I recently spoke with Karen Kerrigan and Barbara Weltman. We discussed the latest news on taxes, regulations, and legislation in the SMB space. There are too many moving parts, but Karen and Barbara helped make sense of it all. Below are excerpts from our webcast.
Barbara: Some of the changes were a result of the Consolidated Appropriations Act (CAA), primarily, with PPP loans. Most businesses knew that that loan forgiveness was tax-free. The CAA change allows business owners to deduct expenses covered by the PPP loans. It’s a rare, double dip, for small businesses. They get tax-free income and then take the deduction.
Another change, made earlier in 2020 under the Cares Act like, allows businesses with losses in 2020 to go back up to five years and offset income in those years with 2020 losses AND get the tax refund now. The change will bring a much-needed cash infusion for some businesses in 2021.
Brian: Karen, can entrepreneurship lift our economy out from the devastating effects of COVID-19 as it has in past downturns?
Karen: New business applications in 2020 were off the charts. The country is far ahead of where we were with business startups today than after the Great Recession. In 2020, there were 4.5 million new business applications, a 24% increase from 2019.
The entrepreneurial spirit is there, and opportunities are everywhere. I recently testified before the House Small Business Committee on the need for a stable business climate from a policy perspective to encourage entrepreneurship and business creation. If the federal government can keep the tax rate stable, and the regulatory climate stable, the economy can fully recover rather quickly.
Brian: Besides PPP and EIDL loan programs, what other loan options are available to business owners who want to buy a building, lease equipment or need money for operational expenses?
Barbara: There are many options; it depends on how the money will be used in the business. Crowdfunding is one option. There are local, state, and federal grants available to small businesses. The SBA has various loan programs.
Brian: There are also traditional institutions like banks, and companies such as Pitney Bowes Financial Services, a great champion of small businesses. They want to have conversations on how to help businesses get the money they need to grow their companies.
Brian: What advice would you give to business owners to help them navigate the rest of 2021?
Karen: In a competitive, uncertain economy, business owners need to stay connected with their customers and their marketplace. Ask them, “How can we do things better?” “What are other businesses doing that we should be doing?” “What are you looking for in new products and services?”
Barbara: Business owners need to watch costs and get rid of debt because interest rates are only going to go up; they're not going down. That’s a heavy burden to carry. Talk to business advisors, accountants, and attorneys to make sure that you have a handle on your numbers and your business.