Last week, President Barack Obama lobbied for last-minute support for his $819 billion stimulus plan, touting it as an immediate lifeline for struggling businesses across the country. "The businesses that are shedding jobs to stay afloat, they cannot afford inaction or delay," he said.
The President's urgent appeal successfully swayed 244 members of the House (all were Democrats), and won enough votes to pass the bill. Embedded in the massive package—which includes funds and relief allocated across various sectors—are notable breaks for small business. Some heartened and some still skeptical, many small business owners teetering on the brink of bankruptcy are now wondering what this plan would mean for them and, even more, if the relief it promises would come soon enough.
"We expect most of these provisions to be relatively quick moving," says Rep. Nydia Velazquez (D-NY), chairwoman of the House Small Business Committee, who voted in favor of the bill. In particular, she pointed to the provision of $30 billion in targeted tax relief to small businesses as creating the most immediate and noticeable effect. "For example, we are repealing the burdensome three percent withholding requirement for government contractors and allowing for bonus depreciation for small business purchases," Velaquez explained.
Supporters of the bill believe that these breaks could make the difference between meeting payroll and making layoffs for those managers struggling to make ends meet.
For those small businesses that have slumped recently but performed well in past years, the legislation allows them to file for cash refunds. The plan would allow businesses with a net operating loss (expenses exceeding revenue) for this year to use that loss to reduce the past five year's tax bills, extended from two years, according to Barbara Weltman, a small business tax expert. "It's a good thing because this applies for 2008, so businesses that haven't filed their returns yet will be able to go back five years with 2008 losses and recoup the size of that loss," she says.
Those business owners who are in a position to purchase new equipment are in luck – the legislation would allow small businesses to immediately write off the cost of new equipment purchases up to $250,000 in 2009. While this nearly doubled the former limit ($133,000), many companies may not be able to afford spending this much on new investments now anyway, according to Weltman. "This is not meaningful to most small businesses," she says, "especially in a year when so many are struggling to pay the bills."
And in an attempt to thaw the frozen lending market that has made it difficult for many small businesses to get capital they need, the stimulus plan also includes increased guarantees for Small Business Administration loans. "This should really help to open things up and to get the money flowing again," says Todd McCracken, president of the National Small Business Association, though he remains skeptical of whether that alone will be enough to jumpstart the economy. "It's a gamble," he says.
Many were disappointed with what the House stimulus bill did not include. Bill Rys, tax counsel for the Washington-based National Federation of Independent Business says that the plan fails to address small business owners' most pressing needs. He was hoping for a payroll tax holiday for employers. "That would really help to reduce the cost of labor," he says. Direct breaks for hiring new employees (either in the form of a credit or deduction) were among various stimulus proposals, that to the chagrin of many understaffed employers, did not make their way into the House bill. Hiring incentives would markedly benefit small business in particular, because according to the SBA, it is small business that has generated 60-80 percent of new jobs each year over the past decade.
The plan would spur job creation, however, through the funding of projects, especially in the arena of infrastructure and public works. "The House bill calls for the re-building of bridges and roads and a portion of those capital expenditures that will be profitable for small business," says Giovanni Coratolo, director of small business policy for the U.S. Chamber of Commerce. But he's skeptical that the plan includes enough business-friendly measures to make a substantial impact. "It has certain aspects that will be helpful, but it's not a full course dinner," he says.
If anything, for workers like Bob Lanham, vice president of Williams Brothers Construction in Houston, Tex., the plan has already inspired some optimism. "There are some of us that are hoping that if this comes through," he says, "it might turn 2009 from a bad year into an at least salvageable one."
While the plan's directed relief efforts alone may not be enough to revitalize those sectors, such as construction or retail, which have been particularly hard hit by the recession, supporters expect that all aspects of the plan – from food stamps to tax provisions for individuals – will get money back into the hands of consumers. If they, in turn, pump that cash back into businesses, both large and small, it just might get the wheels of commerce spinning once again.
The Senate version of the stimulus bill, which is nearing $900 billion, will be debated this week.