Congress is supposed to vote on the proposed Small Business Jobs Act later this week. Slated to pass, this bill could be a welcomed relief to small businesses feeling the pinch of a sluggish economy. One of the provisions of this bill is an increase in the maximum amount of microloans from the Small Business Association.
If you’re a small business owner, you surely know of and may have utilized the services of the United States Small Business Association. This is a federal agency set up to assist in the formation and continued viability of small business in the United States.
Microloans are one of those services. A microloan is simply a loan for small and home based businesses designed to help in the origination of a small business or to aid in their short term capital requirements. These loans are available through commercial lending institutions and are often guaranteed, in part, by the Small Business Association.
A microloan is designed to be repaid using the business profits so repayment terms are often favorable to allowing a business the latitude to establish itself and a client base before having to begin repayment. Loans like these have literally been the financial foundation to the creation of many small businesses and are one of the SBA’s most popular and worthwhile practices.
In the past, a business could only access a maximum of $35,000 in microloan funds. If the Small Business Jobs Act passes this week, the maximum would increase to $50,000. In addition, other SBA loan programs including the 504 and the 7A loan program would increase from $3 million to $5 million.
Before you rush to SBA website once you hear that it passed, you can take your time. As we know, Washington rarely moves fast and that will be the case with the Small Business Jobs Act. First, the bill has to be reconciled with the small business legislation passed by the House of Representatives in June of 2010. Once that happens, and the other legislative hurdles are resolved, the bill should provide needed relief for small business owners.
There are other benefits in the bill for small businesses including a substantial increase in state and federal funds for small businesses. One of these increases provides lucrative incentives to local banks who lend to small businesses. This should, in theory, greatly increase the amount of money lent by smaller local banks.
If you are starting your business in 2010 or 2011, the Small Business Jobs Act would increase the amount you could deduct in business startup costs from $5,000 to $20,000 and also allow for other tax deductions including more favorable deductions for businesses who acquire real estate related to their business.
In addition to the increase in microloan amounts, this bill has numerous favorable incentives for those looking to start a business.