Strengthening the Economy for Small Businesses and Creating Jobs
The President’s Fiscal Year 2014 Budget demonstrates that we can make critical investments to strengthen the middle class, create jobs, and grow the economy while continuing to cut the deficit in a balanced way.
The President believes we must invest in the true engine of America’s economic growth – a rising and thriving middle class. He is focused on addressing three fundamental questions: How do we attract more jobs to our shores? How do we equip our people with the skills needed to do the jobs of the 21st Century? How do we make sure hard work leads to a decent living? The Budget presents the President’s plan to address each of these questions.
To make America once again a magnet for jobs, the Budget invests in high-tech manufacturing and innovation, clean energy, and infrastructure, while cutting red tape to help businesses grow. To give workers the skills they need to compete in the global economy, it invests in education from pre-school to job training. To ensure hard work is rewarded, it raises the minimum wage to $9 an hour so a hard day’s work pays more.
The Budget does all of these things as part of a comprehensive plan that reduces the deficit and puts the Nation on a sound fiscal course. Every new initiative in the plan is fully paid for, so they do not add a single dime to the deficit. The Budget also incorporates the President’s compromise offer to House Speaker Boehner to achieve another $1.8 trillion in deficit reduction in a balanced way. When combined with the deficit reduction already achieved, this will allow us to exceed the goal of $4 trillion in deficit reduction, while growing the economy and strengthening the middle class. By including this compromise proposal in the Budget, the President is demonstrating his willingness to make tough choices and his seriousness about finding common ground to further reduce the deficit.
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A thriving middle class has always been America’s engine of economic growth. Reigniting that engine is the defining challenge of our time. To help meet this challenge we must ensure that we strengthen our small businesses and encourage entrepreneurship. America’s 28 million small businesses currently employ over 60 million Americans, which is half of private sector non-farm employment, and over the last two decades have been responsible for creating two out of every three net new jobs.
In his State of the Union Address, the President put forward a plan to help entrepreneurs and small business owners expand and create jobs through initiatives on tax reform, manufacturing, clean energy, immigration, and skills and education. The President’s plan will strengthen America’s small businesses and entrepreneurs by making America a magnet for jobs, equipping every American with the skills they need to do those jobs, and ensuring hard work leads to a decent living. When combined with the President’s plan for balanced deficit reduction, none of these proposals will add a dime to the deficit.
To strengthen the economy for small businesses and create jobs, the 2014 Budget will:
Continue to Expand Capital Access for Small Businesses and Entrepreneurs. The Administration has already taken unprecedented action to increase capital access for small businesses and, to build on this success, the Budget will strengthen existing programs and support several new initiatives, including: creating a single, streamlined application interface for all Small Business Administration (SBA) Section 7(a) loan guarantees; waiving fees for small dollar SBA loans where the market gap is widest; increasing the SBIC authority from $3 billion to $4 billion; and expanding refinancing opportunities in SBA’s 504 program.
Strengthening SBA’s Flagship Credit Programs. The Budget supports $17.5 billion in loan guarantees through SBA’s flagship Section 7(a) program and $7.5 billion in its Section 504 program, which provides long-term financing for fixed assets. In addition, the Budget provides $25 million in microloans of under $50,000 for new and growing businesses.
Expanding Refinancing Opportunities for Small Businesses. Alongside the President’s plan to help responsible homeowners refinance their mortgages, the President’s Budget reauthorizes a temporary Section 504 refinancing program for small businesses. This program helps small business owners lock-in lower interest rates for their commercial mortgage debts and take equity out to invest in their businesses, which could help up to 10,000 small businesses. SBA’s 504 Refinancing program was originally authorized in 2010 and expired in September 2012, after helping 2,700 business owners refinance a total of $2.5 billion in loans.
Creating a Single, Streamlined Application for All SBA 7(a) Loan Products through SBA ONE. The President’s Budget provides additional resources to create a single common loan application for all of SBA’s 7(a) loans, which will be called SBA ONE. The program will significantly reduce the time and cost for lenders to process an SBA loan and encourage lenders to make more SBA loans, which will open more points of credit access for small businesses.
Waiving Fees for Small Dollar SBA Loans. The American Recovery and Reinvestment Act temporarily reduced fees for SBA’s loan products, which helped bring back 1,000+ lenders to SBA and increase SBA weekly loan volume by 90%. The President’s Budget proposes waiving fees on loans less than $150,000 because this is where the largest credit gap exists and these loans are particularly important for underserved communities and start-up entrepreneurs. This proposal would go into effect starting in FY14.
Increasing the Small Business Investment Company (SBIC) Authority at No Cost to the Taxpayer. The Budget proposes to increase the authorization of SBA’s Small Business Investment Company program from $3 billion to $4 billion per year, which can be done at no cost to the taxpayer and will ensure that this program can continue to expand access to capital for growing small businesses, with a focus on underrepresented regions and key emerging industries. In 2012, the SBIC program had its third consecutive record breaking year, and more than a third of all small businesses financed were located in low income areas or are owned by minority or female entrepreneurs. SBA will continue to addresses the capital gap many start-ups face between early-stage angel financing and later-stage venture capital financing through the SBIC’s Innovation Fund, which will make available up to $200 million in guaranteed debentures for matching funds in 2014 to investors seeking to support innovative start-ups. In addition, SBA will continue to broaden access to venture capital financing in 2014 by leveraging the SBIC Impact Fund to support $200 million in equity-based impact investments in regions not well served by private financial markets.
Increase Access to Intensive Entrepreneurship Education for Growing Small Businesses. Millions of small business owners with the desire to grow their business have no formal training in areas like accounting and finance and do not have mentors or networks to create strong growth plans to expand their businesses, get access to capital and revenue opportunities, and ultimately create new jobs. Many reside in underserved areas, where these issues are further magnified, even though research suggests that individuals in underserved communities are 50% more likely to become business owners. The Budget includes $40 million for an intensive small business leadership program to help existing small business owners with the desire to grow take their business to the next level. This program will include immersion in core business concepts such as accounting and financing, peer-to-peer review among fellow business owners, tailored mentorship from experienced entrepreneurs, introductions to capital access and revenue opportunities, and culminate in the creation of a targeted growth plan for each business owner with actionable steps to put their learning into practice. The program will be modeled as a public-private partnership that is built in collaboration with existing partner networks and other working public, private sector and non-profit models. The Budget also includes $7 million to invest in intensive entrepreneurship education for veterans and returning service-members. In addition, the Budget includes over $120 million for SBA’s Small Business Development Centers, Women’s Business Centers, and SCORE.
Cut Taxes for Small Businesses Seeking to Grow and Expand. The President is proposing to build on the 18 small business tax cuts he has already signed into law with new tax cuts to encourage growth and investment, including: expanding and making permanent the elimination of taxes on capital gains for key small business investments; expanding and simplifying a tax credit for small businesses that provide health care to their workers; permanently extending increased expensing for small businesses; doubling the amount of start-up expenses entrepreneurs can deduct; and providing a 10 percent tax credit for increases in wage expenses that are due to new hires or higher wages.
Strengthen American Suppliers and Small Manufacturers. The President is taking a number of steps to help America’s suppliers and small manufacturers become more effective at competing for domestic and international business. The Department of Commerce’s Manufacturing Extension Partnership (MEP) provides a range of business services to strengthen our small manufacturers. The President’s Budget will propose an increase of $25 million for MEP to develop Manufacturing Technology Acceleration Centers (MTACs), which will be industry-specific centers that can serve as a coordination point within key supply chains. In addition, the Small Business Administration is ramping up its American Supplier Initiative (ASI), a Federal government-wide initiative to increase the number of small businesses in large corporate supply chains and the Federal government’s supply chain. Through this initiative, SBA seeks to address the challenges small businesses face as they seek to break into the federal and commercial supply chain, including access to capital and business training.
Help Small Businesses and Entrepreneurs Connect to Regional Innovation Clusters. The Budget includes $5 million each for SBA’s growth accelerators and Regional Innovation Clusters programs. Start-up accelerators provide intensive mentorship and introductions to capital and revenue opportunities for first-time entrepreneurs. Through its start-up accelerator initiative, SBA will collaborate with existing private and non-profit accelerators to help scale models that are working and support capacity building at new accelerators, with particular emphasis on bringing accelerators to underserved regions. In addition, SBA’s Regional Innovation Clusters program will help small businesses tap into local clusters of economic activity through dedicated efforts to connect innovative small suppliers with large companies, link research at university labs with the start-ups that can commercialize new ideas, and train workers at small suppliers with skills that firms need to capitalize on business opportunities. These grants will target industry-specific and high growth mentoring, and will complement the broad services and expertise of SBA’s existing resource partner network. In addition, through the Investing in Manufacturing Communities Partnership Fund, which will be supported in part with $113 million in the President’s Budget at the Economic Development Administration (EDA), the Administration will accelerate alignment of Federal regional economic development resources and help U.S. localities make coordinated, long-term investments in their public goods in partnership with universities and industry, which will make these regions more attractive for businesses and small suppliers.
Increase Exports from Small Businesses. The President, in 2009, set the goal of doubling American exports over five years. The Budget proposes $520 million for the International Trade Administration (ITA) to continue implementation of the National Export Initiative, a comprehensive Federal strategy to increase American exports and export-related jobs. With this funding, ITA will strengthen its efforts to promote exports from small businesses; help enforce international free trade agreements; fight to eliminate barriers to sales of U.S. products; improve the competitiveness of U.S. firms; expand services in important international markets; and attract investment through the SelectUSA initiative to create domestic jobs. The Budget also supports the activities of the Export-Import Bank to strengthen its efforts to promote small business exports and to meet increased financing demands at no cost to the taxpayer.
Provide One-Stop Access to Federal Services for Small Businesses. Businesses looking for assistance from the Federal Government should feel like they are interacting with one coordinated entity, rather than a number of separate components. To this end, the Budget fully supports the BusinessUSA initiative, a one-stop resource that will make it easier for businesses to access the wide array of Federal small business and export promotion services available to them, while also further streamlining and coordinating Federal programs to reduce costs and provide customer-oriented services.
Increase Federal Contracting Opportunities for Small Businesses. During the first three years of the Administration, the Federal Government awarded over $286 billion of Federal contracting dollars to small businesses, a $32 billion increase over the three preceding years, even as overall Federal contracting spending decreased. To continue this progress, the Budget provides $4 million for SBA to hire 32 new Procurement Center Representatives, who will be strategically embedded across the Federal Government’s largest buying activities to increase the small business share of Federal procurement awards by reserving procurements for competition among small businesses and identifying small business sources to Federal buying agents.