SBA business update – part 4 (Affordable Care Act)

SBAI received this information from the SBA via a friend (Sam Beloff with the SBDC) regarding SBA’s help for small businesses on how to provide health insurance coverage to employees.  I thought it was good info, so I want to pass it on to you.

SUBJECT: One Page Form for Health Care Tax Credit for Small Businesses

December 2, 2010

Dear Small Business Owner,

As I’ve traveled the country this year, I have heard from many of you who are looking forward to the new tax credits, health insurance exchanges, and other tools that will help you provide health insurance coverage to your employees as a result of the Affordable Care Act.

The most immediate benefit of the new law is a tax credit that will help America’s smallest employers and nonprofit organizations (less than 25 full-time equivalent employees with average annual wages below $50,000) who have been hit hardest by premium increases in recent years.  Today, I’m pleased to announce that the Administration is releasing a one-page form and instructions (available at http://www.irs.gov/newsroom/article/0,,id=231928,00.html?portlet=7) on how to claim this credit for the 2010 tax year.   In addition, new guidance released today answers questions that many of you have asked related to: your current contribution arrangements, eligibility for certain religious institutions, and participation by multiemployer health and welfare plans. In each case, the Administration has worked to ensure that a broad range of small businesses can qualify.

These credits are available for tax years 2010 through 2013 and for any two years after that.  Through 2013, the maximum tax credit is 35 percent of premiums paid by small employers and 25 percent for eligible tax-exempt organizations.  Beginning in 2014, those levels increase to 50 percent and 35 percent, respectively.  Importantly, these credits are just one of many benefits in the Affordable Care Act.  Most notably, in 2014, firms with up to 100 workers will be able to pool their buying power and reduce their administrative costs by purchasing coverage through a health insurance exchange.

Finally, the new law strengthens America’s entrepreneurial spirit, overall.  For example, it outlaws discrimination against those with pre-existing conditions, giving more Americans the ability to break out of “job lock” and start their own companies.  The new law also prohibits insurance companies from dramatically increasing premiums for a small business just because one worker gets sick.

Overall, the Affordable Care Act is a critical tool that will help millions of small business owners provide health insurance to people who you often consider to be members of your extended family – your employees.  As a nation, we owe you nothing less as you work to grow, create jobs, and lead us toward full economic recovery.

Warm regards,

Karen Mills

SBA Administrator

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SBA business programs update – part 2 (notes)

SBAThis is the second post in a series.  Will Bowdish, a Lending Officer with the US Small Business Administration, made a presentation to investors in Springfield and Clark County’s economic development (through the CIC) as well as the CIC board.

Here are some of the more interesting comments he made (read yesterday’s post and/or review the SBA programs to get more information on the programs):

• The 7a program can guarantee (starting on 1/1/2011) 85% up to $150,000 and 75% over that.

• Two of the “delegated” products of the SBA are the Preferred Lender and SBA Express programs.  With the Preferred Lender program, you have to use the SBA forms and follow the SBA rules, but you have the authority to approve the loan subject to final SBA approval.  With the SBA Express program, which came out about 10 years ago, you can use your own approval system (as long as you document it in the file).  For banks like Huntington and PNC, when encountering a business loan under $100,000, would include the ability to do the program through the credit card application.  The SBA Express is a 50% guarantee up to a maximum of $1 million, which will drop back to $350,000 next year unless the current policy is extended.

• The Community Express program is not likely to continue.

• The Patriot Express program is for vets and their families and can provide a guarantee of up to 85%, for up to $500,000.

• For the 504 program, the federal government requires that the deal cannot be done conventionally.  Oftentimes, though, there is a collateral shortfall that makes a private bank unwilling to do the deal without some help.

• Refinancing is now possible, if it is a total refinance.

• With an SBA 504, the bank participant has to be willing to do at least ten years on a term.  The upfront origination fee will start back again beginning the first of the year.  It is 50 basis points, and the lenders need to be cognizant of this.  Regarding equity requirements, ten percent is not a hard, fixed requirement.  There are cases where 100% might be possible – an existing profitable manufacturer looking to buy new equipment, where an equity injection would require them to go get additional working capital.

• With 504 job requirements, this is an area that has  some flexibility.  The standard rule is one job for every $65,000 lent, unless it’s a manufacturer, and then it’s one job per $100,000. One example of an exception is the rural rule, which says that if the deal is taking place in a rural area, then you don’t need to worry about job creation.

• With respect to signing personally, the rule is still that anyone with over 20% ownership has to sign personally.  There was some discussion about to what extent you go after getting mortgages on the house – psychological benefit versus not collecting the full amount of the loan on the back end.

• Information required is spelled out in their “Form 4.”

• It was also stressed that the SBA closes when  the business has obtained their occupancy permit.  In other words, a bank using the program may need to have temporary financing in place before this can take place, say a 120-day note.

SBA business programs update – part 1 (Jobs Act 2010)

SBAWill Bowdish, a Lending Officer with the US Small Business Administration, made a presentation to investors in Springfield and Clark County’s economic development (through the CIC) as well as the CIC board.  Below is a copy of his PowerPoint presentation.  It was very instructive.

Tomorrow, I’ll share my notes from the meeting.

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