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Economic Recovery Plan: The Good, the Bad and the Ugly for Small Business

Between job cuts, daily announcements of more Wall Street abuses, the ramifications of the failing auto industry and the credit crunch, it’s no wonder road rage is up and people everywhere are pulling back on spending.

Good News

There is good news, however. Small business is getting a break with the new economic stimulus recovery, which is good for businesses of all sizes and industries!

If you counsel small businesses, if you sell to small businesses or if you are a small business, read on…

Long Term

In the long run, all businesses stand to benefit from America’s Recovery and Reinvestment Act of 2009 in the following ways;

• If your business is in EDUCATION or you offer products and services that would support 21st century improvements to classrooms, labs and libraries, $650 million in funding is being targeted for school computers, science laboratories and technology training for teachers.
• Investments in COMMUNICATION include $350 million in mapping the countries’ current broadband infrastructure; $4.3 billion in grants to provide wireless and broadband infrastructure to communities, including public computer centers and sustainable adoption of broadband service; and $2.5 billion Broadband grants to rural communities. These incentives promise significant improvements for businesses located in rural areas in terms of their ability to advance connectivity speeds and compete more effectively on a global scale.
• Incentives to INNOVATE in areas of science, research and technology in all sectors of the economy will not only include opportunities for small ventures on the front end, but will likely create new markets in housing, security, education, healthcare and other sectors that spawn new types of businesses and new commerce opportunities over the long term.
• RURAL BUSINESSES are also targeted in several ways including $150 million in economic recovery programs aimed at urban industrial core and rural economic recovery programs and another $150 million in guaranteed loans for rural businesses. Both of these incentives offer support for regional economic clusters as a viable economic development strategy.
• Lastly, the stimulus package also speaks to improvements in both sources of ENERGY and energy efficiencies. This will lead to both cost savings and improved operational efficiencies for all businesses.

Many of these incentives are particularly suited to businesses that do government contracting. There are also advantages to being certified as a woman or minority disadvantaged business enterprise, or a disabled veteran business enterprise. There is a lot a paperwork involved in becoming a certified government contractor, but the benefits can make it well worth the effort!

Short Term

In the short term and specifically for small business, the economic stimulus package promising some refreshing relief in the form of business funding and tax breaks. For example, the U.S. Small Business Administration (SBA) is slated for $730 million that will be used in a variety of ways to encourage SBA backed loans including:

• Reducing loan processing fees
• Increasing loan guaranty levels, and
• Improving secondary loan markets.

SBA Loan Program Incentives

More specifically,

• The SBA is temporarily reducing and, in some cases, eliminating fees associated with SBA loan applications and processing.
• The SBA is also increasing the percentage that it guarantees loans from 75 and 85%, up to 90% meaning that the risk to the lender goes down from 15 to 25% to only 10%.
• The SBA is making $3 billion worth of loans more attractive in secondary markets. What this means is that when a bank makes an SBA-backed loan to a small business, the bank then sells the loan in a secondary market. By passing loan guarantees through to secondary markets, SBA lending becomes more attractive for all parties involved.

SBA Loan Programs

What all of this means in terms of access to real funding for small business are three things:

1. A new America’s Recovery Capital will be made available where a business can borrow up to $35,000 to make up to 6 months of payments on a prior loan at fully subsidized interest with no payments in the first year and a repayment deadline in five years.
2. More Micro-Loan monies – $30 million total, will be available. These loans offer up to $35,000 and come with various forms of technical assistance to help the small business succeed and hence, pay back the monies. These loans are made through local nonprofit community organizations.
3. Repositioning of 504 Certified Development Company (CDC) Program – If the project involves expansion of an existing small business concern, in certain situations any amount of existing indebtedness that does not exceed 50% of the project cost of the expansion may be refinanced and added to the expansion cost.

The caveat on all this however, is that time and money are limited. Between now and September of 2010, borrowers will be given priority over lenders, and small banks will be given priority over large banks. Connect with your local SBA office to learn more.

Tax Incentives

Lastly, but certainly not insignificant are tax incentives in areas of hiring, capital equipment and cancelled debt. For example,

1. If your small business hires a military veteran or someone between the age of 16 and 25 that has been out of school or unemployed for the past six months, you can earn a tax credit of $2,400 per worker
2. Capital Equipment Incentives include Expense Write-Offs and Accelerated Depreciation. For example:
   1. Small business capital expenditures, such as vehicles, machinery and computers that do not exceed $800,000 per year, can be expensed up to $250,000 versus $125,000 in ‘08 and ‘09, and
   2. New capital equipment purchases made and used in 2009 can be half expensed in the same year with the balance depreciated against standard fixed depreciation schedules
3. Operating Losses can be carried back 5 years versus just 2 years, and
4. Any Cancelled Debt in ‘09 and ‘10 can be tax deferred with no payments in the first 4 to 5 years, with the balance paid off in years 6 through 10. This means that if you negotiate paying off a $100K loan at $75K, the $25K difference that gets booked as income, does not incur a tax payment obligation until 6 years later.

Each of these accounting issues offer tax incentives where a business can show increased expenses to offset profits, which lowers tax obligations at the federal level, and in some cases, at the state level.

Investor Incentives

A nice final piece of great news is that incentives for investing in small businesses are also part of the recovery package. It used to be that an individual could exclude 50% of capital gains, under certain conditions, on profits from the sale of stock after owning for 5 years. Under the stimulus package, this exclusion is increased to 75% and so those of you who are family members, angel investors or venture capitalists with monies to invest would find it more advantageous to locate promising ventures to put your money into and reap the rewards!

Final Note

While only 20% of the approved $787 billion stimulus package is projected to be spent in 2009, $157 billion is still a lot of money to go around. To make sure that your business takes full advantage of the opportunities ahead, know who your local public business assistance agencies are.

Now more than ever, it is important to work together, leverage scarce resources and work smarter. Visit the SMEToolKit to build the connections that can make this possible.

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Manage Time

By: Deb Osgood

The most precious and scarce resource we all have is time. Benjamin Franklin said it best with, “Dost thou love life? Then do not squander time, for that is the stuff life is made of.”

When it comes to business, time is also the stuff that success is made of and knowing how to save it and use it on what matters most is an important skill to be honed and maintained.

Think about it. How many times during the day do you find your time interrupted? How many times during the week do you find yourself doing something that might be better done by a member of your staff or even outsourced? Do you stop what you are doing every time you receive a new email? How about when your cell phone rings?

The point is that you simply cannot make steady progress toward achieving your business objectives if you do not manage your time effectively. This is not rocket science nor is it a new concept. There are many tools for managing time. In fact, a Google search for time management tools will return over 36,000,000 options. If you began to research which options might be right for you, you’d be spending quite a lot of time!

To save you the time and trouble of determining if any of these might be useful in helping you to improve your management of time, here are four (4) basic tips that are easy to apply and easy to remember as an acronym that spells TIME.

1. T is for Think

Think before doing anything. You might be surprised how many times in any given day that you do something without thinking about it. Even something as routine as reading your daily email might be done more productively if you took a second to ask yourself if this is the next most important thing you should be doing with your time at that moment.

Many successful women entrepreneurs actually limit when and how often they check their email, answer their cell phone or permit members of their staff to interrupt them throughout the work day. By taking even as little as one second beforehand to be fully conscious about how you choose to use your time, you can determine where you can best save it and use it on what matters most to you and your business.

For a list of 10 additional tips on managing time more effectively, view Where Does Time Go?. For a valuable perspective on making the most out of your scarcest business resources time, people and money, visit Management Control.

2. I is for Innovate

When it comes to spending time, ask yourself what other ways might something be performed that would improve operational efficiency or offer other key benefits to your business? For example and thanks to improved Internet access and speed, there are now many common business functions that may be outsourced quite effectively via the Web where you may never even have to meet the service provider.

Payroll is a great example. Even with as few as two employees, outsourcing payroll to a web-based service provider can be a cost-effective time saver, as well as represent improved peace of mind knowing that your business is in compliance with federal, state and related payroll tax requirements.

Other Web-based services that can represent a cost-effective savings of time for you and your business include Business and Legal Document Templates, Human Resource Management Portals, Accounting Applications, Web Site Development & Marketing and Publicity.

3. M is for Manage

Having given further thought about what you do, when and why, and then becoming more innovative about how you do it, brings us to managing your time effectively.

Using a 12-page workbook called Time Management, you can approach this issue as a seven-step process that not only will help you to manage your time more effectively, but also help you and your staff to manage their time more effectively as well. The seven steps for approaching this include:

1. List business functions or tasks that must be performed
2. Determine the time required for each task or function
3. Analyze how tasks or functions are now being performed
4. Construct a skills inventory of key personnel
5. Calculate the percentage of the organization’s total time to be spent on each activity
6. Construct a Functional Time-Use matrix
7. Formulate a Time-Use budget

Approaching time management in this way will facilitate the development of reasonable, realistic objectives and ways to effectively achieve them. With such an approach, it becomes easy to manage time while leading the business toward profitability and success.

4. E is for Evaluate

Last but not least, it is now time to develop a routine systematic approach for evaluating how you and your staff actually spend time on an ongoing basis to ensure that business objectives are actually being fulfilled efficiently.

Using a time management tool, such as a Weekly Time Planning Schedule, the objective is to identify how you plan to spend your time that week given company goals; document how you actually spend your time each day; and then evaluate any deviations to adjust the use of time accordingly.

In summary, there are four ways to improve how you manage time; Think, Innovate, Manage and Evaluate. By better managing how you use your time, you will better manage the success of your business.