According to NIFB, businesses are slightly more confident in plans to expand than a year ago. This is on the backdrop of a bottoming out of sales declines experienced in the past two years.
The question one must ask, as a small business owner, is: when should I initiate my plans to expand? You could wait for your competitors to expand and move with the herd. You could expand too early or too late. Or you could expand at exactly the right time. Ideally, that time would be: (a) when the cost to expand is lowest, and (b) immediately before the demand for your products and services increases.
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The President’s budget proposes contains initiatives that are both good, and bad, for small business owners. We explore these and conclude on balance that most small businesses will be helped slightly.
With the release of President Obama’s FY2011 Federal Budget on February 1, 2010, we can now track the proposed changes that will affect every business and citizen of the United States. The final budget will change between now and whenever Congress finishes their work, but there are a few noticeable proposals that will have good and bad affects on American small businesses.
The Budget Document that describes the actual monetary proposals is 192 pages long (download here http://www.gpoaccess.gov/usbudget/fy11/index.html ) and can be, well frankly boring.
We have identified 4 proposals that we find are both good and bad for small business.
4 Good Proposals
• Eliminating capital gains tax for investments in small businesses. This should attract considerable amounts of new investment capital.
• Immediately implement a small business job and wage tax cut in 2010. This should give you confidence to hire and expand your business with a $5,000 tax credit for each new employee.
• Immediately implement a small business investment tax credit. This will allow you to write off up to $250,000 in qualified investments in 2010.
• Making the research and experimentation credit permanent. This will continue to attract investment for start-ups and investors in innovative businesses.
4 Bad Proposals
• Re-instate the 36% tax rate for individuals making over $200,000 and families over $250,000. Successful small business owners and families will pay more income taxes.
• Changes to IRS worker classification regulations. This will expand the definition of employee and reduce the independent contractor status leading businesses to hihger the benefit costs.
• Changes to accounting rules on inventories. This will lead to increase in taxes on inventories.
• Changes to accounting rules on transactions. There will be increased reporting requirements on deals over $600, increasing the number of transactions being taxed.
In general, we feel that these changes will help the small businesses that need financing now. These are changes that encourage you to hire and expand your business. We can provide the small business loan, cash advance for your business to grow in 2010.
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One reason it is so difficult for small businesses to obtain a small business loan is because the existing portfolio of loans at banks is experiencing delinquencies and late payment status at a very high rate. As of November, delinquencies were slightly over a percent and late payers were over 5%. Imagine if a bank then assumes it’ll have a “typical” default rate of 1%. This may not seem like a lot, but imagine if for every $100 dollars loaned out, that $7 probably won’t get paid back. This is the reality that banks are facing today when considering to make a small business loan. To compensate for this, some banks or finance companies are just not making the loans. Others are chosing to offer alternatives to loans, or to make small business loans available at somewhat higher rates than historical rates.
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