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Stimulus Package Includes Incentives For Small Business
Today, President Obama will sign the American Recovery and Investment Act of 2009. I thought that it might be helpful to state what is in this Act for small business. Here is a run-down of some of the larger items:
* $720 million to help support a number of programs at the U.S. Small Business Administration (primarily reducing fees on 7(a) guaranteed loan guarantees);
* $400 million in support for economic development and entrepreneurship, particularly in distressed rural, urban, and low-income communities; and
* tax incentives for small businesses, including a continuation of section 179 expensing up to $250,000 on new capital investments, loss carry back for up to five years, a delay in the three percent withholding tax for businesses having government contracts, and a reduced capital gains tax for small business investors holding stock for five years or more. Small firms can take advantage of other parts of the stimulus package, as well. For instance, there are major investments in infrastructure, broadband, green technologies, home winterization incentives, etc., which can benefit large and small businesses alike.
Here are some dollar figures for these expenditures:
* $27.5 billion for road construction projects;
* $26 billion to local school districts to enable them to have “21st century classrooms”;
* $7.2 billion for broadband access to underserved areas;
* $15 billion for scientific research;
* $19 billion for health information technology investments;
* $30 billion for improving the nation’s electricity grid and other energy improvements;
* $5 billion to help weatherize homes for low-and moderate-income homeowners.
Hopefully, small businesses will be able to capitalize on the contracting opportunities just mentioned. In addition, to the extent that the economy starts to improve, small businesses, which account for half of our real GDP and tend to recover quicker from recessions than their larger counterparts, will see indirect benefits from passage of this bill, as well. For more information, refer to the sources below.
By Kathryn Tobias, SBA office of Advocacy, February 17, 2009
Sources: Speaker of the House, House Committee on Appropriations, House Committee on Rules
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Entrepreneurs Thrive During Bad Times
If you listen to the analysts and study the markets, they will tell you that recession is upon us. They will tell you that the housing market has crashed and the global markets will let you know that our currency is daily losing its value.
However, in this economic turmoil gold and silver are thriving. New highs are being reached on almost a daily basis. If you have invested in precious metals than this is your time.
Entrepreneurs are like precious metals they know how to thrive in bad times. Unstable times bring incredible opportunities. Capitalizing on these opportunities separate you from the doomsayers. It also provides income opportunities that may not have been there in the past.For example, if you are in the real estate business you know it’s not your time to sell, but it’s prime season if you are buying and adding to your real estate empire. The mortgage crunch, which has led to record numbers of foreclosures, has been a great benefit to you.
Businesses of all types are using this time to generate new business within all this negative talk. You are seeing businesses offer creative pricing and inexpensive luxuries. With these types of tactics you’re seeing businesses move around their slower moving competitors.
By Business Pundit, David, on April 10, 2008_________________________
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Starting a Business in a Downturn
It might go against your instincts, but starting a business in a soft economy has advantages.
MyBizHomepage founder Peter Justen explains:
What are some of advantages of starting up in a downturn?
The real estate market is slowing in most regions of the country, which allows for small businesses to get retail, office, and warehouse space at reduced costs. It's also easier to negotiate for landlord build-outs, signage, and parking.
When it comes to setting up a business, you can find great deals on nearly new furniture, copiers, fax machines, computers, and office fixtures at auctions where companies who ramped up too fast are selling for a fraction of what they paid. We're growing and we just got new office space. We bought furniture at auction for about 10 cent on the dollar.
Unemployment rates continue to rise. Is this a good time to attract employees?
I think there's a flight to safety, and there's a certain comfort level with small companies. There isn't the job security in the big companies that there once was. In tough times, businesses lay off good employees who are willing to accept pay cuts for employment with a company that offers other benefits, like a shorter commute, an improved lifestyle, or more interesting work. There used to be a stigma about going to a small company, then it [had] cachet during the technology boom, and then it became a stigma again, and now I think it's more attractive.
Read More of Karen E. Klein, Business week .
Industries That Thrive On Recession - SIN INDUSTRIES
In bad times, the bad do well. Although it seems a little counterintuitive, people patronize the sin industry more during a recession. In good times, these same people might have bought new shoes, a new stereo or other, bigger-ticket items. In bad times, however, the desire for comforts doesn't leave, it simply scales down. People will pass on the stereo, but a nightly glass of wine, a pack of cigarettes or a chocolate bar are small expenditures that help hold back the general malaise that comes with being tight on cash.
Be warned, though - not all sin businesses prosper in a recession. Gambling, with the exception of the truly troubled gamblers, becomes an extravagance and generally declines during recessions. In fact, casinos do their best trade when the economy is roaring and everyone feels lucky. The most prosperous businesses in this industry are the purveyors of small pleasures that can be bought at a gas station or convenience store.
Read More of Andrew Beattie, Investopedia
To quote The Wall Street Journal, ". . . companies that maintain or increase their advertising spending during recessions get ahead. A less crowded field allows messages to be seen more clearly, and that increased visibility results in higher sales both during and after a recession."
STRATEGIES: It's a good time to start a business. Really!
OK, you're going to think I'm nuts, but listen up. Because right now is a terrific time to start a new business. Yes, I am very much aware of what's going on in the economy and the stock market. Yes, I know credit is tight, customers are cautious, the equity in your home is plummeting, and your 401(k) is more like a 201(k). Doesn't seem promising for starting a business, does it? But it is.
History bears me out. When times are bad for the economy, it can be a great time to start a business. In fact, 16 of the 30 companies that make up the Dow industrial average were started during a recession or depression. These include Procter & Gamble, Disney, Alcoa, McDonald's, General Electric and Johnson & Johnson.
Let's take a look at the years 1973-1975. At the time, the United States had an unpopular president, was in the midst of the Watergate scandal and was at the tail end of an extremely costly war that had divided the country. Gas prices jumped by nearly 50% in two years. Consumer confidence dropped to an all-time low.
It was a terrible time to start a business, right? Well, here are just a few of the companies started in those awful years of the early 1970's: Supercuts, Chilis, Cablevision, Industrial Light & Magic, Famous Amos cookies, Oakley and, oh, yes, a small company called Microsoft.
Why? What makes it possible for new companies to thrive when times are so bad? Why can it be a good time to launch out on your own?
First, there's a lower "opportunity cost." In good times, if you already have a safe job or the company down the street is hiring, starting your own business means giving up the opportunity of a good job. There's a cost to that: a salary, health insurance, other benefits.
Of course, if you have a good job or are offered a good job, I'm not telling you to quit to start your business now. But what happens if you lose your job or you're just finishing school and no one's hiring? There's little opportunity cost in hanging up your own shingle rather than staying home and watching a rerun of "The Simpsons" or Oprah.
OK, but that might just mean creating some income for yourself until you find a job. What actually makes it a good time to start the next Intuit, Whole Foods, J.Crew, Costco, or Applebee's (all launched during recessions)?
Read More of Rhonda Abrams, USA TODAY
REAL ESTATE TRENDS: Buying Advantages in an Economic Downturn
It is often concerning when the cost of living rises, and you bear witness to stock market crashes. In fact, many believe that if the economy is declining then so too should their spending habits, especially in relation to big ticket items such as real estate and property investment.
This belief is usually attributed to the fear of job loss and reduced employment security, and many individuals think that they are better off selling their real estate acquisitions and renting, rather than have a mortgage during such financially tough times. In addition to this, those people who were considering making a real estate purchase are often deterred by the fear that their investment may decrease in value, just as the stock market has. However, the truth of the matter is quite the opposite, and there is no reason why you should sell your home and rent, or not buy that house that you have had your eye on, because there honestly has never been a better time to invest in real estate.
Why? I hear you ask. Well let me explain. Here are some of the advantages of buying a home 'during an economic decline':
1) Solid Investment - Real estate represents a solid investment in an economic decline as the housing market is not as volatile as the stock market, and represents a far lower risk. This is because real estate is a more expensive investment with not as high a turnover as the stock exchange.
2) Less of a Housing Demand - During an economic decline there is less of a demand on homes, making the real estate market buyer-centric rather than seller-centric. This means that buying real estate now will give you greater negotiation power, and you possibly may be able to buy a larger home for less.
3) House Prices are Consistent - While many people will warn you that your home value will decline as they did during the great depression; it is highly unlikely that house prices will remain depressed. In fact, in the past 30 years of American realty history there has never been many consecutive years of reduced home values. And, if homes values are depressed they always recover and gain in momentum to be an asset rather than a liability.
4) Take the Guesswork out of Home Buying - Make smart, educated home purchases, instead of buying a luxury home or a million dollar mansion buy conservatively but modestly. This way you home should gain in value, especially if it is priced in the mid-to-lower price ranges when you purchase it.
Overall, the key to any investment is buying wisely and always be financially focused rather than emotionally, this way you will always find yourself in a commanding position and able to get the most for your dollar. A new home at a great price!
By Jeff Adolph, Sanctuary Real Estate Inc.
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