WASHINGTON — Small businesses stymied by a lack of credit should get lots of help soon, as the House of Representatives on Thursday passed legislation to provide billions in aid and sent it to President Barack Obama. The vote was 237-187.
Obama, who said he intended to sign it into law Monday, chided Republicans for “months of partisan obstruction and needless delay” and called the measure a “common-sense” plan for the economy.
“The small business jobs bill passed today will help provide loans and cut taxes for millions of small business owners without adding a dime to our nation’s deficit, “ the president said in a statement. “I’m grateful that Democrats and a few Republicans came together to support this common-sense plan to put Americans back to work.”
Many Republicans, though, saw the measure differently. “It’s one more bailout, and the American people know you can’t bail and spend your way to prosperity,” said House Republican Conference Chairman Mike Pence of Indiana.
The bill, which the Senate passed earlier this month, will have the Treasury Department administer a $30 billion small business lending fund through small, healthy community banks.
Such banks, whose niche is small business lending, would submit small business plans to their bank regulators. The Treasury Department, consulting with those regulators, then could approve a capital infusion.
Because the measure is a top priority of the White House and congressional Democrats, bank experts expect the money to begin flowing fairly quickly.
“Having an additional capital source available can increase the comfort level for greater lending by banks around the country,” said Paul Merski, a senior vice president and the chief economist at the Independent Community Bankers of America, which represents community banks.
The bill also will make $12 billion in tax relief available for small business. Among the changes: giving investors a 100 percent exclusion from capital gains taxes on small business investments, allowing taxpayers to write off 50 percent of the cost of new equipment immediately and doubling the current tax deduction to $10,000 for start-up expenditures this year and next.
Small businesses generally are defined as those that employ fewer than 500 people, though there's no widely accepted definition. Small business can vary from law firms to entrepreneurs to small manufacturers and others.
The bill is intended to help people such as Tammy Rostov, who runs Rostov’s Coffee and Tea, “Richmond, VA’s oldest and longest established coffee roaster.” The company was started 31 years ago, and it employs four full-time and six part-time workers.
When the economy soured three years ago, Rostov began expanding by selling more wholesale product to restaurants, churches, farmers markets and others.
She needed a way to deliver the goods, and had her eye on a Ford Transit Connect van that sold for about $22,000. Her credit was terrific. She spent about two and a half weeks filling out all the paperwork for a bank loan _ and then found no one would give her one.
So Rostov makes the rounds in her 2002 Toyota Corolla. The small business bill, she hopes, will make local banks more willing to make such loans.
“I’m really excited,” she said.
Rostov’s plight isn't uncommon, experts said.
Since the recession began, lending to small business has been scant.
The Democratic staff of Congress’ Joint Economic Committee found earlier this month that hiring at small firms declined last year and in the early part of this year “as a result of tight lending standards facing small business.”Using data from the Bureau of Labor Statistics and the Federal Deposit Insurance Corp., the study found that the number of loans made to small business peaked in the second quarter of 2008 at 27.2 million, but has fallen since then by more than 4.8 million.
Small business groups and independent analysts warn that the bill isn't going to suddenly transform the economy, though.
“It’s going to help at the marginsbut I think it dances around some of the more significant issues small businesses have raised,” said Brian Bethune, the chief U.S. financial economist at IHS Global Insight in Lexington, Mass.
Among those issues: creating more demand for products. The National Federation of Independent Business, a leading small business trade group, has argued that it’s important to extend all the Bush-era tax cuts as a way of getting more money into consumers’ pockets, money they then could spend on small businesses’ goods.
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