Entrepreneurial

After spending most of his first year in office focused on Wall Street, President Obama tried to reconnect with disenchanted Main Street voters in his first State of the Union address.

Mentioning “small business” at least 13 times in his speech (get the full text here), the president unveiled a two-pronged attack to get America’s “true engine of job creation” back on its feet and hiring again. Obama pledged to redistribute $30 billion in repaid bailout money from big banks to smaller community banks “to give small businesses the credit they need to stay afloat.” He also promised to eliminate all capital gains taxes on small business investment, to give tax breaks for small businesses who raise wages or hire more workers, and for those who invest in new plants and equipment.

Nydia Velazquez, the chairwoman of the House Committee on Small Business, said the president clarified the “central role small businesses play in our economy,” and added the tax initiatives “would spark growth by helping firms reinvest in their facilities.”

Washington, DC-based tax policy expert Clint Stretch, of Deloitte Tax LLP, said the president’s tax incentives would address the “cashflow issues” facing small businesses and added the tax credit on the purchase of new equipment is especially significant for companies looking to expand as the economy recovers. “If you’re looking at a recovery, you’re going to want to start updating your equipment or start bringing in new equipment in as you hire workers back. The quicker they can write it off for tax, the quicker Uncle Sam is picking up the bill.”

Stretch said Obama is on the right track by combining tax breaks with a program to increase small business lending.”At the end of the day if I’m going to go out and buy $250,000 worth of equipment for my little factory, the fact that the government is going to allow me to write most of that off so that I’m going to save 35 cents on the dollar, I’ve still got to finance the other piece.”

The healthcare debate is just starting to heat up for small business owners. FindLaw, a Thomson Reuters sister publication, has a nice blog post titled “Healthcare reform & small business: 3 bills explained,” in which they break down Obama’s “Affordable Health Care for American Act” legislation, that was approved by a slim majority of 220-215 by the House over the weekend.

In general the reaction by small business to the Obama legislation has been largely negative, with the most damning attacks coming from small business lobby groups, the National Federation of Independent Business and the National Small Business Association. In a Wall Street Journal story, titled “Small Business Crunches Numbers“, NFIB senior VP Susan Eckerly said the bill’s “punitive employer mandates and atrocious new taxes will force small business owners to eliminate jobs and freeze expansion plans at a time when our nation’s economy needs small business to thrive.”

Denver Business Journal reporter Kent Hoover examined the bill from a small business perspective in his article “How small business fares under health-reform bill“. In it Hoover said that while the majority of small businesses oppose the legislation, some support it because “they think the insurance market needs the bill’s reforms, such as barring insurance companies from denying coverage based on pre-existing conditions,” wrote Hoover, adding: “Plus, they think providing a government-run option in new health insurance exchanges would bring needed competition to the insurance market.”

(Note: The Recovery Act did not directly assign $15.5 billion in funds to the SBA, but $730 million that has so far supported $13.4 billion in SBA-backed loans to small businesses, according to the SBA.)

After having watched Wall Street get a near $1 trillion bailout, America’s reeling small businesses will get their own relief package from Uncle Sam, in the form of the “Small Business Financing and Investment Act” that was passed by the House of Representatives last night by a 389-to-32 majority vote.

The new legislation, which increases the Small Business Administration’s lending budget by $44 billion, was announced on a day when President Obama met with small business owners to discuss his proposals to improve their access to credit in order to boost job creation. The bill will still have to be approved by the Senate and there is no timetable for when the money will get into the hands of small business owners.

Last year was a record for small businesses, which scooped up more than $93 billion in federal contracts, a $10 billion jump from a year earlier, according to a report by the U.S. Small Business Administration (SBA).

It’s good news to be sure, but critics are already grumbling that the government only allotted 21.5 percent of its promised 23 percent target to small businesses for fiscal 2008.

Key among their complaints:

* High costs: Small businesses often opt out of the running for government contracts for fear that they can’t absorb the proposal costs that can run as high as $25,000 to $500,000, The Washington Post reports.