The new federal stimulus package amounts to nearly $800 billion, but for most small businesses, the plan offers mere chump change, according to a national small business vendor, a trade group and local businesspeople.
Less than 1 cent of every stimulus dollar will go to small businesses, despite that operations with fewer than 100 workers created 94 percent of all net job growth in America over the last 20 years, according to Illinois-based paycheck-servicing company SurePayroll.
And officials from the National Association for the Self-Employed said it was "unfortunate" that Congress left out provisions that could have saved small, home-based entrepreneurs thousands of dollars, though the group is pointing its members toward several potential tax incentives they could claim.
"There’s very little, if any, money in the stimulus package for small businesses, and what is there is really sort of a trickle-down from the benefits that go to consumers," said Michael Alter, president of SurePayroll. "And it’s a slow trickle, perhaps one you won’t see until sometime in 2010, and small businesses need help now."
SurePayroll surveyed more than 200 small-business owners nationwide and asked them which types of federal initiatives would help most.
Nearly half — 44 percent — said they need immediate, improved access to capital more than anything. And 29 percent said investing in innovation and development would boost small companies, while 18 percent said lower health care costs would make a big difference for their operation. Nine percent mostly said lowering business taxes would lighten the burden of recession.
Locals agreed Congress’ stimulus prescription is wrong for them, and they and their colleagues can’t wait for the federal plan’s benefits to wend their way down to small businesses.
"We deal with many different companies around town, and many of them are sitting right on the edge," said Ronnie Fox, vice president of Fox Design and Print Team in Las Vegas. "They could go one way or the other. If they don’t see something happening out there in the next six months, they’re not going to be around for a long-term solution."
Many small companies have seen sales fall 25 percent to 50 percent amid the recession, Fox said, and they must borrow simply to stay open. The government could save or create "a heck of a lot more jobs" if it made stimulus dollars available as credit for small companies, Fox said.
Fox would also like to see the U.S. Small Business Administration be more aggressive in loaning to smaller companies. And policies that spur purchasing would exert a multiplier effect on the entire economy, not just the small-business sector, he said.
Curtis Cummings, chief executive officer of Alan Jeskey Builders in Las Vegas, said lower taxes could "kick-start" recession-strapped small businesses, but banks’ inability to lend is what is really holding back smaller operations.
"The left hand has the banker by the throat, saying, ‘We want your ratios adjusted to compensate for diminishing assets,’ while the other hand is saying, ‘We need you to start lending,’ " Cummings said. "They’re coming from different directions. If they could work in some parallel manner to take that bottleneck out of the system, bankers would be able to be more cooperative."
Revenue at Alan Jeskey Builders plummeted 70 percent year-over-year in September after several developer clients couldn’t obtain lending to complete their projects, Cummings said. Alan Jeskey Builders is working with a few clients who can pay cash for construction, so the company should be OK, but Cummings said he knows a substantial number of subcontractors who have already closed their doors due to scarce capital.
Bill Werksman, owner of local headhunting firm Resource Partners, agreed that making credit available is essential to preserving small businesses. But stanching the flow of foreclosures would help as well, he said.
A federal policy that would help homeowners hang on to their properties would ease fear and uncertainty among consumers, Werksman said. That, in turn, would loosen the tight grip most Americans have on their wallets, and an improvement in spending would pay big dividends for small companies.
Alter suggested short-term tax breaks to improve liquidity immediately. The government could also demand that 20 percent of contracts funded under the stimulus go to small enterprises. A tax credit for smaller firms that provide health insurance to employees would put more money in companies’ hands and possibly encourage hiring.
"The only way out of this (recession) is to create new jobs, and the people who have historically done that have been small business owners," Alter said. "You need working capital for existing business to grow, and you need the right environment and available capital for people to start new small businesses. If you give the stimulus to big companies and wait for it to trickle down, you might get a new stadium name or a new corporate jet, but you won’t have jobs."
Contact reporter Jennifer Robison at email@example.com or 702-380-4512.INCENTIVES COULD AID SMALL BUSINESSES
The federal stimulus package doesn’t offer any direct cash or capital for small businesses, but the National Association for the Self-Employed is advising its members to take advantage of some of the bill’s tax incentives:
• Making work pay credit. A $400 credit per worker or $800 credit per double-earning couple for those making $75,000 or less for individuals and $150,000 or less for couples.
• Depreciation costs. A business can write off expenses for new capital equipment. Companies can write off half the purchase cost of any equipment bought in 2009 as long as the equipment is used this year. A fixed-depreciation schedule applies to the rest of the buying cost.
• Temporary deduction for new cars. Taxpayers making less than $125,000, or $250,000 for joint filers, can deduct state and local sales taxes and excise taxes if they buy a new car, light vehicle, recreational vehicle or motorcycle in 2009.
• Loss write-offs. Businesses with gross revenue of $15 million or less can expand their operating-loss carryback to five years, up from its current two years. Eligible companies could also apply 2008 losses to past and future tax bills.
• Temporary reduction of gains holding period. Taxable companies that convert to s corporations don’t face taxes, but they do need to hold assets for 10 years to avoid taxes on built-in gains that existed at the time of the conversion. The stimulus bill reduces that holding period to seven years.
• Delayed recognition of canceled debt income. Taxpayers who cancel or repurchase debt for less than the debt’s adjusted issue price must count the amount of canceled debt as income. Under the new law, some businesses will be able to recognize that income over a decade.