Exchange Microbusiness News Weekly Roundup

Every week AEO gathers small business headlines and links from online media publications and blogs. Here’s what was in the news the week of February 23rd.

AEO IN THE NEWS
How to Get a Small Business Loan if You're a Credit Risk
http://www.ehow.com/how_4806913_business-loan-youre-credit-risk.html

AEO MEMBERS IN THE NEWS
Second Regional Flavor Conference planned for March 12
http://www.observertoday.com/page/content.detail/id/519563.html?nav=5007

SMALL BUSINESS NEWS
Open for Business, Despite the tough economy, SJ entrepreneurs take the risk and set up shop.
http://www.sjmagazine.net/articles.aspx?aid=507&AspxAutoDetectCookieSupport=1

Small Business Owners React to President Obama's Speech
http://ozarksfirst.com/content/fulltext/?cid=122802

Business Owners Say Obama Should Reduce Small Business Taxes and Free Up Lending
http://www.foxbusiness.com/story/markets/industries/media/business-owners-say-obama-reduce-small-business-taxes-free-lending/

Survey: Small-business owners resilient
http://www.bizjournals.com/southflorida/stories/2009/02/23/daily23.html

Small Business: Starting a blog and making it effective
http://www.newsday.com/business/ny-bzherz0223,0,5485247.story

Manchin: Small business success vital to state
http://www.bdtonline.com/local/local_story_053203359.html

Small loans to keep troubled firms afloat
http://www.msnbc.msn.com/id/29343657/

Small business: By a thread
http://www.startribune.com/business/39992472.html

Small business feels the pinch of tighter credit
http://seattletimes.nwsource.com/html/businesstechnology/2008771277_bizfinance22.html

Board Eases Application For Business Licenses
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/21/AR2009022100055.html

Being own boss gains appeal, Some ready to start small business
http://cjonline.com/stories/022109/bus_396302114.shtml

The recession beaters: Three women small-business owners succeeding in today's economy
http://www.philly.com/dailynews/top_story/20090219_The_recession_beaters__Three_women_small-business_owners_succeeding_in_today_s_economy.html

AEO National Membership Call

AEO’s most recent National Membership Call focused on microenterprise development funds in the Economic Recovery and Reinvestment Act and how the new funding impacts AEO’s policy initiatives in 2009. Below are the notes from the call.

Association for Enterprise Opportunity
National Membership Call
February 24, 2009 ~ 2:00 p.m. Eastern Time

I.Introduction: Elizabeth Wilson, AEO senior development officer field services acknowledged and thanked presenters: Bill Zavarello, AEO policy consultantGeorge Dale, Small Business AdministrationJon Bailey, Center for Rural AffairsMathew Josephs, CDFI Fund



II. AEO Overview: Bill Zavarello reported that the last administration had decided it was no longer useful to assist microenterprise development programs. This put microenterprise development into a very defensive position. We struggled and worked with Congress to restore money to some extent. Toward the end of each cycle, the program was saved and/or restored but the money was never as much as was needed. Zavarello said that in reality we were only given scraps to exist on. He continued to say that now it is important to stop and recognize that all the arguments made over the last six to eight years have a created a paradigm shift and we have essentially won the argument and tipped the scales in our favor. It is still very important that we prove we can create jobs and continue to show that an investment in microenterprise is highly valuable.

Question: Will there be money available outside of lending? Zavarello replied that the short answer to this is ‘no.’

He noted that AEO will be advocating for full funding from training and technical assistance under PRIME. This process has not started yet for 2009. Full funding is a top priority for AEO and Zavarello encouraged participants to stay tuned for news from AEO as to how to best advocate as members during this initiative.

III.SBA Microloan Overview: George Dale began by noting that timing is everything and that currently the provisions are for items other than microenterprise. There are technical assistance grants and loans available for microenterprise provisions. There isn’t currently a budget although one may be passed next week. He noted that performance numbers and outcomes will be expected. With respect to the use of the technical assistance funds, you are authorized to use funds toward training sessions.

The price of money is extremely attractive currently. However, we need to think carefully about implementing this process. The intention is to continue with the procedures already in place. In terms of implementation it is important to figure out if this is a stimulus matter or a 2009 budget matter.

If you have any suggestions please send a detailed email to George - george.dale@sba.gov.

Dale also mentioned that there will be two training opportunities – in Tampa there is the PRIME conference and there is also the AEO Summit in May.


IV.Rural Microenterprise Overview: Jon Bailey noted that they were unable to receive rural assistance under the economic stimulus package, but he hopes that the annual appropriations process may provide additional resources. There are extra funds within the CBDG and USDA programs but it is important to check the criteria for each individual state.

Question: What should be done to build support for rural efforts? Members of Congress are always important contacts in this matter. Any member of Congress who is a member of House/Senate Agriculture Committees is a good target for discussions regarding the Farm Bill microenterprise development funding. There may also be support from the USDA to raise this funding.

V.CDFI Fund Overview: Mathew Josephs noted that once an organization is certified as a CDFI it is eligible for several types of funding. Funding may require a funding match from your organization. Grants of up to $100,000 are also available for training, consulting, etc. Banks may also receive incentives for investing in small microenterprises or low-income community development. The 2009 round closed in October but additional funding opportunities may be announced next week.

Questions: Is there a time table for the stimulus money? Next week there should be more news so please stay tuned.
Is there enough to fund all the current applications? Tentatively, yes, but they depend on the match requirement.
How quickly will the funds be dispersed? This depends on when the groups applied.
How will you handle the dispersements of stimulus funds? TBD

VI. Conclusion and Next Steps: Elizabeth Wilson noted that if you have additional questions, please email them to Elizabeth so that she can follow up after the call. Please note that you can access policy updates on AEO’s blog at www.aeoexchange.blogspot.com.

Zavarello noted that it is important to keep in mind that the budget cycle will remain the same as it has always been. We have the advantage this year of knowing that the political terrain is more favorable for us this year. We can therefore expect to see better results if we can also continue to grow and show our positive results. He added that as long as we continue to do our job, the people in power will do theirs.

Josephs suggested that all groups who are eligible apply. It is critical to get your organization certified as a CDFI and to make sure you remain aware of the opportunities available to your organizations.

Dale reminded the group that the 2009 funds and the stimulus funds cross paths so it is important to keep in mind that 2009 should be used in conjunction with or before the stimulus funds. Also, be cautious not to make bad loans or to loan money too quickly. Because banks do not want to make loans right now, so if you come across the opportunity to make a good loan, please do so.

Bailey noted that all the rules on the stimulus money are yet to come out. Unlike the SBA program, their funds have to go to a public entity. He also seconded what Zavarello said in that it is important over the next few months to speak with your members of Congress regarding rural funding.

Elizabeth thanked each of the panelists for their input and reminded everyone that this discussion can be continued at AEO’s National Summit this year. Please visit http://www.microenterpriseworks.org/index.asp?bid=2764 for more information about this opportunity and please check in at AEO’s blog for continuing policy updates.

Exchange Microbusiness News Weekly Roundup

Every week AEO will gather small business headlines and links from online media publications and blogs. Here’s what was in the news the week of February 16.

AEO IN THE NEWS

Recession ups U.S. demand for microloans
http://www.msnbc.msn.com/id/29258701/

As Credit Dries Up, More Owners Seek Microloans
http://news.yahoo.com/s/bw/20090216/bs_bw/0962s0902018039571

In Credit Crunch, People Turn to Payday Loans, Microloanshttp://personalmoneystore.com/moneyblog/2009/02/16/credit-crunch-payday-loans-microloans/

Microfinance in the U.S.A. about to explode?
http://www.walletpop.com/blog/2009/02/17/microfinance-in-the-u-s-a-about-to-explode/



SMALL BUSINESS NEWS

Bill Clinton: Stimulus Package Should Do More for Small Business
http://blogs.wsj.com/independentstreet/2009/02/17/bill-clinton-stimulus-package-should-do-more-for-small-business/

Smaller lenders see opportunities in SBA loan programs http://www.azcentral.com/arizonarepublic/business/articles/2009/02/16/20090216stim-biz-SBAstimulus.html


Small Businesses Face More Fraud in Downturn
http://online.wsj.com/article/SB123501158460619143.html?mod=googlenews_wsj

SBA Applauds Stimulus Bill, Planning Underway For Broadest, Quickest Small Business Impact
http://www.utahpulse.com/featured_article/sba-applauds-stimulus-bill-planning-underway-for-broadest-quickest-small-business-i

Stimulus Act - A Small Impact on Small Business Owners and Even Smaller for Women in Business
http://womeninbusiness.about.com/b/2009/02/18/stimulus-act-a-small-impact-on-small-business-owners-and-even-smaller-for-women-in-business.htm

Green incentives add millions to small business loan program
http://www.jaxdailyrecord.com/showstory.php?Story_id=51845

Congress Passes the Economic Stimulus Package - What's in it for Microenterprise

In its first major initiative, the Obama Administration is expected to sign the Economic Recovery and Reinvestment Act of 2009, which was passed by Congress late last week. This bill is exceedingly broad in its scope and can be expected to impact communities around the country in many ways in the months and years ahead. There are a few specific programs to highlight from this legislation which have been particularly important to AEO and its members.

Comprised of spending and tax cuts the bill has two main goals; short term job production and long term economic viability. Since microenterprises are a major source of U.S. employment it is only fitting that funding for microenterprise development was included. The bill includes:

• $51 million in lending authority for the Small Business Administration (SBA) Microloan Program



• $24 million for SBA Microloan technical assistance



• $100 million for the Community Development Financial Institutions Fund

This is one-time only funding and is in addition to the regular funding provided by Congress during the annual appropriations process. This is great news for the field, especially as AEO members continue to experience a higher demand for microloans and other business support services

Details about how AEO members can access the new funding and what affect this will have on AEO’s funding requests for Fiscal Year 2010 will be made available soon. Stay tuned!

Want to share your thoughts about the funding for microenterprise development in the Economic Recovery and Reinvestment Act? Leave a comment for the AEO Exchange Blog – be the first to start a discussion!

Exploring Microenterprise Tax Incentives Guest Blogger Gene Severens

Last week AEO sent a link to a recent article posted on Forbes.com, which discusses the small business tax incentives (or lack there of) in President Obama’s stimulus proposal. We invited AEO members and friends to share their thoughts and Gene Severens of CFED shared the following. AEO invites you to continue the conversation and include your own comments – click on “comments” below to see what others are saying or to add a comment yourself.



Thanks for the invitation to inform AEO membership about how tax incentives impact our microenterprise customers, and thanks for circulating the link to the Forbes article – it was quite provocative. Microenterprise tax policy and practices are important and largely unexplored issues, and the Forbes article demonstrates how misleading the subject can get.

By way of background, I direct CFED’s Self-Employment Tax Initiative (SETI), which was launched in 2005. SETI explores: (1) how the tax code could be used to develop new policies that would support start up microenterprises; and (2) how tax preparation and the “tax season” can be used as an annual marketing opportunity to deliver financial products to a wider range of microenterprises. For the current tax season, SETI is working with 16 local programs (through $10-25,000 subgrants) that will provide tax preparation to approximately 7,500 microenterprises by April 15, 2009.

The Forbes article, like many articles assessing small business tax reform, only tells half the story - the corporate side (including Subchapter S) of small business taxation. But because most microbusinesses are started, by default, as self-employed “sole proprietors” not corporations, they are taxed through individual tax laws. As a result, to understand the impact of tax policies on micro and early-stage small businesses, the microenterprise development field needs to focus on individual tax laws and its “Schedule C” tax form used to calculate self-employment net profit.

The Forbes article complains that the stimulus bill does not consider small business tax credits like “a zero rate on capital gains from investments in new small businesses” or “payroll tax holiday for employers.” No doubt these particular tax credits could be useful to some small businesses, but they are, for the most part, irrelevant to most microbusinesses - especially start ups during their first few years of business and businesses that start with no employees.

What the Forbes article does not mention at all – the missing “other half” of the story – is any mention of the stimulus package’s “Making Work Pay” tax credit ($1000 if filing jointly, $500 single). While our analysis is just beginning and could change, we believe that the “Making Work Pay” tax credit applies to microenterprises and provides an important new kind of opportunity to AEO members to reach more customers with new tax code-based financial products.

By our first calculation, the “Making Work Pay” tax credit would allow approximately 10.8 million self-employed households with net profits from microbusiness to claim either a $500 or $1000 tax credit. While this credit can also be claimed using wage income, for those households whose income is substantially derived from microbusiness income, “Making Work Pay” will function like a “microenterprise tax credit.”

In the deepening recession and spurred both by struggling low-income households as well as talented, laid-off workers, we expect that “self-help jobs” will become increasing important, making this credit all the more significant as a counter-cyclical stimulus. For lower-income households, which run “informal” businesses that do not report self-employment income, the “Making Work Pay” tax credit can combine with the EITC to provide a $5000+ refundable tax bonus to formalize their business.

This is not a small program. By our initial calculation, the value of the new tax credit for self-employed households is something like $8 billion. That’s “billion” with a “b,” making this tax credit one of the largest federal “microenterprise” programs ever.

We have much to learn about how the tax code impacts microbusinesses and would invite comments from AEO members. Because of the peculiarities of microenterprise tax policies, many new microenterprises will not realize their eligibility for this tax credit until next year’s tax season (Jan - April 2010). As a result, I can imagine a big role for AEO and its members to educate the 10 million households about this important help. SETI staff will continue to refine our understanding of the microenterprise tax policies in general and the Obama stimulus package, in particular, and post our work at www.cfed.org/go/seti. Comments and criticism can be sent to us at seti@cfed.org or feel free to email me directly at eseverens@cfed.org.

Thanks.
Gene Severens


Eugene Severens founded the Rural Enterprise Assistance Project (REAP), a microlending and training program serving rural Nebraska in 1989. He went on to start the Nebraska Microenterprise Partnership Fund, a successful statewide microenterprise intermediary and CDFI which supports microenterprise programs in Nebraska. He is currently Director of CFED's National Fund for Enterprise Development, where he works on the State Microenterprise Systems project and directs CFED's Self-employment Tax Initiative (SETI), a project which explores how the tax code is and potentially could be used as an important new direct delivery systems for microbusinesses. SETI recently (Fall 2006) disbursed a series of mini-grants to work with community tax preparation and microenterprise programs to explore the potential of tax preparation and planning as an important new product for the field. Gene was also a member of the very first AEO Board of Directors.