When it was passed in February, the $787 billion stimulus package—or, more officially, the American Recovery and Reinvestment Act of 2009 (ARRA)--seemed like a promising development for small business owners. But,tapping that money has proven to be a difficult, complex task, especially for small companies. With that in mind, here are five tips for making the stimulus package work for your business.
Scour local agencies for useful stimulus-funded programs. Earlier this year, Dick Shaw, who heads 20-employee Little Colorado, wanted to find government programs that could assist him in hiring two more people for his Denver-based company, which sells hand-crafted furniture and toys. He ended up working with Workforce Development Division; the city agency was using part of the $4.66 million in stimulus funding it had recently received to subsidize half the salary of newly hired employees in selected local companies for six months. In October, Shaw brought on board two people to do everything from sanding to painting. “We would not have hired them without this help,” he says.
If you’re after a government contract, be prepared for homework—lots of it. Trying to win a contract is pretty much the same as it is for any government work. That means filling out long, cumbersome forms and winding your way through a maze of agencies. “You can’t lightly poke at the application process and see results,” says Eric Gillespie, CIO of Onvia, a Seattle-based company with an online database of government contracting information.
What it all means is you have to do a lot of upfront research to determine which agencies to approach and what the procurement process is. (For more resources, see below). Luckily, you can check out federal opportunities over $25,000 at one fell swoop, at FedBizOps.gov. At the state and local level, where most of the money will be allocated, you’ll have to look at state and county, or individual agency, web sites. You also need to find out who the buyers are and get their names, phone numbers, and email addresses. For federal work, register with the Central Contracting Registry (CCR); states have their own individual sites.
Think about sub-contracting or teaming up with another company. Some projects just require a larger work force or a higher volume of production than a small business can supply. In that case, consider teaming up with another small business to bid on the contract (for more about teaming read these stories on www.openforum.com="" http:="" href=" www.openforum.com="" idea-hub="" topics="" innovation="" article="" target="_blank" href=">http://www.openforum.com/idea-hub/topics/innovation/article/team-to-help-win-government-contracts-open-book">OPEN Forum). Or, you might approach big companies that have recently won contracts about doing sub-contracting. “I’ve talked to large engineering and construction businesses that have so much work, they can’t find enough contractors to do all the drainage and road repair they need to finish,” says Steve King, a partner with Emergent Research, a Lafayette, Cal., small-business research and consulting firm
Start by approaching small-business outreach offices at large contractors. You can also check company web sites for information about current contracts. Or, post your profile on such sites as the Federal Contracting Network, www.tfcn.us, and www.mySBX.com.
Don’t overlook tax provisions. While the ARRA includes a handful of tax benefits, they’re still not widely understood. As a result, “I don’t see a heck of a lot of small businesses taking advantage of them,” says King. For that reason, you should familiarize yourself with the most potentially beneficial provisions. For example, there’s a deduction of up to $250,000 for the cost of such equipment as computers and machinery. The dollar limit begins to phase out when purchases for the year exceed $800,000. Also, you can get a depreciation allowance of 50% of the cost of qualified property.
Other useful provisions include a tax credit for hiring certain unemployed veterans and disadvantaged youths; the ability for some small business owners to pay only 90% of 2008 estimated taxes; and a host of tax credits for investing in alternative energy.
It’s also important to act quickly. One provision allowed small business losses to be carried back for three to five years, instead of the usual two, to offset income in those years. But it was only applicable for the tax years beginning or ending in 2008. “Don’t wait to talk to your accountant or it could be too late,” says Barbara Weltman, a Millwood, NY, tax and business lawyer specializing in small business.
Combine benefits. As Ethan Siegal recently discovered, you can mingle tax incentives. The CEO of Orb Audio, a 10-employee maker of audio equipment in New York City, is thinking of using a new $250,000 line of credit to buy equipment for making binding posts for speakers, instead of outsourcing the task to another manufacturer. He figures he can apply both the deduction and depreciation allowance to the purchase. “That can make a significant change to our business,” he says. “We’ll be less reliant on outside suppliers.”
