The Economic Stimulus and What's in it for Small Business

By Catlin McDevitt, Inc. Magazine

When President Barack Obama first lobbied for support for his economic stimulus plan in late January, he touted 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 has swayed enough members of the House to pass the $819 billion bill, and the Senate, yesterday approved their $838 billion-version of the bill. During his press conference on Monday night, President Obama said he hoped the two houses of Congress could hammer out their differences and present him with a final bill by the end of the week.

Embedded in both versions of the massive stimulus package—which include funds and relief allocated across various sectors—are some breaks for small business. Many small business owners struggling to get by 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 stimulus. In particular, she says that targeted tax relief measures should help small business owners in the short term.

For those companies that have slumped recently but performed well in past years, both versions of the plan would allow them to file for cash refunds. Businesses with a net operating loss (expenses exceeding revenue) for this year could use the loss to offset profits made in the past five years, extended from two years, according to Barbara Weltman, an attorney who specializes in small business tax law. "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 buy new equipment, such as computers, refrigerators, or machinery, are in luck – the House and Senate plans would allow them to immediately write off the cost of these purchases up to $250,000. Of course, many struggling companies may not be able to afford to invest in big-ticket items now anyway, says 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 the capital they need, the stimulus will likely include measures to facilitate borrowing backed by the Small Business Administration. These provisions may include increased loan guarantees to appeal to risk-averse lenders, waived borrowing fees, and higher maximum loan limits.

"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.

For more on the immediate benefits to small businesses due to the new economic stimulus package, visit http://www.sba.gov/stimulus/.

For more on this story, visit Inc.com.