By Harry Reid, United States Senator for Nevada
No one is immune to the pain of the terrible recession we're experiencing, least of all the small business owners of Nevada. As consumer spending continues to dip, it becomes increasingly difficult to meet your overhead while still providing a quality product or service, along with a good wage and health coverage for your employees. Many smaller businesses face tough decisions about cutting staff or staying open altogether.
I am aware how much the thousands of small businesses in the Las Vegas Chamber of Commerce are hurting. Those of us in our delegation who voted for the recently passed economic recovery act pushed hard to make sure it includes many ways for you to get assistance now. We've already seen hundreds of millions of dollars come to Nevada in recovery funding, just a fraction of the $1.5 billion on the way.
The economic recovery packages takes aim at freeing up lending for small businesses, notably through the Small Business Administration (SBA), as well as eliminating fees for many types of loans and providing significant tax relief. We also included the provision that allows businesses temporary relief from the tax on cancelled debt by deferring full payment for up to 10 years.
We know many Nevadans would like help interpreting what is available through the economic recovery act and then applying for it. This is why I created the American Recovery and Reinvestment Act of 2009 Resource Guide - a step-bystep booklet for Nevadans to get the assistance they need. You can access this guide through my Web site here: http://reid.senate.gov. Following are some key provisions of the economic recovery act targeted to small business:
- Provides $375 million to temporarily eliminate fees associated with 7(a) and 504 loans, which make up 40 percent of all long-term capital to small businesses and helped to create or retain more than 544,000 jobs last year. This change could stimulate as much as $20 billion in new loans.
- Allows the SBA to temporarily raise the loan guarantee level to 90 percent for 7(a) loans, providing a higher level of protection for small business lenders who have tightened their lending standards. Also increases the SBA's lending authority for 7(a).
- Allotted $6 million for loans to micro-businesses (typically businesses with fewer than 10 employees). This funding will leverage $51 million in microloans.
- Changes the SBA's second largest loan program, 504, to allow refinancing of an existing business debt. The 504 program offers fixed interest rates for up to 20 years for fixed assets such as real estate, buildings and equipment. This change will give small businesses access to affordable capital when they need better terms and allow them to access some of the capital in their business to survive the recession. The Recovery Act also updated the job creation requirement, making it possible for more businesses to qualify for 504 financing and increased SBA's lending authority for this program.
- Provided $15 million for surety bonds, usually helpful to contractors in the construction industry, and raised the maximum amount of contracts backed by surety bonds from $2 million to $5 million, and in some cases up to $10 million. This will help small businesses access another $6.5 billion in federal contracts.
- Created a program to help thaw the secondary market by allowing the SBA to make loans to broker-dealers, who in turn would purchase additional 7(a) loans. Also allows the SBA to guarantee the first lien in 504 loans. This will unclog $2 to $3 billion for new loans.
- Stimulates the flow of venture capital in the SBA's Small Business Investment Company (SBIC) program, making it possible for SBIC funds to take about $2.2 billion and invest in the most promising and fastestgrowing small businesses.
- Businesses recover the cost of capital investments through depreciation deductions taken over the property's useful life. The ARRA extended the "bonus" depreciation allowance enacted in 2008 for an additional year. This provision allows businesses to immediately deduct one-half of the cost of property put into service this year.
- Small businesses are allowed to immediately write-off the cost of certain capital expenditures instead of deducting these costs over several years. Certain small businesses can write off as much as $250,000 of capital expenditures in 2008. The ARRA extended this provision for 2009 to make it easier for small businesses to quickly recover the costs of their investments.
- Losses incurred by businesses may be carried back to the two previous years to recover income tax paid on earnings in those years. The ARRA expanded the carryback period to five years to allow certain small businesses to recapture a greater amount of priorpaid taxes.
- Taxpayers selling certain small business stock may exclude one-half of any gain on the sale from taxable income. ARRA increases the percentage of gain excludible to 75 percent for stock issued after February 11, 2009 and before January 1, 2011.
We are working every day to put Nevada's economy on the right track, and I know this cannot happen without giving small businesses the access to lending and tax fairness they need to create the jobs that drive our state.
