The National Small Business Association’s (NSBA) Mid-Year Economic Report, released today, indicates that small businesses are struggling despite stimulus help, with decreases in three key indicators of a healthy business – revenues, profits and employee size.  Despite Small Business Administration’s “ARC” loan program (America’s Capital Recovery) and expanded 7(a) loan program, small businesses say that access to capital is still one of their biggest challenges.  80% of businesses surveyed in July 2009 say they have been negatively impacted by the credit crunch, up from 69% in December 2008.  The NSBA report shows that only three percent of small businesses have seen a positive impact from the stimulus bill.  Of that three percent, 72% say the positive impact has come from customers spending more, with only 14% reporting a positive impact as a result of access to lending programs.   The full report can be found here.

The stimulus package expanded consumer tax incentives for homeowners who make energy efficient home improvements and for individuals and businesses that purchase or lease hybrid vehicles.  These consumer tax benefits, initially introduced in the Energy Policy Act of 2005 (EPACT), have been extended through 2010.  In addition, the total available tax credit has been tripled (from $500 to $1,500), the available tax credit has been increased to 30 percent of the cost of each qualified energy efficiency improvement, and the cap on geothermal heat pumps and solar water heaters has been removed.   In addition to federal tax incentives, consumers may also be eligible for state or utility sponsored rebates and state tax incentives.  More information can be found at the United States Department of Energy and the Alliance to Save Energy.

Are incandescents out the door?

CFLs, LEDs, incadescents… there are so many options out there for lightbulbs these days, and each has its own advantages and drawbacks. Incandescent bulbs are the traditional lightbulbs that we all grew up with, and have been commercially popular since the days of Thomas Edison. However, incandescent bulbs emit not only light but also heat, making them extraordinarily energy-inefficient. In the United States, sales of these bulbs will be banned by 2012, given the number of handy alternatives.

Compact fluorescent lightbulbs, or CFLs, are becoming increasingly popular amongst consumers, especially as the quality of the light they give off is improved. According to the U.S. EPA Energy Star program, CFLs use about 75% less energy than incandescents, and last ten times as long. You can pick up a 6-pack for about $15, which is more than the initial price of incandescents – but CFLs pay for themselves within about six months. An environmental disadvantage of CFLs is their mercury content – many states require that CFLs be properly disposed of or recycled, and Maine even passed a law recently that requires CFL manufacturers to pay for CFL recycling. An aesthetic disadvantage of CFLs is their lack of compatibility with most dimming circuitry – however, this is sure to change in coming years.

LEDs, or light-emitting diodes, are electronic lights that have frequently used in cell phones and computers. Packing twice the efficiency of CFLs (and with fully dimmable capabilities), they are also considerably more expensive than CFLs or incandescents – as in, $120 per bulb. Nonetheless, they are increasingly being used in large-scale lighting such as streetlights (the stimulus package is helping cities with the up-front cost), and even in the overhead lights at Buckingham Palace.

And what of our old friend the inefficient incandescent? Well, it may be making something of a comeback – scientists at the University of Rochester are using lasers to make incandescents much more energy-efficient. They still aren’t as efficient as CFLs, but the new research is encouraging to those who miss the traditional feel of these much-maligned bulbs. Now that’s the type of innovation that would make Thomas Edison proud.

Unpacking the Stimulus Package, Vol. 3

The Stimulus Package created, extended or expanded several business tax deductions and credits to help small businesses struggling as a result of the economic downturn.  As some of these tax breaks are only available this year, companies have just a few months to take action.  Here are some of the key provisions:

• If your business had a net operating loss (NOL) in 2008, you can carry the loss back over five years instead of the usual two years. This means you can get a refund of taxes you paid in prior years by submitting an Application for Tentative Refund.  The IRS will generally process these in ninety days.
• You can deduct up to $250,000 worth of new and used machinery, equipment, vehicles, furniture and other qualifying property that your small business purchases during 2008 and 2009.  Without the new law, the limit of this Section 179 deduction would have dropped to $133,000.  This deduction can be claimed on your 2009 tax return on Form 4562.
• In addition to the $250,000 Section 179 deduction, your business can deduct 50% of the remaining cost of most new (not used) assets that were purchased Jan 1, 2008 through Dec 31, 2009.  This is referred to as “bonus depreciation”, and can be claimed on your 2009 tax return.
• The new bonus depreciation also increases the first-year depreciation deduction of new vehicles for your business by $8,000.  The increase does not apply to large SUVs and pickups.  For new cars, the estimated maximum first-year depreciation deduction for 2009 is now $10,960, and the estimated maximum first-year deduction for light trucks is $11,060.
• Finally, many individual small business taxpayers may be able to defer, until the end of the year, paying a larger part of their 2009 tax obligations.  If your total income is less than $500,000 and 50% of it is from a small business, you only have to pay 90% of your estimated taxes in 2009.

Click here for step-by-step instructions on how to take advantage of each of these tax breaks.

Unpacking the Stimulus Package, Vol.2

Small businesses hoping to take advantage of the SBA’s America’s Recovery Capital Loan Program (“ARC”) should be proactive in securing their place in the program, which only allows for about 10,000 loans nationwide, or an average of 200 per state. The SBA anticipates a high demand for these loans, so businesses looking to apply should make sure they have all of their paperwork and supporting documentation ready by the June 15^th launch of the program.

Business owners should first verify that their bank participates in the ARC program. For a list of banks that make SBA loans, click here. Each bank will set its own procedures and timeline for issuing loans. It is likely that applicants will need to provide financial statements (and/or tax returns) for the past two years – showing the business was profitable before the economic downturn and can become profitable again. In general, the business must have been profitable in at least one of the last 3 years to be eligible for the ARC program.

Applicants will also need to provide information about the loans that they intend to pay with ARC funds. Each lender will be limited to 50 loans per week. If a bank makes less than 50 loans, they can carry the unused allocation over to other weeks, but lenders will be capped at a maximum of 1,000 loans through the program’s duration. The ARC loan program is scheduled to run through Sept. 30, 2010, or until its funding runs out, whichever comes first.  Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds.  Repayment can extend up to five years.