Highlights of the Small Business Stimulus Act

By Lamoreaux, Matthew G.; Nevius, Alistair M. | Journal of Accountancy, December 2010 | Go to article overview

Highlights of the Small Business Stimulus Act


Lamoreaux, Matthew G., Nevius, Alistair M., Journal of Accountancy


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The Small Business Jobs Act of 2010 (PL 111-240), which Congress passed and President Barack Obama signed in September, expands loan programs through the U.S. Small Business Administration (SBA), strengthens small business preference programs for federal government projects, provides incentives for exporters, offers a variety of small business tax breaks and includes some revenue raisers.

SMALL BUSINESS LOANS

The act creates a Small Business Lending Fund to address ongoing effects of the financial crisis on small businesses by allowing the Treasury Department to make capital investments in eligible financial institutions to increase credit available for small businesses. Independent community banks may participate in the new $30 billion lending fund on the condition they make loans to small businesses and meet other requirements. Financial institutions (bank and savings and loan holding companies, depository institutions, and community development loan funds) with $10 billion or less in total assets may apply for capital investments of up to 3% of risk-weighted assets.

Other small business lending provisions in the act include:

Online information center. The act directs the SBA to create an online lending platform that lists all lenders that make SBA-guaranteed loans and provides interest rates for each lender.

Nonprofit lenders pilot. The act also creates an intermediary lending pilot program to allow certain private, nonprofit entities that seek or have been awarded SBA loans to make loans to small businesses. The pilot will allow $20 million in loans each year from 2011 to 2013 to not more than 20 eligible entities. Eligible nonprofit organizations may apply for up to $1 million for the purpose of making loans of up to $200,000 to eligible small businesses.

Increased maximums for Microloan Program. The act increases the Microloan Program maximum loan amount to $50,000 from $35,000. The act raises total outstanding loan commitment limits to $4.5 million from $1.5 million and the total gross loan amount to $5 million from $2 million. Increased government guarantees and outstanding loan commitments are effective until Jan. 1, 2011, when the percentage guarantees will revert to the original percentages and the total outstanding loan commitment will be reduced to $3.75 million.

Increased participation limit for Section 7(a) business loans. It also increases the limit on the government's participation in so-called Section 7(a) small business loans to 90% from 75% or 85% for all Section 7(a) loans regardless of the loan amount.

Raised loan maximums for plant acquisition, construction, conversion and expansion. The new maximums under the SBA's 504 Program are tiered in relation to the borrower's plans to use the capital to support federal government priority goals and projects, mostly in the energy and manufacturing sectors. For nonpriority goals and projects, the maximum is increased to $5 million from $1.5 million for each small business concern; to $5 million from $2 million for each small business concern if the loan proceeds will be directed toward certain public policy goals; to $5.5 million from $4 million for each project of a small manufacturer; to $5.5 million from $4 million for each project that reduces the borrower's energy consumption by at least 10%; and to $5.5 million from $4 million for each project that generates renewable energy or renewable fuels, such as biodiesel or ethanol production.

Reduced fees for American Recovery and Reinvestment Act SBA loan guarantees. The reduced fees for SBA loan guarantees enacted by the American Recovery and Reinvestment Act of 2009 are extended to Dec. 31, 2010 (from Sept. 30).

Law-interest refinancing for Local Development Business Loan Program. Up to $7.5 billion in low-interest refinancing is available under the SBA's Local Development Business Loan Program. …

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