By : Claude Solnik; Claude Solnik
Source : http://insurancenewsnet.com
Category : Small Business Grant
Small businesses stymied by complex tax codes often don't take advantage of breaks available to them for various forms of spending, but could benefit from incentives to set aside money for difficult times, according to a study Dowling College released today.
The study, commissioned by the U.S. Small Business Administration through a $200,000 grant, concluded that many small businesses can't afford to tap, or aren't aware of, benefits that might be available to them. But it also found that there's a huge tax gap in terms of incentives for businesses to save during good times, when they're encouraged to spend.
The study, by Dowling College'sAmerican Communities Institute, concluded that tax-deferred savings accounts for businesses, similar to IRAs for individuals, could cushion them from difficult times when they can't find or can't afford loans or credit.
"They have an incentive to spend, so they don't pay as much taxes," Nathalia Rogers, director of the American Communities Institute at Dowling College and principal investigator for the small business study, told LIBN. "When a tough situation comes in, businesses have nowhere to go to get extra capital."
She said Dowling concluded the lack of incentives for small business to set aside money during good times leaves them particularly vulnerable during downturns, when they may be forced to borrow to survive. Tax-deferred accounts, in which companies could set aside money tax-free in accounts they could draw on in tough times, could smooth the way for companies to survive downturns.
"We found 52 percent of businesses, a high number, wanted the state to provide something like this and 47.8 percent wanted the federal government to do something like this," Rogers said. "They wanted a form of self-reliance. Put a percent of profits into a tax- deferred account. When a recession hits, you can draw on those accounts up to point without paying taxes."
She said there could be various triggering events, including recession along with industry or company disasters that would be considered "defined moments." Companies could withdraw money when triggers occur, or pay penalties if they chose to withdraw money early.
"They can't get credit anywhere. This gives them an incentive to save rather than spend in immediate reinvestment in good years," Rogers said. "It softens the economic cycle. It's a form of a tax break."
The report, part of a eight-month study done with questionnaires to 150 businesses and 10 focus groups of 160 people, found almost 80 percent of small business owners are worried about the "uncertain direction of the economy," while 61 percent cited declining customer demand and 46 were concerned about the high cost of health insurance.
Although government has been pouring billions into bailouts and working to spur job creation, more than a third of those surveyed said federal, state and local taxes, regulatory burdens and the high cost of capital impede their growth.
A vast majority, 62.3 percent, said federal tax credits, would be a key to small business growth, while 69.8 percent said state tax credits and 62.3 percent said containment of health insurance costs would help.
"Larger corporations have an opportunity to employ professionals to get maximum leverage out of tax breaks," Rogers said. "But small businesses do not for the most part take advantage of tax breaks available to them, even if they exist."
She said the cost of filing and hiring consultants often deters small business from taking advantage of existing incentives, making it more important to have simple programs, transparent ways of taking advantage of them and breaks that encourage saving and self- sufficiency.
"That puts smaller businesses at a disadvantage," Rogers said of complex programs rather than simple small business benefits. "People said they have no time to find those tax breaks, because the tax code for small businesses is 10,000 pages. Small businesses were left without any monetary policy stimulation. They say, 'What about us? Give us some kind of tax break.'"
Rogers said business people complained about the state's decision to discontinue its Empire Zone program, replaced by the Excelsior Jobs program, which some business people believe isn't as "effective or as generous" as its predecessor.
"They felt that the old program was good," Rogers said. "There are so many rules and regulations, to take advantage of that [Excelsior]. You need a specialist, which costs a lot of money."
Although survey respondents painted a picture of a tough economy, 16.4 percent said they're already growing. Only 6.9 percent, however, said they see growth opportunities in the next three months, while 8.2 percent saw them in three to six months and 27.7 percent saw opportunities in the next six months to a year.
"No one other than manufacturing wanted to invest in research and development," Rogers said of a possible sign that small businesses are putting cutting-edge work on hold due to economic problems.
Entrepreneurs said they often couldn't qualify for loans under most bank guidelines, but instead often turned to family, friends and credit cards when they faced s credit crunch. "We found that bank loans were used very little by companies one to 10 years old," Rogers said. "But they were used the most by companies with 25 or more years of operation."
The study found that in the past 12 months 25 .8 percent of companies used bank loans, 24.5 percent used earnings, 27 percent used credit cards, 14.5 percent used vendor credit, 11.9 percent used private loans from friends or family, 5 percent used leasing to finance operations and 1.3 percent used Small Business Administration loans. Another 3.8 percent used private placement of debt, while 36.5 percent used no financing.
"Larger companies were much more likely to use bank loans. Smaller businesses were much more likely to use credit cards to finance their operations," Rogers said. "Many companies cannot access this kind of financing. Small business is having difficulty getting loans from smaller banks, which were available before."
Although commerce is shifting to the Internet, the study found that small businesses have been slow to join the bandwagon, often creating and maintaining their own websites and complaining that government sites could do more to provide easy access to forms. "Larger companies want Internet expansion," Rogers said. "Local companies had limited interest in e-commerce."
Small businesses have been hit hard by downturns in downtowns, traditionally a haven for entrepreneurs seeking to compete with malls and shopping centers, where leases can be more costly. The study found that real estate prices and lack of parking hold back the growth of small businesses in downtowns.
"People want to see their downtowns filled with viable small businesses," Rogers said. "Before, I don't' think that was such an issue."
Source : http://insurancenewsnet.com/article.aspx?id=311388
Source : http://insurancenewsnet.com
Category : Small Business Grant
Small businesses stymied by complex tax codes often don't take advantage of breaks available to them for various forms of spending, but could benefit from incentives to set aside money for difficult times, according to a study Dowling College released today.
The study, commissioned by the U.S. Small Business Administration through a $200,000 grant, concluded that many small businesses can't afford to tap, or aren't aware of, benefits that might be available to them. But it also found that there's a huge tax gap in terms of incentives for businesses to save during good times, when they're encouraged to spend.
The study, by Dowling College'sAmerican Communities Institute, concluded that tax-deferred savings accounts for businesses, similar to IRAs for individuals, could cushion them from difficult times when they can't find or can't afford loans or credit.
"They have an incentive to spend, so they don't pay as much taxes," Nathalia Rogers, director of the American Communities Institute at Dowling College and principal investigator for the small business study, told LIBN. "When a tough situation comes in, businesses have nowhere to go to get extra capital."
She said Dowling concluded the lack of incentives for small business to set aside money during good times leaves them particularly vulnerable during downturns, when they may be forced to borrow to survive. Tax-deferred accounts, in which companies could set aside money tax-free in accounts they could draw on in tough times, could smooth the way for companies to survive downturns.
"We found 52 percent of businesses, a high number, wanted the state to provide something like this and 47.8 percent wanted the federal government to do something like this," Rogers said. "They wanted a form of self-reliance. Put a percent of profits into a tax- deferred account. When a recession hits, you can draw on those accounts up to point without paying taxes."
She said there could be various triggering events, including recession along with industry or company disasters that would be considered "defined moments." Companies could withdraw money when triggers occur, or pay penalties if they chose to withdraw money early.
"They can't get credit anywhere. This gives them an incentive to save rather than spend in immediate reinvestment in good years," Rogers said. "It softens the economic cycle. It's a form of a tax break."
The report, part of a eight-month study done with questionnaires to 150 businesses and 10 focus groups of 160 people, found almost 80 percent of small business owners are worried about the "uncertain direction of the economy," while 61 percent cited declining customer demand and 46 were concerned about the high cost of health insurance.
Although government has been pouring billions into bailouts and working to spur job creation, more than a third of those surveyed said federal, state and local taxes, regulatory burdens and the high cost of capital impede their growth.
A vast majority, 62.3 percent, said federal tax credits, would be a key to small business growth, while 69.8 percent said state tax credits and 62.3 percent said containment of health insurance costs would help.
"Larger corporations have an opportunity to employ professionals to get maximum leverage out of tax breaks," Rogers said. "But small businesses do not for the most part take advantage of tax breaks available to them, even if they exist."
She said the cost of filing and hiring consultants often deters small business from taking advantage of existing incentives, making it more important to have simple programs, transparent ways of taking advantage of them and breaks that encourage saving and self- sufficiency.
"That puts smaller businesses at a disadvantage," Rogers said of complex programs rather than simple small business benefits. "People said they have no time to find those tax breaks, because the tax code for small businesses is 10,000 pages. Small businesses were left without any monetary policy stimulation. They say, 'What about us? Give us some kind of tax break.'"
Rogers said business people complained about the state's decision to discontinue its Empire Zone program, replaced by the Excelsior Jobs program, which some business people believe isn't as "effective or as generous" as its predecessor.
"They felt that the old program was good," Rogers said. "There are so many rules and regulations, to take advantage of that [Excelsior]. You need a specialist, which costs a lot of money."
Although survey respondents painted a picture of a tough economy, 16.4 percent said they're already growing. Only 6.9 percent, however, said they see growth opportunities in the next three months, while 8.2 percent saw them in three to six months and 27.7 percent saw opportunities in the next six months to a year.
"No one other than manufacturing wanted to invest in research and development," Rogers said of a possible sign that small businesses are putting cutting-edge work on hold due to economic problems.
Entrepreneurs said they often couldn't qualify for loans under most bank guidelines, but instead often turned to family, friends and credit cards when they faced s credit crunch. "We found that bank loans were used very little by companies one to 10 years old," Rogers said. "But they were used the most by companies with 25 or more years of operation."
The study found that in the past 12 months 25 .8 percent of companies used bank loans, 24.5 percent used earnings, 27 percent used credit cards, 14.5 percent used vendor credit, 11.9 percent used private loans from friends or family, 5 percent used leasing to finance operations and 1.3 percent used Small Business Administration loans. Another 3.8 percent used private placement of debt, while 36.5 percent used no financing.
"Larger companies were much more likely to use bank loans. Smaller businesses were much more likely to use credit cards to finance their operations," Rogers said. "Many companies cannot access this kind of financing. Small business is having difficulty getting loans from smaller banks, which were available before."
Although commerce is shifting to the Internet, the study found that small businesses have been slow to join the bandwagon, often creating and maintaining their own websites and complaining that government sites could do more to provide easy access to forms. "Larger companies want Internet expansion," Rogers said. "Local companies had limited interest in e-commerce."
Small businesses have been hit hard by downturns in downtowns, traditionally a haven for entrepreneurs seeking to compete with malls and shopping centers, where leases can be more costly. The study found that real estate prices and lack of parking hold back the growth of small businesses in downtowns.
"People want to see their downtowns filled with viable small businesses," Rogers said. "Before, I don't' think that was such an issue."
Source : http://insurancenewsnet.com/article.aspx?id=311388
