviate some of the strain on the lending environment. The first,
H.R. 1923, has already been introduced in the House and referred to
the Ways and Means Committee. Sponsored by Reps. Jim DeMint (R-SC)
and Brian Baird (D-WA), the Start-Up Success Accounts Act (SUSA) of
2001 would allow small businesses with gross receipts of up to $2
million to deduct and place up to 20 percent of tax-deductible
income in a SUSA account for each of the first five years of
operation. Small businesses could then utilize those funds for
growth over a five-year period.
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Rep. DeMint has another proposal on the agenda as well: The
BRIDGE Act (Business Retained Income During Growth and Expansion),
which will target emerging-growth companies, would allow firms that
have experienced sales growth of at least 10 percent above the
average gross receipts for the prior two taxable years to
temporarily defer a portion of federal income tax liability. The
deferral would be limited to $250,000 of tax and would have to be
repaid over a four-year period with interest. The deferred amount
would be deposited in a separate trust account at a bank or other
approved intermediary, and the firm could borrow against the
deferred amount for business purposes. Businesses with up to $10
million in gross receipts and using the accrual accounting system
would be eligible for the deferral.
Predicting the success of any of these efforts to help new
businesses is like trying to predict which of the thousands of
businesses that launch every year will be successful. But the
issues must be dealt with decisively and soon if the American
economy is to regain its vitality.
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