In response to the recession of 2009, in order to stimulate the economy the government looks to small businesses to stimulate the economy. According to Allen and Daniels (2013), more than half of private sector job growth comes from small businesses. Small businesses are needed to prime the pump of the U.S. economy through goods and services acquisition. According to Clark and Saade (2010), small businesses represent 98 percent of all U.S. businesses and generate 64 percent of all new jobs. Between 1999 and 2000, 75 percent of all newly created jobs was from small businesses. Small businesses encourage creativity and earn more patents per employee than larger firms (Groth & Bhasin, 2011) as they are trying to make a mark and become more known. Large firms often stand on previous or current products and are just managing. To that end, it is feasible and politically advantageous for government to encourage, support, and provide opportunities for small businesses to form and flourish toward success.
The American Recovery and Reinvestment Act (ARRA) of 2009 was created in response to the recessional period the United States experienced after the housing and foreclosure crisis of 2008. The act provided not only employment and other economic help to individuals, but also provided billions of dollars for infrastructure, scientific research, housing, healthcare, energy infrastructure, efficiency, and renewable research and investment, communications, government structure improvements, and transportation. These improvements helped small businesses due to the minimum of 23 percent of government contracts award parameters. The ARRA also provided $730 million to the Small Business Administration for loans and for improvement to its lending and investment programs to include more outreach to small businesses.
ARRA allows for increased loan guarantee rates, stabilization through deferred-payment loans; microloan, refinancing options; secondary market expansion; investment programs; and surety bonds. There were also a number of small business tax credit programs created. Small businesses are allowed a longer recover period for capital expenditures; the option of writing off certain capital expenses; five years of carryback of net operating losses; incentives for hiring new employees; capital gains changes; and temporary tax payment relief.
Considered the most significant piece of small business legislation in more than ten years (U.S. Small Business Administration, 2010), the 2010 Small Business Jobs Act provides critical resources to the help small business grow in order to create jobs. This act made additional funds available to entrepreneurs and small business owners. The SBA Enhanced Loan Provisions added over $12 billion in lending support, with extended loan provision and a $505 million subsidy for Job Acts loans. Of the loans, 22 percent went to rural; 21 percent to minority; 15 percent to women-owned; and seven percent to veteran-owned businesses, for a total of 65 percent. The Jobs Act also allows for higher loan limits; alternate size standards to quality as a small business; temporary commercial real estate refinancing; dealer floor plan pilot program (vehicular businesses); and an intermediary lending pilot which provides a maximum of $20 million per year over a three year period for non-profits which help with small business loans.
The Jobs Act also strength the ability of small businesses to compete for government contracts with reinforced equal treatment information, increased opportunities, and making large firms more accountable to subcontracting plans. The National Defense Authorization Act for Fiscal Year 2013 made changes to several SBA programs (Dilger & Lowry, 2013). The Defense Act increased the SBA’s surety bond limit from $2 million to $6.5 million, up to $10 million under certain circumstances. It is under the Defense Act that the previously mentioned mentor-protégé program is regulated. The Defense Act also requires independent assessment of small business procurement goals, and addresses combining size standards with groups for fairness of the approval process (Dilger & Lowry, 2013).
The Department of Homeland Security has an internal office for helping small businesses. The Office of Small and Disadvantages Business Utilization (OSDBU) holds small business conferences and vendor outreach sessions, to inform small businesses about upcoming contract opportunities. Additionally, their website lists current projects and provides a forecast of upcoming projects so that small businesses have the opportunity to prepare. The OSDBU has two small business innovation research programs that help with working the Department of Nuclear Detection Office (DNDO), and science and technology. For the remote control aircraft business, The Deaprtment of Homeland Security with the Small Business Administration is striving to work with and help small businesses grow and prosper.
- Clark, M.L., & Saade, R.N. The role of small business in economic development of the United States: From the end of the Korean War (1953) to the present. [online]. Retrieved from http://www.sba.gov
- Dilger, R.J., & Lowry, S. (2013). Small Business Administration: A primer on programs. Congressional Research Service. [online]. Retrieved from http://www.fas.org/
- Groth, A., & Bhasin, K. (2011). 18 amazing facts about small businesses. Business Insider. [online]. Retrieved from http://www.businessinsider.com
- U.S. Small Business Administration. (2010). Small Business Jobs Act of 2010. [online]. Retrieved from http://www.sba.gov