Small Business Loans More Available To Businesses–Is The HIRE Tax Credit Better For Creating Jobs?

There have been reports over the past weeks that many lenders are beginning to loosen their practices when it comes to small business loans. Earlier in the year, the SBA was able to guarantee a higher percentage of loans made from certain lenders and, as a result, more businesses who were looking to borrow were given the opportunity to do so. Yet, constricted lending practices has caused many small business owners to become displeased with the lack of capital that may be gained from certain lenders.

However, there has been debate over the need for small business loan capital versus more incentives like the HIRE Tax Credit that is currently being offered to small business owners who employ new workers that were previously unemployed. This tax credit provides an incentive to a business owner which essentially makes them exempt from Social Security taxes on their payroll for these workers and may also bring in a tax credit for up to $1000 on new employees who are kept for over a year.

The argument against small business lending versus the hiring tax credits is that the vast majority of small businesses will not add new workers when they take on debt. While it’s understandable that many small businesses need opportunities to borrow so that they may inject capital into their company, which allows for expenses like purchasing new equipment or handling a higher volume of customers, and ideally will lead to the need for more workers. Yet, there are those who argue that few businesses will obtain a small business loan and directly hire more employees as a result.

Since the small business sector is being called on to create much needed jobs for the vast number of unemployed men and women in our nation, legislation has been proposed that would extend tax credits for employers who hire and possibly provide more funding to the Small Business Administration to guarantee a higher percentage of loans. At the present time a tax credit for employers who hire workers who were previously out of work is available and, if reports are correct, more lenders are beginning to make small business loan capital available.

It is hoped, however, that new legislation may be passed that would create an environment where small businesses who are looking to borrow can find lenders to work with and companies who want to avoid debt may still be able to hire more workers and received incentives for doing so.