Barack ObamaPresident Barack Obama’s $787 billion American Recovery and Reinvestment Act, better known as the economic stimulus bill, contains a vein of gold for small businesses, but businessowners must be prepared to do a lot of spade work to get at it.

“You probably aren’t going to just be able to see a proposal request in a newspaper, apply for it and watch the money fall into your lap. You have to start beating on doors with government agencies and not-for-profits that will be funneling the money and start building relationships, particularly with contractors for subcontracting opportunities,” says Maya Wiley, executive director of the Center for Social Inclusion, a national racial justice policy advocate.

While plans for spending megadollars from the American Recovery and Reinvestment Act are still in the beginning stages, Wiley says it is not too early for businessowners to start contacting city and state officials to get in on the ground floor. She advises them to be especially vigilant in working with housing and transportation agencies, since they will be responsible for much of the contracting. At the state level, she recommends letting your legislators know that you want to be kept informed of stimulus opportunities and urging them to set up workshops on how businesses can tap into the stimulus, if they haven’t already done so.

Acknowledging the importance of small businesses as the engine of economic growth and job creation, President Obama and Treasury Secretary Timothy Geithner on March 16 announced measures to open up lending for these businesses. The measures, which took effect immediately, seek to boost liquidity by restoring the secondary credit market for loans guaranteed by the U.S. Small Business Administration. Primary bank lenders typically sell these loans in the secondary market and use the proceeds of the sale to make new loans to other small-business owners. But the roiling financial markets have kept buyers away. The government will now buy these loans, using $10 billion to $20 billion from the $700 billion financial bailout package.

Roger Campos, chief executive of the Minority Business Roundtable, a national organization whose members are CEOs of African American-, Hispanic American-, Asian American- and Native American-owned top-tier businesses, says that the $130 billion in the stimulus bill for construction-related spending on infrastructure improvement should be the source of a large number of contracts for Black-owned firms. He and others estimate that more than 90 percent of this money will go to small businesses.

To attract stimulus contracts, says Terry Clark, vice president for entrepreneurship and business development at the National Urban League, business-owners should make sure their company is in a position to get bonding if it is required and has the ability to expand its staff to meet the needs of increased business. To find qualified minority workers, he recommends searching on the Web at www.diversity.com, www.hirediversity.com and www.blackvoices.com. Clark adds that Urban League entrepreneurship center offices in Atlanta, Chicago, Cincinnati, Cleveland, Jacksonville, Florida, Los Angeles, and Kansas City can provide free help in obtaining stimulus contracts.

Few SBA employees have poured through the fine print in the 1,700-page bill to find expanded offerings, but small-business consultant Deborah Osgood has.  Co-founder and chief knowledge officer of Knowledge Institute Inc., an Exeter, N.H., think tank specializing in small-business development and education, Osgood says the stimulus’ gifts to the SBA start with $6 million in new guarantees for the agency’s 7(m) Microloan Program, which provides short-term loans from $2,500 to $35,000 to small businesses for working capital or for the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment.

In addition to temporarily waiving the 2 percent to 3.75 percent out-of-pocket upfront fees on SBA loans, the stimulus bill also waives the 0.5 percent ongoing lender servicing fee for SBA 7(a) and specialized Certified Development Company/504 loans. Single loans under each program have a ceiling of $2 million, but manufacturers can borrow up to $4 million through the 504 program. The act also allows for the refinancing of 504 loans under specified circumstances and doubles the tax incentive for equipment purchases. For the 2008 and 2009 tax years, small businesses will be able to write off 30 percent of equipment purchases of up to $800,000. The previous write-off was 15 percent.

In an additional tax break for small businesses, operating losses can be carried back five years instead of the previous two. The Internal Revenue Service is also being more generous on canceled debt. For example, if you have a loan for $100,000 and negotiate with your lender to settle the debt for $75,000, the IRS normally will view the difference as profit. Under the stimulus bill, businessowners will have four to five years before they start paying taxes on that profit and they will have the sixth through the 10th year to pay the entire amount.
There is also a new incentive for investing in a small business. Previously, 50 percent of capital gains was excluded from tax computations for persons who held stock in a small company for at least five years. Going forward, the tax break will be 75 percent. Furthermore, a small business that hires a military veteran or anyone between age of 16 and 25 who is out of school or has been unemployed for six months may earn a tax credit of $2,400 per hire.

In a first for the SBA, the agency will be offering interest-free Small Business Stabilization loans of up to $35,000 to help pay back existing loans, with no payments due the first year and a repayment deadline of five years.

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