Small Business Stimulus Act

Floor Speech

Mr. KERRY. Mr. President, over the past few months, our country has experienced instability and volatility in its credit markets. This looming credit crisis is affecting virtually every sector of the economy, including small business financing.

Since its inception in 1953, the Small Business Administration's 7(a) loan guaranty program has become the largest single source of long-term capital for small businesses. However, in the wake of the credit crunch and a slowing U.S. economy, we are now noticing that this essential financing resource is not serving nearly as many small businesses as it should. For example, during the first quarter of the 2008 fiscal year, 7(a) lending was down by 12 percent compared with the same period last year. In addition, at his State of the Agency Address this past Tuesday, SBA Administrator Steven Preston acknowledged that SBA lending was down in its largest program.

The Small Business Stimulus Act of 2008 will help reverse this downward trend in small business lending. The bill will temporarily reduce the fees collected from borrowers and lenders. This will immediately reduce the cost of capital for small businesses. With lower monthly loan payments, more money will be placed into the hands of small business owners money that will be quickly injected into the economy through purchases of inventory, real estate, and equipment. The fee reduction for lenders, coupled with the government guarantee, will give them an incentive to make 7(a) loans, as banks are scrambling for ways to salvage declining revenues and take on less risky loans. A similar stimulus was adopted after 9/11, and lending increased to businesses nationwide, pumping almost $3 billion into local economies and creating or retaining more than 90,000 jobs.

The bill also provides additional funding for the SBA's microloan program. As its name implies, microloans are small-scale business loans, which provide an essential financing source to underserved members of the business population, including women and minorities. This bill provides $12 million to expand the SBA's microloan program, including $2 million that will help leverage nearly $20 million in microloans.

The Small Business Stimulus Act of 2008 also includes two business tax incentives that will help small businesses that are feeling the impact of the economic downturn. The first provision would increase the amount that businesses can expense from $125,000 to $200,000 for 2008. This will help businesses immediately write off business purchases. The second provision increases the net operating carry back period for losses arising in taxable years ending in 2007 and 2008 from 2 years to 5 years. This provision will help business with cash flow. Expanding the carry back allows business owners to balance out net losses over years when the business has had a net operating gain.

I am confident that each of these targeted measures will provide timely, effective incentives to spur spending and encourage new investment and job growth in the hundreds of thousands of small businesses that drive this Nation's economy.

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