If one owns a small business or is considering starting a small business, it might seem a bit daunting if one considers the economic condition of the U.S. as well as the instability of the global economy. However, in a sea of uncertainty, there IS land on the horizon.
Fortunately, there are government programs that are designed to specifically help jumpstart the establishment of a new small business as well as help existing business owners expand. Let’s take a peek at what is called The Small Business Jobs Act which was signed into law in 2010.
The Small Business Jobs Act:
In a nutshell, the SBJA offers billions more in lending as well as tax cuts and other breaks for entrepreneurs and small business owners.
This act provides critical resources to bolster small job creation by freeing up lending lines that would, normally, present themselves as a challenge.
Here are some of the benefits of the SBJA:
1— Maximizing Credit:
Loan sizes for the SBA loan programs are dramatically increased allowing small businesses to expand and have access to more generous credit lines. The 7(A) and 504 loans have jumped from $2M to $5M and the SBA Express Loans have gone from $350,000 to $1M which allows small businesses to take on increased inventory.
2— The $30 Billion Lending Fund:
This provides capital to small banks and results in the banks’ increased motivation and incentive to want to lend to small businesses since this money is specifically earmarked for small businesses, and nothing else.
3— Small Business Tax Cuts:
Eight new small-business tax cuts inspire small business owners to invest; and a partial sampling of these cuts are, as follows:
– Zero taxes from capital gains from key small-business investments
– Extension and expansion to write-off capital investments
– Deduction of health insurance costs for a small business owner and his/her family members
– Limitations on penalties for errors in tax reporting
Additionally, the law more than doubles the maximum loan size for the largest and most commonly used lending programs: 7(a) and 504, guaranteed by the SBA.
The proceeds from this type of loan can be used to acquire a new business or they can be used to expand an existing business. The Small Business Jobs Act provides a guarantee against default to 90% and raises the loan amount to a whopping $5 Million. The 7(a) loan gives lenders an increased sense of security so they feel comfortable lending to small businesses. Additionally, it encourages prospective and existing small business owners to eagerly apply for those loans.
The SBA 504 Loan Program puts financing within reach for small businesses through low down payments and long-term, low, fixed interest rates. Here, it reduces the risk to lenders by using a shared financial structure.
Here are a few uses of this type loan:
– Land and buildings
– New construction or renovation
– Certain types of debt refinancing
– Soft costs such as title searches, attorney’s fees, etc.
The low, fixed interest rates serve as a shot in the arm for a number of small businesses. As of March 2013, SBA â€˜504′ interest rates have proven to be inviting: 4.30% for a 20-year term and 3.71% for a 10-year term loan.
The SBA’s 7(a) loans and 504 loans are the administration’s flagship efforts in a sea of uncertainty for those who believe in the American dream of business ownership.
Business ownership—it can be done!