U.S. Law Gives Small Businesses a Boost
Published in El Caribe
(Dominican Republic) on 4 October 2010
by Roberto Despradel (link to
original)
Last week the United States implemented a new law to promote small businesses with the intention of creating employment. The international [economic] crisis is prompting many countries to increase the range of available resources to its manufacturing sectors in order to boost production. It is important to note that in the U.S. a small business is one that generally has 500 to 1,000 employees.
The law focuses on two areas, the first of which is to provide sources of funding for small businesses. Throughout the financial crisis, the United States has been able to maintain low interest rates although the lending capacity of banks has been significantly reduced. The intention of the law is to provide liquidity to companies for the purpose of investment or to expand working capital. It has the ability to support financing, by increasing the guarantees for a loan portfolio of up to $14 billion. Options include loans of up to $5 million.
In addition, it creates new provisions for express loans of up to $1 million and other financing options. Second, the bill extends eight tax cuts to encourage companies to make new investments and expand. These tax cuts will be instrumental for securing the capital needed to make equipment purchases. For example, all new equipment purchases for the first $500,000 can be immediately depreciated in the first year.
There are many additional benefits for small businesses. Capital gains are excluded from taxation. Deductions can be taken for health insurance expenses and cell phone usage. Companies can have tax credits forwarded on their income tax forms for up to five years. Additionally, the fines for errors in reporting certain tax transactions are more limited.
This new initiative of President Obama’s has similar elements to the Proindustria law implemented by the Dominican authorities three years ago. By promoting investment and industrial upgrading via the granting of tax reductions and resources to provide financing, small businesses are able to continue to exist and thrive. Due to the deteriorating international [economic] environment, Proindustria has the potential to play a leading role in the development of the manufacturing sectors by working with key government institutions. Just as the U.S. authorities are expanding their support to the manufacturing sectors in its country, we must also continue to support our own.
The law focuses on two areas, the first of which is to provide sources of funding for small businesses. Throughout the financial crisis, the United States has been able to maintain low interest rates although the lending capacity of banks has been significantly reduced. The intention of the law is to provide liquidity to companies for the purpose of investment or to expand working capital. It has the ability to support financing, by increasing the guarantees for a loan portfolio of up to $14 billion. Options include loans of up to $5 million.
In addition, it creates new provisions for express loans of up to $1 million and other financing options. Second, the bill extends eight tax cuts to encourage companies to make new investments and expand. These tax cuts will be instrumental for securing the capital needed to make equipment purchases. For example, all new equipment purchases for the first $500,000 can be immediately depreciated in the first year.
There are many additional benefits for small businesses. Capital gains are excluded from taxation. Deductions can be taken for health insurance expenses and cell phone usage. Companies can have tax credits forwarded on their income tax forms for up to five years. Additionally, the fines for errors in reporting certain tax transactions are more limited.
This new initiative of President Obama’s has similar elements to the Proindustria law implemented by the Dominican authorities three years ago. By promoting investment and industrial upgrading via the granting of tax reductions and resources to provide financing, small businesses are able to continue to exist and thrive. Due to the deteriorating international [economic] environment, Proindustria has the potential to play a leading role in the development of the manufacturing sectors by working with key government institutions. Just as the U.S. authorities are expanding their support to the manufacturing sectors in its country, we must also continue to support our own.