Time will tell if act helps small businesses

In spite of the buzz, don't expect a torrent of money from the Small Business Jobs and Credit Act signed last week by President Barack Obama. On the other hand, CPA Greg Dowell says there are some important and timely small business tax credits in the legislation.

Accordingly, your first conversation about the new legislation probably should be with your accountant. Save the banker for later.

The legislation's intent is to pump up to $30 billion in capital into smaller banks that in turn would leverage the funds to as much as $300 billion in credit to small businesses, whose subsequent growth would then generate more jobs. But, says Mike Moebs, an economist who is a longtime banking consultant and CEO of Moebs $ervices, Inc., Lake Bluff, “There's no need for small businesses to get excited. It will be a long time before money flows.

For one thing, interested banks must apply and qualify for the program, which will take time. In addition, implementing regulations are yet to be written by federal banking regulators and the U.S. Department of the Treasury, which is overseeing the program.

Many bankers, therefore, are likely to take Christopher Woelffer's approach. Woelffer, whose STC Capital Bank in St. Charles is as locally focused as any institution, is “evaluating the legislation. We have to figure out how to make it work.

Risk is part of what bank executives are figuring out. “If you don't have any credit, any collateral or any cash flow, why would a bank lend you money? asks Harriet Parker, executive director of the Illinois Small Business Development Center at Waubonsee Community College, Aurora.

Moebs, “Lenders who are street smart and know the small business market know these loans are riskier and costly (to obtain and administer).

That makes Dowell's natural focus on the legislation's tax benefits even more pertinent. Dowell, managing partner at Bass, Solomon & Dowell, LLP, a Palatine-based CPA firm, lists the top tax benefits in this order:

Ÿ The legislation doubles, to $500,000, the amount of purchased assets a small business can write-off in 2010 and 2011. “A $10 million business buying a $400,000 piece of equipment will be able to write if off this year rather than spread the expense over several years, Dowell explains.

Ÿ The legislation provides a similar benefit to building owners by allowing them to treat up to $250,000 of qualified leasehold improvements as expensing-eligible property. Restaurant and retail property could qualify, Dowell says.

Ÿ The amount of first-year depreciation a business can claim on a new automobile soars by $8,000, to $11,060 this year. The 2010 limit for light trucks and vans will be $11,160.

Ÿ The deduction for a new business' startup expenses doubles for tax years beginning in 2010, from $5,000 to $10,000.

Ÿ Questions, comments to Jim Kendall, JKendall@ 121MarketingResources.com.