President Barack Obama’s latest plan to spur job growth among small businesses is drawing lukewarm praise from entrepreneurs and advocates.
Under the president’s latest plan, small businesses would receive an extension of various tax incentives, which were authorized in the American Recovery and Reinvestment Act, or ARRA. The plan also extends the suspension of fees and the promise of larger guarantees for Small Business Administration loans. Currently, the SBA provides a sweetened 90% guarantee on certain loans, up from 75% or 85%.
The reaction to the plan was mixed among small-business owners and industry advocates. Although the president’s proposals are intended to create job growth and help troubled businesses, small-company CEOs and advocates say they are frustrated by Congress’s pace.
“Small businesses need help this month and they needed help last month,” says George Cloutier, chief executive of American Management Services, a small-business consulting firm in Orlando, Fla. “But nothing has passed,” he says. “If they can rush health care, they can get something passed to help small businesses.”
The plan, which was announced Tuesday, is part of the president’s ongoing strategy to put Americans back to work, expand business investment and create greater access to capital.
“Even though we’ve reduced the deluge of job losses to a relative trickle, we are not yet creating jobs at a pace to help all those families who’ve been swept up in the flood,” Obama said in a speech at the Brookings Institution, a Washington, D.C.-based think tank. “There are more than [seven] million fewer Americans with jobs today than when this recession began.”
The president also proposed a complete elimination of capital gains taxes on small-business investment for one year. (Leading up to the passage of the ARRA, Obama had proposed eliminating capital gains taxes on all investments made in small and start-up businesses. However, that initiative never made it to the House’s bill.) He suggested that unused funds from the Trouble Asset Relief Program, or TARP, be redirected to small businesses — a move that he also recommended in October and he proposed investing in building infrastructure improvements, and rebates to homeowners for making their homes more energy efficient.
The president also proposed a short-term tax cut for small businesses that hire new workers in 2010. Although the details remain unclear, Obama said this tax incentive would encourage small businesses to “add and keep employees.” One plan from the Economic Policy Institute, a Washington-based research organization focused on labor issues, calls for the government to provide refundable tax credits of 10% to 15% against payroll taxes for each new hire over two years.
For now, many small-business owners are growing restless. Amy Nichols, the president and CEO of Dogtopia, a Bethesda, Md.-based dog day care franchise, says she remains frustrated with Congress’s tempo. “I’m in the middle of getting a line of credit approved,” she says. But because she’s waiting on securing an SBA-backed loan, she says she’s hopeful that Congress will soon greenlight moves that would extend the elimination of fees and continue the increased 90% guarantee. “I’ll have to pay between $2,000 and $3,000 in fees unless we get this passed,” Nichols says, adding that “that money would go right back into my business.”