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3 ways Obama's otherwise DOA budget could help small businesses

Loan Tips > 3 ways Obama's otherwise DOA budget could help small businesses


President Barack Obama’s proposed $4.1 trillion budget plan for next year is primarily a political document, setting the agenda for what Americans can expect if Democrats win the 2016 elections.

This year’s Republican-controlled Congress won’t pass the plan’s tax increases — higher rates on capital gains, limits on itemized deductions for wealthy Americans, and a new $10-a-barrel tax on oil, for example. The president’s proposed seven-basis-point fee on the liabilities of the nation’s 100 largest financial firms isn’t going anywhere, either. Obama’s proposal to increase federal spending by 5 percent, including doubling investments in clean energy, also is dead on arrival, especially since the budget plan would produce a $503 billion deficit despite all of its tax increases.

But Obama’s budget plan does offer some proposals for businesses that actually have a chance of being enacted. Here’s a look at three areas:

More loans for small businesses

The budget plan would build on the success of the Small Business Administration’s flagship 7(a) loans to small businesses, which have reached record levels without requiring any subsidies from the government.

Combine help to small businesses with little or no cost to taxpayers, and you’ve got a winner on both sides of the aisle. The SBA’s budget proposal authorizes the agency to guarantee $46 billion in loans to small businesses. The agency’s flagship 7(a) loan program could back up to $27 billion in loan guarantees next fiscal year, up from $26.5 billion this year. That’s well above the record $22 billion in 7(a) loans that the SBA backed in 2015 (net of cancellations). The budget authorizes $7.5 billion in SBA guarantees for 504 loans, which are primarily used for commercial real estate and are paired with conventional loans. It also authorizes $7.5 billion in loan guarantees for the use of 504 loans to refinance existing commercial real estate mortgages on owner-occupied properties. The SBA also will create a new loan guarantee program, which would provide $10 billion in financing over five years, to help small advanced manufacturing startups bring innovative technologies to commercial-scale production.

To help the smallest of small businesses, the SBA budget calls for $44 million in loans to nonprofit organizations that make microloans to new businesses in their communities. That’s a 26 percent increase.

Additional spending is paid for by canceling $55 million in prior-year balances for loan subsidies that weren’t needed since the SBA’s 504 loan program is now a zero-subsidy program, just like 7(a) loans.

The Treasury Department, meanwhile, would provide $1.5 billion for a second round of funding for the State Small Business Credit Initiative, which has supported more than 12,400 loans or investments in small businesses by 47 states, five territories and five cities.

More resources for cybersecurity

The budget calls for $19 billion in federal spending on cybersecurity, up 35 percent from last year.

Obama wants the government to work more closely with the private sector on fighting cyber attacks, but to do that, the government needs to get its own house in order, so agencies such as the Office of Personnel Management and the Internal Revenue Service will no longer be hacked. That requires billions of dollars to update antiquated information technology systems. Obama plans to hire a new chief information security officer to direct the government’s efforts to fight cyber attacks. Plus, the government also will try to raid the private sector for technology talent.

“We’ll do more—including offering scholarships and forgiving student loans—to recruit the best talent from Silicon Valley and across the private sector,” Obama wrote in a Wall Street Journal op-ed. “We’ll even let them wear jeans to the office.”

The president also will create a new commission on cybersecurity, which will include private-sector representatives, and will make recommendations on steps that can be taken over the next decade to improve cybersecurity in the private sector and government. Plus, the government just opened a new cybersecurity research and development center, and plans to establish a national test lab that businesses can use to test their IT systems against a simulated cyber attack.

In addition, the SBA will work with other agencies to provide cybersecurity training to more than 1.4 million small businesses.

More programs to train workers with skills businesses need

Republicans may substitute their own ideas for Obama’s program for workforce training, but both parties hear complaints for businesses about the shortage of skilled workers. Obama’s budget calls for $4 billion over the next three years to support state efforts to expand access to computer instruction to all students. The plan also would fund grants to support tuition-free job training programs in high-demand fields, and spend $2 billion to double the number of apprenticeships in the U.S.

Up to 500,000 skilled workers could be created over the next five years through Obama’s proposal to create a competitive grant program that would provide funding to 50 “talent hotspots” across the U.S. These localities would prioritize a specific sector of their economy, and recruit and train workers to serve it.

The budget plan also aims to make college more affordable by providing two years of free tuition to community college for “responsible students” and increasing the amount for Pell Grants.


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