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Janice France-Petit: The Small Business Jobs Act of 2010

Union Bank

Posted: December 10, 2010 11:09 p.m.
Updated: December 11, 2010 4:55 a.m.
 

The Small Business Jobs Act of 2010 (HR 5297), which President Barack Obama signed on  Oct. 4,  will provide approximately $30 billion to small banks (those with less than $10 billion in assets) for lending to small businesses; provide approximately $12 billion in tax incentives  to small businesses and expand the loan programs of the Small Business Administration (SBA).

Many banks rely on these programs to provide small-business loans to businesses that might not qualify without the added backing provided by the SBA.

According to the SBA, “the new law will provide critical resources to help small businesses continue to drive economic recovery and create jobs.”

In California, there may be more loan opportunities as banks may be able to offer credit to small businesses that might not have previously qualified. (According to the SBA, in the first week after the Jobs Act was passed, the SBA backed nearly 2,000 loans totaling nearly $1 billion in lending support.)

State funding programs and community banks will also receive more federal dollars to lend to small businesses.  The law also provides $50 million in grants to small-business development centers to fund counseling and training.

The following is a more detailed look at the law:

7(a) loan changes
- The SBA enhancements include the ability to increase the maximum loan amount from $2 million to $5 million, providing small businesses with an opportunity to expand their businesses and take advantage of commercial real estate opportunities and low interest rates.

- SBA loan origination fees have been waved until the end of 2010. Such fees can range from 2 to 3.75 percent of the guaranteed portion of the loan.

- The guarantee percent has increased from 75 percent up to 90 percent through the end of 2010, making it easier for banks to approve loans.

504 loan changes
- Increased loan amount: 504 maximum loan size will also permanently increase to $5 million ($5.5 million for manufacturers and energy loans).

- Fee reductions: 504 fees have also been waived for banks and borrowers.

- Debt refinancing: For the next two years, 504 loans may be used to refinance real estate loans coming due on owner-occupied commercial property. It enables refinancing of qualified existing debt without business expansion.

Tax implications
- HR 5297 allocates $12 billion for tax incentives  on investments for new equipment and increased hiring by small businesses.

- Deductions are allowed for employer-provided mobile phones, health insurance costs for the self-employed and more deductions are allowed for startup businesses.

- General business credits may be carried back five years and there is accelerated/bonus depreciations.

- Zero capital gains taxes for those who invest in small businesses.

- Limitations have been imposed on penalties for certain tax reporting errors.

Microloans
The law permanently increases microloan limits from $35,000 to $50,000, helping entrepreneurs with startup costs and small business owners in underserved communities.

Alternative size standards
The law expands the number of small businesses eligible for SBA loans by increasing the alternative size standards to those with less than $15 million in net worth and $5 million in average net income.

Temporary enhancements
To help with working capital and commercial real estate financing, the law temporarily increases the maximum amount of SBA Express loans until Sept. 27, 2011, from $350,000 to $1 million. Several other temporary enhancements exist. Visit www.sba.gov for details.

Exporting

The new law promotes small-business exporting and offers various incentives for small businesses to export goods, including turning a pilot loan program into a permanent program with 90-percent guarantees for loans up to $350,000; for loans between $350,000 and $500,000 it guarantees 75 percent.

Federal contracts
The new law strengthens small businesses’ ability to compete for federal contracts. See the SBA website at www.SBA.gov for details.

Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, Santa Clarita Valley, San Fernando Valley and Antelope Valley region. Visit www.unionbank.com for more information. The foregoing article is intended to provide general information about New Jobs Act and is not considered financial or tax advice from Union Bank. Please consult your financial or tax advisor or the IRS. Ms. France-Pettit’s column represents her own views, and not necessarily those of The Signal. Visit www.unionbank.com for more information.

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