What Will Obama Do for Small Business?
While small business owners anxiously await new legislation from the Obama administration, many have put plans on hold until the details are unveiled. Primary concerns are health insurance, cash flow, taxes, and consumer confidence, and small business owners are anticipating new legislation and an immediate stimulus proposal that will influence their plans going forward. So what can small business owners expect from Obama?
The Credit Crunch
Despite federal intervention aimed at loosening credit, many small business owners are still having trouble getting a loan, while many others are seeing credit lines reduced or eliminated. The federal infusion of TARP funds into banks did not come with a requirement that banks use the money to extend more loans to small businesses, so the program has yet to help small business owners facing a credit crunch. In a Business Week article, author Amy Barrett points out that Congress has the right to make that demand retroactively, and says that a portion of remaining TARP funds are expected to go to smaller banks which are major lenders to small businesses. She also says SBA lending will have to be revitalized, “perhaps by reducing or eliminating fees and allowing the agency to make emergency loans to small businesses”.
Health Care
While everyone understands the enormity of the financial crisis and the urgency to restore confidence in the overall economy short-term, small business owners are also looking longer term at the real and persistent problem they face in health care. The cost of health insurance has been rapidly increasing for some time, and small business owners are hoping for some help from Obama as they struggle to afford the cost of covering themselves and their employees.
According to Barrett’s Business Week article, the President-elect has announced that health care reform will be a priority, and that the solution will be largely a private-sector one. Barrett says small business owners can expect Obama to ask for a 50% tax credit on their health insurance costs, although the question of which businesses qualify as “small” has not yet been defined. And given Obama’s strong position with Congress right now, Barrett thinks there will be a sense of urgency to get something done soon. She quotes John Arensmeyer, founder and chief executive of the trade group Small Business Majority, as saying the odds of comprehensive health insurance reform getting done in 2009 are “better than 50%”.
Taxes
According to Barrett, experts think it is unlikely that Obama will want to raise income taxes immediately in a recession. However, some expect small businesses will face a higher tax eventually, although not before the end of 2009. As for tax breaks, Barrett says, “The first tax break for small businesses will probably come in the stimulus bill, which is expected to include an extension of the $250,000 limit on the first-year depreciation of equipment (otherwise, the deduction will fall to about $125,000 in 2009), and possibly Obama’s promised cut in the capital gains tax to zero for investments in small businesses and startups.”
Confidence and Obama’s Stimulus Package
Short term, small business owners need to see consumer confidence restored as quickly as possible, and this can only be done if Obama can convince the nation that he has a plan that will work to stimulate job and economic growth. It is widely expected that some sort of stimulus package will be passed quickly for this reason, and will involve big infrastructure spending. Small businesses will be able to benefit from these government programs if they can position themselves accordingly; however, it is expected to take some time for government to sort out the specific investments. In a Fortune magazine article, Anthony Karydakis writes, “All in all, the legitimate infrastructure spending, which in its expanded form would include Obama’s ambitious plans to invest heavily in renewable energy sources, will most likely not start coming on line until the fourth quarter of the year, and its full effect is at least 12 to 18 months away. In other words, the fiscal stimulus measures that the incoming Administration will be pushing through are more a 2010 story.”
