Posted April 15, 2009
Federal initiatives to stimulate the economy could mean more credit and less in taxes for small businesses. The government also is helping some laid-off workers by subsidizing their health insurance, though employers must pay the subsidy up front.
On March 16, President Barack Obama and Treasury Secretary Timothy Geithner announced plans to unlock credit for small businesses.
"Our recovery in the present and our prosperity in the future depend upon the success of America's small businesses and entrepreneurs," Obama said.
To stimulate lending to small businesses, the Treasury Department will purchase up to $15 billion in securities backed by Small Business Administration loans.
An SBA loan is a loan from a bank to a small business that the SBA guarantees against default, up to a certain percentage. Many lenders sell the guaranteed portion of the loans, providing money for additional loans. Recently, the secondary market for SBA loans has been stagnant. The Treasury Department plans to jump-start the market by buying securities backed by SBA loans with funds from the 2008 bailout package, the Emergency Economic Stabilization Act.
The SBA also will take steps to stimulate lending by implementing certain provisions of the 2009 stimulus package, the American Recovery and Reinvestment Act. The package provides $730 million for the SBA to increase maximum loan guarantees to 90 percent, temporarily eliminate many fees, and make other program changes.
The Treasury Department is requiring the 21 largest banks receiving assistance from the federal government to report monthly on their lending to small businesses. Secretary Geithner called for other banks to report on their lending to small businesses on a quarterly basis, rather than an annual basis.
The 2009 stimulus package includes some tax provisions to help small businesses. One measure allows owners of small businesses to pay 90 percent of their previous year's taxes in estimated taxes. The new law also extends some tax provisions of the 2008 stimulus package, the Housing and Economic Recovery Act. Notable is a measure allowing businesses to write off $250,000 of capital investments, twice as much as previously.
At the same time, the 2009 stimulus package subsidizes health insurance premiums for many workers who lose their jobs.
The 1985 Consolidated Omnibus Budget Reconciliation Act provided certain former employees with the right to temporarily continue health coverage at group rates. The 2009 stimulus package provides for laid-off workers to pay only 35 percent of the cost of COBRA coverage for as long as nine months. Employers must pay the other 65 percent up front and then recover the cost on quarterly payroll tax returns, according to the Internal Revenue Service.
Details about the federal initiatives affecting small businesses are available at