Recovery Act Updates

RSSGet Instant Updates on Activities from Recovery.PA.gov

The American Recovery and Reinvestment Act (ARRA) of 2009 is a $787 billion combination of tax cuts, incentives and government spending designed to kick-start the U.S. economy in the short term and drive long-term economic growth. Find out how you can take advantage of the stimulus package to help your small business.

Expansion of Two Critical SBA Lending Programs

Feb 5—President Obama proposed the expansion of two critical Small Business Administration (SBA) lending programs, aimed at allowing small businesses to refinance and increasing limits for working capital. These are both legislative proposals designed to help small businesses through what continues to be a difficult period in credit markets.

Details of the President’s new small business initiatives

  1. Expand SBA’s existing program to temporarily support refinancing for owner-occupied commercial real estate loans

    The Administration is proposing legislation to temporarily allow for the refinancing of owner-occupied commercial real estate (CRE) loans under the SBA’s 504 program, which provides guarantees on loans for the development of real estate and other fixed assets.  Currently, 504 loans cannot be used for the refinancing of maturing debt.  This change would respond to the difficulties many current, solvent borrowers face in refinancing existing commercial real estate loans.

    Businesses with a loan maturing in the next year who are current on all loan payments will be eligible. Lenders that are refinancing mortgages for existing customers will make a loan for up to 70 percent of the current property value; and SBA will help finance the remaining 20 percent.  For new lenders taking on a refinancing project, SBA will take on a greater share of financing, up to 40 percent. SBA’s proposal for a temporary, zero-subsidy CRE refinancing program would be funded through additional fees for refinancing projects, not through a Congressional appropriation. This proposal will help refinance up to $18.7 billion each year in commercial real estate that might otherwise be foreclosed and liquidated.

  2. Temporarily increase the cap on SBA Express loans from $350,000 to $1 million

The President is proposing to temporarily increase the maximum SBA Express loan size to $1 million, which would expand the program’s ability to help a broad range of small businesses through a streamlined approval process. Unlike traditional 7(a) loans, lenders can use their own paperwork for SBA Express loans, which can be structured as revolving lines of credit.  Currently, these Express loans are capped at $350,000 and carry a 50 percent guarantee. Fees would cover virtually all of the added costs of this proposal.

These proposals complement the President’s broader small business agenda.

The $30 Billion Small Business Loan Proposal

Feb 2—President Barack Obama pitched his $30 billion loan program proposal to help small businesses grow their companies through increased hiring. Obama said he hopes to take money repaid by Wall Street banks as part of the $700 billion bank bailout known as TARP to create the Small Business Lending Fund, which would provide capitol to community banks to spur economic growth on Main Street.

The new loan program could, by loosening credit, help to create thousands of jobs. To encourage hiring, the president supports a tax credit that will encourage companies to hire workers, to pay competitive wages, and to expand facilities such as manufacturing plants. The administration also supports cutting the capital gains tax on small business investment.

Source: Inc. magazine

Key Elements of the New Small Business Lending Fund

Limited to Community and Smaller Banks Which Devote a Higher Share of Lending to Small Businesses

The Small Business Lending Fund would support lending among small- and medium-sized banks (with assets under $10 billion). These banks devote the highest percentage of their lending to small businesses in their communities, accounting for over 50 percent of all small business loans nationwide, even though they make up only about 20 percent of all bank assets.

Program Would Be Separate and Distinct from TARP to Encourage Participation

By transferring, through legislation, $30 billion to a new program that would be distinct from TARP, the Administration’s proposal would encourage broader participation by banks, as they would not face TARP restrictions.

A Core Function of New Fund Would Be Offering Capital With Incentives to Increase Small Business Lending

The Administration’s core proposal for the new lending fund is an initiative to invest in smaller banks capital under terms that provide strong incentives to increase lending. As participating banks increase lending to small firms compared to 2009 levels, the dividend paid to Treasury on that capital investment would be reduced.

Administration Will Discuss with Congress Additional Ideas to Enhance Credit for Small Businesses Through the Small Business Lending Fund

While the Administration is presenting its plan to provide capital with an incentive structure to maximize small business lending, it looks forward to discussing with Congress other ways that – in addition to what is described above – the Small Business Lending Fund could be fully deployed.

New Small Business Loans and Grants for Philadelphia

Small businesses in Philadelphia will be able to compete for $27 million in loans and grants, available through stimulus-funded programs, Mayor Michael Nutter said Wednesday.

Applications for funding are available on PIDC’s Web site and through the city’s Business Services Portal.

Source: Philadelphia Business Journal

President Says Jobs, Small Businesses Are Priorty

Small businesses played a prominent role in President Barack Obama’s State of the Union speech January 27. Obama said jobs “must be our No. 1 focus in 2010,” citing small businesses as America's job creators:

“We should start where most new jobs do -- in small businesses, companies that begin when an entrepreneur takes a chance on a dream, or a worker decides it’s time to become her own boss,” the president said.

To help small businesses grow, the president proposed:

  • Using $30 billion in Troubled Asset Relief Program (TARP) funds to provide cheap capital to community banks for use in making loans to small businesses;
  • Eliminating capital gains taxes on investments in small businesses, an idea Obama proposed during the presidential campaign;
  • Continuing tax incentives that allow small businesses to immediately write off much of the cost of investments in new equipment instead of having to depreciate it over time; and
  • Creating a tax credit for small businesses that hire new workers or raise the wages of existing workers.

The White House blog has a statement from Karen G. Mills, Small Business Association (SBA) Administrator, about the tax credit for hiring.

 

Funding for SBA Recovery Lending Programs Extended

arraRecovery Act enhancements to SBA loans will continue through February 28, 2010, thanks to appropriations President Obama signed into effect in December. As part of ARRA, SBA increased the guarantee on 7(a) loans to 90 percent and waived borrower fees on most 7(a) and 504 loans.

Funds for these programs were exhausted in November but restarted December 28.

For non-ARRA 7(a) or 504 loans funded during the transition period, this extension does not provide a retroactive guarantee or waived fees.  Loans that were funded under non-ARRA terms cannot be canceled and resubmitted to take advantage of the ARRA extension provisions.
 
This extension does not affect other SBA ARRA programs, including the America’s Recovery Capital (ARC) loan program or the agency’s microloans. ARRA funding still remains for both of those programs.

SBA anticipates the lending programs will support $4.5 billion in small business lending.

Source: SBA via Business Wire

New Green Energy Revolving Loan Fund

Dec. 10—Governor Edward G. Rendell announced the commonwealth will use up to $12 million in American Recovery and Reinvestment Act funding to create a new revolving loan fund to support energy-saving projects and develop clean, renewable energy resources that put Pennsylvanians to work.

The fund will finance energy efficiency upgrades that will save at least 25 percent of the total energy consumption of an entire building or facility, and develop and install onsite energy technology that generates electricity from renewable resources, and create and retain jobs.

View guidelines or submit application - deadline Jan. 6, 2010

President Announces New Help for Main Street

December 8—The president pledged to extend loan aid and tax breaks to small businesses and to create a new tax credit for hiring new workers in a speech at the Brookings Institution. He also suggested the Treasury will use some of the TARP money originally intended to bail out banks to aid small businesses.

Aside from the new hires tax credit, a lot of the small business aid extends existing tax and lending relief into next year:

  • He wants to create a short-term tax credit for new hiring in 2010 (a proposal Obama floated over a year ago in the campaign).
  • He wants to eliminate capital gains taxes on new equity investments in small businesses for one year (these are 75% excluded for now).
  • He wants to extend the stimulus provision that lets businesses immediately deduct up to $250,000 in capital investments to 2010.
  • He wants to keep the increased guarantees and reduced fees on SBA loans going into 2010.

More details are available on whitehouse.gov.

Obama’s speech is the latest recognition that a Main Street recovery must parallel Wall Street’s rally to ease unemployment.

Source: BusinessWeek

Back to top Back to top

Loans for Rural Businesses

Pennsylvania has $98 Million in Business & Industry funding through ARRA. USDA is now accepting applications for commercial loans for rural businesses of all sizes. Deadline is September 15, 2010.

October Progress Report

  • More than $1 out of every $4 spent on the Recovery Act contracts has gone to small businesses
  • Governor issues Executive Order on the creation of business opportunities for small businesses

    Excerpt: The Department of Community and Economic Development shall work through small business development centers to reach out to small businesses and provide information on contracting, professional service, subcontracting, and purchasing opportunities.

  • New plans to improve credit for small businesses - download fact sheet
  • President announces more help for small businesses Oct. 29, 2009
  • SBDCNet releases Stimulus Money & Small Business Report
  • Pennsylvania Releases Citizens' Update on stimulus efforts
  • US Small Business Administration: Recovery Act Changes to SBA Loan Programs Sparked Major Mid-Year Turn-Around in Volume

    Loan volume up 70%: SBA has supported $12.2 billion in loans since February

    More lenders: Over 1200 lenders, that had not made a loan since 2008, made SBA loans from February-September 2009

    Broad Support: 20% of Recovery Act loans went to to minority-owned businesses, 19% to women-owned, and 9% to veteran-owned.

Local Weatherization Program Contacts

You may have heard about federal stimulus funds that are coming to Pennsylvania for residential weatherization projects.  These funds will be passed along from the state, via the Weatherization Assistance Program, to local organizations that will use the funds to provide weatherization services to current participants in the Low Income Home Energy Assistance Program (LIHEAP). 

Each local agency will determine how to provide the weatherization upgrade services.  Contractors should contact these agencies directly to inquire about opportunities to bid on these projects. In addition, contractors participating in this program must be certified to participate.

Microloan Program to Expand

The U.S. Small Business Administration is expanding its Microloan program and increasing access to capital for small businesses.  The program is shifting to funding provided under the Recovery Act for $20 million in loans and $20 million in technical assistance.

Microlenders use the SBA funding to provide loans of up to $35,000 to entrepreneurs, which can be used for working capital and acquisition of materials, supplies, furniture, fixtures and equipment. The average loan size is about $13,000. Applications are submitted to the local intermediary and all credit decisions are made on the local level.

Microloan Intermediaries in Pennsylvania

View full list or check out Pennsylvania's Business Financing Programs for other options.

"Green" Provisions

arraWe're getting a lot of questions about how businesses can benefit from "green" provisions in the American Recovery and Reinvestment Act of 2009 (ARRA).

Our Environmental Management Assistance Program team has identified a number of energy tax incentives for small and large businesses:

Modified Accelerated Cost-Recovery System (MACRS)

This accelerated depreciation schedule covers a variety of renewable energy technologies that have five year MACRS schedules (solar PV and solar thermal, fuel cells and micro turbines, geothermal electric, direct use geothermal and geothermal heat pumps, small wind, and combined heat and power), and some biomass properties that have seven year MACRS schedules. For details on MACRS review the Publication 946, IRS Form 4562: Depreciation and Amortization, and Instructions for Form 4562.

Bonus Depreciation

The federal Economic Stimulus Act of 2008, enacted in February 2008, included a 50% bonus depreciation provision for eligible renewable-energy systems acquired and placed in service in 2008. This provision was extended (retroactively to the entire 2009 tax year) under the same terms by The American Recovery and Reinvestment Act of 2009 enacted in February 2009.

To qualify for bonus depreciation, a project must satisfy these criteria:

  • The property must have a recovery period of 20 years or less under normal federal tax depreciation rules; 
  • The original use of the property must commence with the taxpayer claiming the deduction; 
  • The property generally must have been acquired during 2008 or 2009; and 
  • The property must have been placed in service during 2008 or 2009 (or, in certain limited cases, in 2010).

If the property meets these requirements, the owner is entitled to deduct 50% of the adjusted cost basis in the first year (2008 or 2009) and the remaining 50% along the ordinary depreciation schedule.  Refer to the IRS guidance document for bonus depreciation for details.

Energy Efficient Commercial Building Tax Deduction

Owners of new and existing buildings can receive $0.30 - %1.80 per square foot for energy efficiency upgrades to the Lights, HVAC system, building envelop, and the hot water system.

http://www.efficientbuildings.org/

http://www.energytaxincentives.org/uploaded_files/irs_notice2008-40.pdf

Corporate Energy Investment Tax Credit (ITC)

The corporate energy investment tax credit has been extended until 2016 for solar, fuel cells, and small wind: 30%, geothermal, micro turbines, and combined heat and power: 10%. Maximum incentive amounts apply depending on the technology. Small wind and solar projects are not subject to an incentive cap.

Companies eligible for this tax credit may elect to take a grant from the U.S. Treasury Department equal to the tax credit instead. The Treasury Department is not yet accepting applications for the grant funds but they just published the long awaited guidelines.

Renewable Energy Production Tax Credit (PTC)

Commercial and Industrial entities can receive a tax credit for the production of renewable electricity. The size of the credit depends on the technology: 2.1 cents per kWh for wind, geothermal, closed-loop biomass, 1.0 cents per kWh for other eligible technologies. The tax credit applies for the first 10 years of operation.

Temporary Increase in Credit for Alternative Fuel Vehicle Refueling Property

Qualified property placed in service in 2009 and 2010 is now eligible for a 50 percent credit, and the per-business location limit increases to $50,000. Property relating to hydrogen remains at the 30 percent rate, but the per-business location limit rises to $200,000.

Plug-in Electric Drive Vehicle Credit

The new law modifies the credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009.

Plug-In Electric Vehicle Credit

The new law also creates a special tax credit for two types of plug-in vehicles: certain low-speed electric vehicles and two- or three-wheeled vehicles.

ARC Loans

SBA recently made the America's Recovery Capital (ARC) loan program official, which allows deferred-payment loans of up to $35,000 to "established, viable, for-profit small businesses."

The ARC program was created as a no-interest, deferred payment loan to help small businesses that have a history of good performance, but as a result of the tough economy, are struggling to make debt payments. The loan is not for startups. Eligibility criteria are listed on SBA’s website.

Any of the 18 SBDCs in the state can provide more detailed assistance in pursuing this new financing option. If you would like to speak directly to a customer service representative about the ARC Loan Program, please call the toll-free number (866-947-8081) Monday through Friday 8AM - 9PM or contact your local SBA office:

Philadelphia District Office

Pittsburgh District Office
Parkview Tower
1150 First Avenue
Suite 1001
King of Prussia, PA 19406
(610) 382-3062 		411 Seventh Avenue
Suite 1450
Pittsburgh, PA 15219
(412) 395-6560
(412) 395-6560 (Fax)

Back to top Back to top

E-Book: What's in it for Growing Businesses?

MyVenturePad, in partnership with SCORE and SAP, created this (free) eBook to provide small and growing business with the information they need to take advantage of the stimulus package. Features expert insights from Barbara Weltman, Tax Law Expert, Steve King, Emergent Research, and Erik Pages, EntreWorks consulting.

Download the free eBook

Changes as of March 16, 2009

President Obama and Secretary Geithner have announced new provisions to the American Recovery Reinvestment Act of 2009. Among other things, the bill makes major changes to US Small Business Administration (SBA) lending and investment programs that will help small businesses.

The Treasury Department will also commit up to $15 billion to help unlock the frozen credit markets by purchasing small business loan securities to free up more capital to jumpstart lending for small business owners.

We’ve talked with our partners at SBA and here’s what small business owners need to know with regards to the loan programs:

90 Percent Guarantee

The bill allows SBA to temporarily raise guarantees on its 7(a) loan program to as much as 90 percent for some loans through calendar year 2009, or until the funds are exhausted. Increasing the SBA guarantee percentage will provide banks with the greater confidence they need to extend credit during the current recession and make more capital available to small business owners.At present, SBA can guarantee loans up to 85 percent on loans up to $150,000, and up to 75 percent on loans greater than $150,000. The 50 percent guarantee on SBA Express loans would remain unchanged.

Fees for Borrowers Eliminated

The bill also temporarily eliminates fees for borrowers on SBA 7(a) loans and for both borrowers and lenders on 504 Certified Development Company loans, through calendar year 2009, or until the funds are exhausted. This will mean more capital available to small businesses at a lower cost. The fee elimination is retroactive to February 17, the day the Recovery Act was signed.  SBA is developing a mechanism for refunding fees paid on loans since then.

Business Stabilization Loans

The bill creates a new SBA loan program to provide deferred-payment loans of up to $35,000 to viable small businesses that need the money to make payments on an existing, qualifying loan for up to six months. These loans will be 100 percent guaranteed by SBA. Repayment would not have to begin until 12 months after the loan is fully disbursed. The bill provides $255 million for this new program. These loans will help ensure that small businesses have time to re-focus their business plans in order to succeed in the long run.

Microloans

The bill expands SBA’s Microloan program, which provides small loans (up to $35,000) paired with technical assistance to start-up, newly established or growing small businesses. The bill provides funding to increase loans from SBA to participating microlenders by $50 million through September 30, 2010, and adds $24 million in grants to provide technical assistance to borrowers. Historically, these loans reach low-income individuals, women and minorities in both rural and urban areas. Expanding this program through the stimulus bill will help ensure these entrepreneurs are not left behind in the credit crunch.

Refinancing

The bill also gives SBA the power to use the 504 Certified Development Company program to refinance existing loans for fixed assets, providing fresh support for small business expansion. This change will help business owners expand their current development projects and create jobs in their communities.

Secondary Market Expansion

The bill authorizes SBA to establish a secondary market for pools of “first lien” loans under the 504 program. These “first lien” loans from commercial lenders currently have no SBA guarantee. The bill authorizes SBA to deploy federal guarantees for pools of these first lien loans, so that they can be sold to investors in a secondary market. Providing liquidity for these first mortgages will help encourage lenders to continue participating in SBA’s 504 loan program, which provides a key source of capital for community development and other projects.

The bill also empowers SBA to set up a Secondary Market Lending Authority that would make direct loans to broker-dealers that participate in the secondary market for SBA-guaranteed 7(a) loans. These broker-dealers would use the funds to purchase SBA-backed loans from commercial lenders, assemble them into pools and sell them to investors in the secondary loan market. This program may help address some of the issues facing the secondary market for SBA loans and may ultimately help SBA lenders make new loans to borrowers.

Investment Program

The bill helps SBA-licensed Small Business Investment Companies (SBICs) and families of SBIC funds better leverage the capital used to invest in small businesses. The bill sets maximum levels of funding the agency can provide to these companies at up to three times the private capital raised by those companies, or $150 million, whichever is less. It also raises the percentage any one SBIC can invest in a single small business to 10 percent of total capital, and raises from 20 percent to 25 percent the percentage of any licensee’s dollar investments that must be made in “smaller” businesses.

Surety Bonds

The bill also raises the maximum contract amount that can be covered by an SBA guaranteed surety bond from $2 million to $5 million, and, under certain circumstances, for contracts amounting to $10 million, and provides additional funds to cover the costs of expanding this program. Small businesses need surety bonds in order to bid on and obtain many federal and other contracts. The changes are particularly helpful to small and emerging contractors looking to bid on public construction and service projects. SBA guarantees surety bonds to small businesses that private surety companies would not otherwise be able to extend.

COBRA Tax Credit

The Recovery Act of 2009 includes changes to the health benefit provisions of COBRA. If your small business has had to lay off workers due the recession, this may be important for you to know. Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.

The IRS unveiled new information on their website that includes an extensive set of questions and answers for employers. In addition, the website contains a revised version of the quarterly payroll tax return that employers will use to claim credit for the COBRA medical premiums they pay for their former employees.

Related Links

Recovery Act FAQ

Provisions likely to be of most importance to ALL small business owners

Official Outline of Plan from the White House

Video: Wharton SBDC client introduces President Pledging Aid for Small Businesses

Kauffman Foundation Poll Finds Americans Favor Entrepreneurship Stimulus

U.S. Small Business Administration updates

IRS Information Related to the American Recovery and Reinvestment Act of 2009

US Department of Labor COBRA Continuation Coverage Assistance

Recovery.gov

Full Text of Recovery Act Legislation

Warning: Stimulus Scams

Possible projects in Pennsylvania

 

 

Home About the Pennsylvania SBDC Partners Ver en español Sitemap Pennsylvania SBDC Intranet

A partnership program of the U.S. Small Business Administration and accredited affiliate of the national network of Small Business Development Centers. All services provided on a non-discriminatory basis. © 2010 Pennsylvania Small Business Development Centers. All Rights Reserved.

Pennsylvania Small Business Development Centers | 3819-33 Chestnut Street, Suite 325, Philadelphia, PA 19104-3238
tel: (215) 898-1219 | fax: (215) 573-2135 | pasbdc@wharton.upenn.edu