While the economy is recovering, small businesses across the country are still struggling to access the capital they need to expand their businesses. To assist small business owners and their employees, Senate Democrats have brought forward legislation that will promote job creation through a combination of much-needed tax credits, enhancements to Small Business Administration (SBA) lending programs, and the development of new community bank lending facilities. The jobs bill targets the unique needs of small businesses and community banks, giving them the tools they need to help sustain our economic recovery. The bill is fully paid for.
Tax Cuts for Small Business Job Creation. The legislation includes tax cuts designed to help small businesses hire more workers. The legislation would increase access to capital, strengthen opportunities for investment, promote entrepreneurship and promote tax fairness.
Increased Loan Limits. The bill would increase 7(a) loan limits from $2 million to $5 million, 504 loans from $1.5 million to $5.5 million, and microloans from $35,000 to $50,000. The legislation would establish an Intermediary Lending Pilot program, which would allow the SBA to make direct loans to eligible nonprofit lending intermediaries, which would in turn make loans to new or growing businesses. SBA has estimated that raising the 7(a) cap to $5 million would increase lending to small businesses by $5 billion in the first year alone.
Export Enhancement for Small Businesses. The legislation would improve the SBA’s trade and export finance programs, elevate the Office of International Trade within the SBA, and add export finance specialists to the SBA’s trade counseling programs. Coupled with these efforts, the bill would establish the State Export Promotion Grand Program, which is designed to increase the number of small businesses that export goods and services. It is estimated that these provisions would leverage more than $1 billion in export capital for small businesses, creating or saving as many as 40,000 – 50,000 jobs in 2010.
Addressing Underserved Communities. The legislation would allow the SBA to waive or reduce the non-federal share of funding for Women Business Centers (WBC) or a Microloan intermediary, which provide assistance to underserved communities that are starting or growing a business. SBA estimates that this provision would create or save more than 10,000 jobs in Fiscal Year 2011.
Small Business Contracting. The legislation would improve opportunities for small business to access federal contracts and ensure prompt payment to small business subcontractors. It is estimated that increasing contracts to small businesses by just 2 percent could create approximately 60,000 jobs and infuse billions of dollars into small businesses nationwide.
Small Business Disaster Relief. Current law excludes aquaculture businesses from receiving SBA Economic Injury Disaster Loans, and there is often no other federal disaster assistance available to these businesses. Provided it does not duplicate other federal disaster programs, SBA would be able to make economic injury disaster loans to these businesses, many of which are currently affected by the Gulf oil spill.
Incentivizing Small Business Lending. The bill would establish the Small Business Lending Fund (SBLF) to provide much-needed capital to community and smaller banks. The program, run out of the Treasury Department, would target community banks who hold under $10 billion in assets. To incentivize only those lenders that extend new credit, the performance-based program would decrease the dividend rate that banks pay as they increase lending. Banks that did not increase lending would face a higher rate after two years. This program would be established separately from the Troubled Asset Relief Program (TARP), without TARP restrictions or warrant requirements, and with a separate, but strong, oversight regime.
Financial Credits for Small Businesses. To support innovative small business lending initiatives that have been threatened by state budget shortfalls, the bill would establish the State Small Business Credit Initiative. States would be required to demonstrate at least $10 in new lending for every dollar in federal funding. By providing up to $2 billion in grants, the program would thereby encourage $20 billion in additional provide lending through state initiatives. The program would allow states to build upon successful models for state small business programs, including collateral support programs, Capital Access Programs (CAPs), and loan guarantee programs, including those targeted at rural and agricultural small businesses.