Obama Pushes Small Business Aid for Job Recovery

Posted by: John Tozzi on December 8, 2009

The president pledged to extend loan aid and tax breaks to small businesses and to create a new tax credit for hiring new workers in a speech at the Brookings Institution today. He also suggested the Treasury will use some of the TARP money originally intended to bail out banks to aid small businesses.

Following the White House jobs summit last week, a tour of businesses in Allentown, Pa., and a forum last month to address small business access to capital, Obama’s speech today is the latest recognition that a Main Street recovery must parallel Wall Street’s rally to ease unemployment.

Aside from the new hires tax credit, a lot of the small business aid extends existing tax and lending relief into next year. The details available are here:

  • He wants to create a short-term tax credit for new hiring in 2010 (a proposal Obama floated over a year ago in the campaign).
  • He wants to eliminate capital gains taxes on new equity investments in small businesses for one year (these are 75% excluded for now).
  • He wants to extend the stimulus provision that lets businesses immediately deduct up to $250,000 in capital investments to 2010.
  • He wants to keep the increased guarantees and reduced fees on SBA loans going into 2010.

From the speech:

Building on the tax cuts in the Recovery Act, we’re proposing a complete elimination of capital gains taxes on small business investment along with an extension of write-offs to encourage small businesses to expand in the coming year. And I believe it’s worthwhile to create a tax incentive to encourage small businesses to add and keep employees, and I’m going to work with Congress to pass one.

Now, these steps will help, but we also have to address the continuing struggle of small businesses to get loans that they need to start up and grow. To that end, we’re proposing to waive fees and increase the guarantees for SBA-backed loans. And I’m asking my Treasury Secretary to continue mobilizing the remaining TARP funds to facilitate lending to small businesses.

There’s been chatter about using TARP funds to aid small businesses for months, with few details yet. Such a proposal may have become more viable since the Treasury announced Monday that the cost of the bailout appears to be $200 billion less than the $341 billion originally expected.

Aside from small business aid, Obama announced investment in infrastructure and a plan modeled on “cash for clunkers” to encourage homeowners to make their homes more energy efficient.

Venture capitalist and White House adviser John Doerr (of Kleiner Perkins Caufield & Byers) pitched a Cash-for-Caulkers program to weatherize homes just over a month ago. A nationwide tax credit for weatherizing homes could bolster the construction industry and countless small contractors who have been wanting for work since the housing bust. Such a program needs approval from Congress.

Reader Comments

Really Small Business

December 8, 2009 8:16 PM

Small businesses can create jobs simply by taking the payroll tax money we give the government to a new employee.

We give ~$35,000 of every $100,000 to the government in payroll taxes.

tammy

December 8, 2009 9:07 PM

It sounds great but unless we can get banks to loan money to small business, what good is it to have these programs? I have been trying since June to get an ARC loan from the SBA (100% backed loan) but no banks will work with us. We fit all the criteria but can't find a bank that will work with us.

At least the tax credit will help. I won't have to rely on people to loan me money. I only want to consolidate my debt from last year. Interest rates are terrible.

I am praying for a break for my small business and employees.

Felicia Ingram

December 8, 2009 9:51 PM

How does a person begin to apply for a small business loan under the Obama plan?

CWood

December 9, 2009 9:23 AM

If President Obama really wants to help businesses and reduce unemployment, he would stop this insane CapNTax legislation and health care "reform". Empty rhetoric!!!!

Carol Cross

December 9, 2009 12:12 PM

As always, it would be helpful if the SBA would separate out small business loans for franchised small businesses from those loans for independent small businesses when they provide loan statistics and job statistics upon which policy decisions are made.

As always, the President, inadvertently, perhaps, has lumped together all small business entities.

So often, the subsidy of the small business franchisees with the guaranteed loans is actually a subsidy of "big business" franchisors whose principle assets ARE their franchisees, owned under contract, who produce the gross sales upon which the big franchise systems take their profits.

The SBA has subsidized "big business" franchising for many years and this looks like an even bigger subsidy in terms of increased SBA guarantees and reduced collateral, etc..

Will this mean that the banks and lenders will continue to loan to founding startup
franchisees of big franchise systems who churn and turn their franchisees to themselves survive in hard times?

Is it more of the same?

http://thegreatfranchisingrobbery.blogspot.com/

Robert Chappell

December 9, 2009 12:32 PM

Pres. Obama should be complemented for considering more tax cuts.

Now to really help a small business owners, drop carbon taxes and regulation, cut government spending, and make more long-term tax cuts.

Judy

December 9, 2009 12:52 PM

First of all, the TARP funds were to be repaid. Using them for another program that doesn't include repayment puts the country under more financial stress. Secondly, the capital expenditure release will do most small businesses little good when we are struggling just to keep our doors open and our employees paid.
Thirdly, when small business is in crisis, why would investors want to put in capital that won't lead to gains, taxable or not?
Fourth, a tax break to hire someone won't cover the cost of that employee, and as long as sales remain flat, there will be no need to hire.
President Obama should have understood that a pyramid will topple if the base crumbles, and done more for us at the base than for the few at the top. At this point,the release of credit through the banks to small business is critical. Our assests are less toxic than the assests they bought, hoping to make huge profits. The profits will come back to the surviving businesses, but we must have help to survive.

Sox Fan

December 9, 2009 12:59 PM


Obama is a very small business unfriendly president. He has been threatening tax increases on "S" corporations , forced unionization aka Card check, and who know what with health care. I'm not hiring until the dust settles. His administration doesn't understand.

D. Sohn

December 9, 2009 1:15 PM

Those making the decisons are so out of touch with the reality of small business! Business credit card interest rates at 25%+, and no relief in taxes creates a no win situation for small business. I use Bank of America (who got the bailout) and today received a letter that my interest rate will go to 29.9% , not becasue I don't pay, but because of the "possibility" that they bank card may not be able to adjust rates after Jan. 1.
The fix is simple,by providing a line fo credit (SBA or ?) limited at 4% or less (banks borrow at 1/2% so 4% is a good profit) to get rid of these business card high rates,and the small business community can recover, but not when 25%+ of every dollar goes to a government subsidized bank!

Lynn

December 9, 2009 2:14 PM

These proposals do nothing to create sales. The reason for lay-offs were lack of sales. The Presidents believes small businesses can borrow their way to prosperity the same way he believes the Federal government can borrow its way to prosperity. They just don't get it!

Wise old man

December 9, 2009 2:42 PM

Well, I thought Obama would be in for 8 years, but I really think he's blown it and is looking for votes. Let me see if I have his plan right? Give money to big business, give money to small business, give money to individuals...all via lower taxes, but do nothing else to stimulate the economy. No research grants, nothing to boost favorable international trade. Bigger Government funded via fewer taxes and a bigger deficit for our kids, and probably more robbing of social security. All from the guy that won't give up his health plan for the one he's proposing. Maybe he'll make sure welfare recipients will be paid no less than the national average wage as well? Boot this book-smart, street-stupid idiot.

alan newcomb

December 9, 2009 3:01 PM

I own a company that for over fifteen years has administered federal tax credit programs designed to provide tax credits to businesses creating jobs and hiring or retaining employees. It is very confusing to me as to the disconnect of the current administration to recognize the programs that are already in place to incent employers to create jobs and hire employees.

I would ask everyone's assistance in bringing to the forefront current legislation relating to the Federal Empowerment Zone and Renewal Community Tax Credit programs to extend and expand the tax credit programs to promote job creation and spur hiring. Please support HR 1677 and S.1222.

The Work Opportunity Tax Credit program is in place for 2010-2011 which is a program that has been hugely successful for almost thirty years. It has provisions designed to safeguard against fraud and abuse that congress fears will happen with “new” tax credit programs.

I would welcome a conversation to further discuss the merits of the current programs.

Thank you,

Alan Newcomb, CEO
Associated Consultants, Inc. (ACI)
ACI Franchising, LLC, Franchisor of RetroTax™

www.acitaxbiz.com
www.retrotax.com

A-M

December 9, 2009 3:26 PM

The proposed raise in taxes for S corporations is enough to make me sit still and wait to do much with my business until I figure out what the financial hit for me growing my business will be.

I might as well stay small if they're going to tax my extra growth...

Ron

December 9, 2009 4:26 PM

I too , have been trying to apply for AN ARC loan but cannot find any banks that are involved in ARC loans. In talking with my bank they are involved in SBA loans but not the ARC loans supposedly because of the potential for loss because of delays getting returns on there money and the odds on repayment of ARC loans.

Qaam

December 9, 2009 4:37 PM

Maybe I'm missing something but the easiest, quickest and most simple thing that would help my company to survive would be to cut payroll taxes. They are killing us. You wouldn't need months to organize another bureaucracy and the red tape to qualify etc. etc.

John Tozzi (BusinessWeek reporter)

December 9, 2009 5:23 PM

Folks, thanks for all the comments. Can someone point us to a link about the S corp tax changes people are talking about here? S corps themselves don't pay corporate income taxes -- they are "flow-through" entities (like LLCs, sole props, etc.) with taxes paid by owners/shareholders. So please clarify what proposed changes you're referring to.

(Special thanks to @taxgirl on Twitter for expertise on this one.)

billy37

December 9, 2009 10:14 PM

More troops, more troops, more troops!!! The budgets gone to hell, our young die in a war that shouldn’t be...
Obama this isn’t the American way, Obama it’s in your hands.
Here’s an article with the latest
http://ketiva.com/Politics_and_Government/whats_with_the_bailout_obama1.html

Dummy

December 10, 2009 1:11 PM

A tax credit for hiring? I'll hire only when sales are increasing. To increase sales reduce individual taxes so they have more to spend. That will increase sales and then we'll need more workers to produce the products & services wanted.

Barbara

December 10, 2009 2:23 PM

How about start by lowering the cost of group medical insurance.

John S

December 10, 2009 3:44 PM

What is eliminating capital gains tax on new equity investments going to do for the small business owner... small business owners rarely have capital gains and it has nothing to do with their business if they do. Capital gains taxes are 15%... meanwhile people that own profitable small businesses are pay just under 40%, and congress is trying to raise that by 5% to pay for healthcare. They are disguising it by saying it is for the richest americans, but in fact the lions share is small business (small business income is added to the owners W2's). Rich people don't have income tax, they have capital gains.

SALLIE SIMMONS

December 10, 2009 4:32 PM

WHAT ABOUT THE SMALL BUSINESSES WITH UNDER 10 EMPLOYEES. WHAT IF YOU DON'T WANT TO HAVE TO TAKE A LOAN OUT TO PAY KEEP THE EMPLOYEES YOU HAVE. I WOULD PREFER TO GET BETTER TAX CREDITS SO I CAN KEEP THE EMPLOYEES I HAVE AND NOT HAVE TO PAY BACK A LOAN TO DO IT.

Michele

December 10, 2009 4:51 PM

As an S-Corp, I concur with the other comments. I will not hire till the dust settles. In addition, why don't we require drug tests in order to receive welfare and unemployment benefits? We require them for employment? That would probably save us all some tax increases.

Michele

December 10, 2009 4:53 PM

I concur with the other S-corps...until the dust settles, there is no incentive to hire. Why don't we require drug tests for welfare and unemployment payments? We require them for employment. Think that might save us some tax increases? I do.

John Heinrich

December 10, 2009 5:34 PM

No political comments, although those within NFIB know that I certainly have them (I'm one of the Federal legislative coordinators).
I'm the head of a small business owners' discussion organization, and I'll offer a couple of ideas to all of you:
1. We see an alarming number of marketing and sales mistakes by small
businesses: poor internet marketing, ineffective sales people, hanging onto ineffective sales people too long.
2. Try alternative financing, even shucking your bank in favor of a mid-tier local or regional bank.
3. Don't discount a tour through Ch. 11; it takes less time to get over the stigma than you might think.
It so happens that we've just launched a spinoff of Solutions Forum, called the International School of Entrepreneurship, whose courses address many of your concerns. Take a look at www.theisoe.com
We also do online business owners' groups, and if this is of interest, call me at 1-800-716-9626.

Larry

December 10, 2009 6:24 PM

As a small business we need customers and the lowest costs we can get. Most of these fancy programs are or will be a breaucratic nightmare of paperwork and regulations that few will have the desire to work their way through. Just let me borrow money at 4 % for 3 years and I will manage the rest. That also includes commercial loans for buildings.

Andre

December 10, 2009 11:04 PM

Can someone tell me do comp under 75M need to do SOX or not as it's not clear, do we need to proceed with testing or not?

Janice Rochman

December 11, 2009 8:39 AM

This is a bunch of crap and won't help at all. Get the government out of our way and then you'll see some progress. Cut taxes, put health care reform and cap and tax on the back burner and then we'll see small businesses take off.NO ONE is going to hire with those uncertain taxes hanging over our heads. I own a small business and there's no way I'll try to take out a loan I'm not sure I can repay when my sales are so low. These idiots just don't have a clue what small business needs!

True American

December 11, 2009 5:54 PM

I read most of the comments...Alot of people have very little positive to say...when most or none have the mental stregnth to runa "small business" let alone a country! So what do u think u could do as president when half of your country's deceiding parties oppose you off top due to differences in parties or other obvious reasons that still exist, then you have the money people and elite that yay or nays...please!!! Obama ain't doin all HE can, but he don't have full authority to do all HE can...but he does takeALL the criticism! At least he's putting out programs that other presidents neglected to...our NAT'l debt is 12trill...but the bailouts ended in 9.7trill in total payouts which we are aware of only about 1.4 trillion (2 700$ bailouts) but we broke right??? Recession my ass...y'all wanna comment bout something wake up and find out more of what's really going on!

Raph Jensen

December 14, 2009 5:00 PM

All this talk about small business tax credits and loans is stupid. If a business doesn't have enough demand to keep it's staff busy, why would you take out a loan or need a tax credit to expand your staff?

Small businesses need more customers willing to spend money. When people start letting go of their cash, demand will increase. When demand increases, small businesses will add staff to meet the higher demand. It is that simple.

People aren't spending because they don't have faith in the future and the current ideas coming out of Washington and state governments aren't helping to change that.

Stop the one time shots that only skew demand. A real cut in taxes to consumers is the only long term solution.

Jackie

December 16, 2009 8:39 PM

I thank him for so much and his really commitment to helping small business but what about help. New business getting the loans or start funds if there personnal credit is not good do to lack fund get started .why not put fund to help company get started with out using there personal credit. PS. We get no help form our SBA. In Washington DC

Victoria

December 18, 2009 8:18 PM

I applied for the ARC LOAN through Well Fargo and I just become award that their were one of the bank that got bailout,I am very upset because after put together all my financial for the past three year, submitting a hardship letter(requested by the ARC Loan as to why I needed the ARC/SBA 2009 Recovery Loan,also submitted a Projection Letter another request for the application and also the Cash Flow for 2009 I was told after 2 month of not know anything about my loan application that I was denied because my company did not make profit for 2007 and 2008 and that I would be getting a letter through the mail. If I had made enough profit for 2007 and 2008 I would not have needed to apply for a loan, I had two company that file bankrupt leaving me with debit of $35,000 in the hole how did this people expect for me to profit in 2007 and 2008 it was all explain in the hardship letter and know I myself have to make a decision soon as to filing for bankruptcy. I am hurting and very upset at the bank it is unbelievable that they could be bailed out but couldn't help bailing my company out. I don't now what to do anymore I have wrote to the President but I have yet to hear form them. I also know someone that got denied the loan because of the profit issued, he resubmitting the application and this time the denied him because his Projection Letter didn't not meet the bank expectation and they didn't tell him that the first time

tom

January 14, 2010 12:33 PM

Small business,What. co. that make a million a year.What about the real small business in america.The plumbers,carpenters sheetrockers,pipefitters,tileworker,homebuilders.We are all hanging on by a thread.A lot of us have gone under because of this economy.To hire people for employment you have to be makeing a profit,so don't blame the small business
for no work in america.It was big business that destoryed this economy.GREED.bonuses.Who is bailing the small business out.NO ONE.

Cindy

January 26, 2010 7:41 PM

The entire country is a mess, economy, jobs, health care...all I can say is thanks to bush we are in this mess...it is a big task for obama to be expected to clean up in his 4 year term, let alone clean it up in just the 1 year he has been in office. Doesn't look like he is getting much help from congress either. I will definitely remember that it was the republicans that actually held up progress and will not be voting for them in upcoming elections.

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About

What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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