Tuesday, July 21, 2009

Stimulus a non event with small to midsize companies!

After months of clients asking me where they could get stimulus payments that the big banks and large companies are getting I resolved to telling most clients that there wasn't much out there for small companies, except for maybe bridge loans (ARC loans) that had to be paid back and also the the Section 179 maximum being increased, all the while knowing that my clients needed a help just as much as the big firms and maybe more. See the following article I pulled from Reuters (my commentary is in red):

Small business seeks help in U.S. economic storm

NEW YORK/WASHINGTON (Reuters) - U.S. small businesses say they feel slighted by the Obama administration and efforts to shore up the economy, with large companies taking much of the government's attention and stimulus cash.

The government decision last week against bailing out small business lender CIT Group raised fears of thousands of companies left without funding for day-to-day operations, and the lack of support showed big corporations can get bailout cash but small business interests are less pressing, many say.

With only some potential relief buried in the healthcare reform proposals in Congress, whose support is waining, small businesses feel pushed aside in the stimulus and recovery efforts.

"There has been nothing really in all the stimulus package that has really helped small business in general," said Kelli Glasser, president of Exhibit Concepts in Dayton, Ohio, whose 87 employees build trade show and museum exhibits.

"Most of the help has been in the form of supporting loans, but we're not looking for loans right now," she said. "We're not looking to heavily invest in equipment. We're just trying to keep our doors open."

Small business is not that small, representing 99.7 percent of all U.S. employer firms.

The U.S. Small Business Administration got $730 million this year to recharge the small business lending market, nearly doubling its budget. However, some say the package was not well structured and dwarfed by the $180 billion the government committed to save insurer American International Group.


"Only $730 million going to the SBA didn't really help the small business owners," said James Tracy, president of America's Best Companies in Illinois, which represents small businesses nationwide.

"Small business owners are having a tough time financing themselves today because I believe that the stimulus plan should have allowed for more loans to small business owners," he said.

A $15 billion administration plan to buy small business loans for resale on the secondary lending market has not taken effect, in part because market activity picked up after the plan was announced in March, the administration says.

The Obama administration wants small businesses to come out ahead in the reform effort, said Melody Barnes, a domestic policy advisor at the White House. They just have a funny way of showing it!

"We absolutely want to make sure that small business owners and small business can continue to thrive," she said in an interview with Reuters Television. And what are they doing we continue to ask, seems like a lot of talking out of both sides of the mouth? It is like saying to your kids we want you to get a college education but you pay for college yourself???

But applying for a small business loan can be more trouble than it's worth, said Joe Olivo, owner of Perfect Printing in Moorestown, New Jersey, who said his bank advised against it.

"The paperwork was so onerous that my bank told me it was not worth my effort to try and get that money," Olivo said.

To further the decisions evident in Washington, I then read with concern that the New GM, after having the lions share of its fixed debt erased in bankruptcy, was getting the tax advantage of transferring to itself an old $87 billion Net Operating Loss generated by the old GM. Fact is that NOL's can only be transfered if 51% of the former owners of the old company are owners of the new company. The old GM shareholders comprise 1% of the new company. Government has the lions share and the unions now somehow control a large stake of stock also. Folks this all boils down to the New GM having to make $87 and 1 dollar before it pays any taxes on that $1! The first $87 billion in profit is tax free! Where is the fairness in that?