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Small Business Jobs Act: FAQ
What does the Small Business Jobs Act do?
The law provides tax cuts and improved access to capital to help small businesses weather these difficult economic times and create the jobs our country needs right now. Specifically, the legislation includes eight new tax cuts for small businesses and establishes a $30 billion lending fund which is expected to leverage around $300 billion in private-sector lending to small businesses. In addition, the law creates a $1.2 billion State Small Business Credit Initiative, under which Washington state government will receive $19.8 million to support small business job growth. It also extends successful Small Business Administration (SBA) Recovery loan programs and increases the maximum loan size for SBA loan programs. More information on the Small Business Jobs Act from Senate Finance Committee is available here.
How will the Small Business Jobs Act help our economy recover?
Small businesses are the growth engine that drives our economy, but since the financial crisis began in the fall of 2008, many small businesses have had their lines of credit taken away or struggled to secure the capital they need to run and expand their businesses. Improved access to capital, particularly through community banks that many small businesses rely on, and the availability of new growth incentives will enable American small businesses to follow through with long-postponed investments, expand their businesses, and hire more employees.
What is the Small Business Lending Fund?
Frozen credit markets caused by the Wall Street meltdown continue to prevent even strong businesses from accessing capital. The Small Business Lending Fund (SBLF) seeks to help rectify this problem by investing $30 billion into healthy community banks with under $10 billion in assets. The fund is structured to give community banks a financial incentive to make loans to credit-worthy small businesses. Banks will pay the U.S. Treasury a dividend rate that would decrease as their lending to small businesses increases -- starting at 5 percent and going as low as 1 percent for banks who increase lending by 10 percent. The Independent Community Bankers of America estimate that the $30 billion fund will generate up to $300 billion in small business lending.
Can we afford another big $30 billion government program?
Actually, the Small Business Jobs Act will not increase the federal deficit. According to the non-partisan Congressional Budget Office (CBO), the Small Business Lending Fund will actually reduce the federal deficit by $1.1 billion over ten years as banks repay the investment.
I am a small business owner. Am I qualified for a loan? How do I obtain one?
Businesses with under $50 million in annual revenues are eligible for loans from the Small Business Lending Fund (SBLF). The Act defines "small business lending" as commercial and industrial loans; owner occupied nonfarm, nonresidential loans; and loans to farmers. Loans must be under $10 million to qualify as small business lending for the purposes of the SBLF.
The Department of the Treasury, in consultation with bank regulators, will approve banks to participate in the SBLF. Once SBLF participation is announced, you should contact participating community banks to apply for a loan. You can also inquire with your bank whether or not they are applying for or participating in the SBLF program.
What about Small Business Administration (SBA) Loans?
The Act makes several improvements to the SBA's small business lending programs, which provide guarantees for loans to small businesses. The Small Business Jobs Act extends a Recovery Act program that increased the portion of a loan the SBA will guarantee from 75 percent to 90 percent of the loan and eliminated associated fees. The Small Business Jobs Act also increases limits on the size of SBA loans: The 7(a) loan limits increased from $2 million to $5 million and the 504 loan limits increased from $1.5 million to $5.5 million. For more information on the SBA's loan guarantee programs, please visit SBA's website.
What new tax breaks are available for small business owners?
This bill provides eight new tax cuts for small businesses nationwide to provide access to capital, encourage investment and entrepreneurship, and promote fairness for small business taxpayers. Together, these tax breaks make it easier for businesses to make new investments and expand. More detailed information from the Internal Revenue Service is available here, as well as from the Joint Committee on Taxation here.
When does this law take effect?
The eight tax provisions took effect shortly after it was signed into law on September 27, 2010, providing an immediate incentive to businesses to expand and hire new employees. And Washington small business are already benefitting from the SBA loan improvements, with the first wave of $15.7 million in loans to 27 Washington small business approved on October 8. Application materials for the Small Business Lending Fund were made available on December 21, 2010; banks are encouraged to apply by March 31, 2011.