Both the Senate and U.S. House of Representatives have passed legislation creating a $30 billion lending fund that will be distributed to regional banks, which will in turn lend to small businesses.
The “Small Business Jobs and Credit Act of 2010” passed by a 61-38 margin in the senate and a margin of 237-187 in the house. The bill, which is now headed to the white house for President Obama’s approval, would also authorize $12 billion in tax cuts for small businesses. Advocates for the lending bill believe it will have a large impact on the U.S. economy, as small businesses employ approximately half of all Americans and account for almost 60% of gross domestic product, the Automotive Service Association stated in a release.
“For months, our member companies and small businesses across the country have struggled to gain access to capital and credit,” said Chris Kersting, president and CEO of SEMA, which applauded signing the bill into law. “In many cases, tougher credit access has nothing to do with the SEMA member’s business and everything to do with the bank’s difficulties in meeting current lending to capital ratio requirements. Under this new law, funding for loans will be infused into community banks nationwide that are positioned to lend, helping small businesses to become an engine for economic growth and recovery.”
The law includes an extension of the bonus depreciation program, which allows businesses to write off 50% of the cost of newly purchased depreciable property. It also expands and extends the Section 179 program, allowing companies to write off up to $500,000 in capital expenditures in tax years 2010 and 2011, double the current limit for 2010.
“While SEMA appreciates the enactment of this legislation, we now urge bank regulators to quickly implement the lending program,” said Kersting. “It is time to get basic working credit available and help small businesses to become an engine of economic recovery.”
The U.S. Department of Treasury will be responsible for the small business lending fund. Some of the key provisions of the bill include:
• Requiring an applicant institution to provide information to the appropriate federal banking agency, as well as a small business lending plan, outlining how its business strategy and operating goals would allow it to address the needs of small businesses in the areas it serves.
• Setting forth financial incentives for small business lending by such institutions.
• Requiring capital investment recipients to provide outreach and advertising in the appropriate language of the applicant pool using media outlets that target organizations, trade associations and individuals who represent or work within or are members of minority communities.
• Establishing the Small Business Lending Fund Program as separate and distinct from TARP.
• Directing the secretary to study and report to Congress on the number of women-owned and minority-owned businesses that receive assistance as a result of the program.
