Will the Small Business Jobs Act Help Self Storage Businesses?

The U.S. Senate passed legislation yesterday designed to make it easier for small businesses to create new jobs. The bill is called the Small Business Jobs Act. It was passed in the Senate by a vote of 61 to 38 and is expected to be passed by the House of Representatives, and signed by President Obama, next week as well.

According to the national Self Storage Association, about 90 percent of self storage companies are owned by individual entrepreneurs who each operate just one self storage facility. In the United States today, there are around 27,650 self storage owner/operators who own and operate one facility each. Will the Small Business Jobs Act help these self storage business owners?

Below is a list of the basic provisions of the Small Business Jobs Act and how each might affect self storage facilities.

• Credit: Loans to small businesses have dropped by 17.8 percent since the second quarter of 2008. The Small Business Jobs Act will create a $30 billion federal fund that banks are expected to use to help leverage up to $300 billion in loans. The new bill may make it easier for self storage facility owners (and the owners of other small businesses) to take out loans to expand their businesses or to hire staff members. To get these loans, business owners will have to approach community banks -- the act will only provide funding to banks that have less than $10 billion in assets. Businesses may also be able to get assistance from state lending programs, because the Small Business Jobs Act will provide $1.5 billion in grants for such programs.
• Health insurance: The legislation will allow the owners of small self storage businesses (and other small business owners) to deduct the cost of health insurance for themselves and their families from their self-employment taxes for the 2010 tax year.
• Tax cuts: The new bill will prevent small self storage businesses (and other small businesses) from having to pay capital gains taxes on the sale of stock in their business, and will double the amount of start-up expenses that can be deducted from the taxes of an individual who has just started a business. The bill contains an assortment of other tax incentives as well.
• Indirect effects: Small business owners who receive loans that are leveraged through the fund created by the Small Business Jobs Act, and who are trying to expand their businesses, might turn to self storage facilities for space to store inventory or supplies. They might also lease trucks to use for moving inventory and supplies or for making deliveries.

Some analysts doubt that the new bill will help small business owners, even if it does provide them with easier credit and more working capital. “More debt will only make small business more vulnerable to failure in the long run,” writes Jeff Cornwall, director of Belmont University’s Center for Entrepreneurship, in today’s Christian Science Monitor. “Higher debt payments raises the fixed monthly overhead expenses for these businesses, which pushes their break even point even higher. That means they are going to have to generate even more sales to pay their higher fixed monthly bills.” 

Other analysts point out that funding is needed to keep state small business loan programs going. These programs, wrote reporter Catherine Clifford in CNN Money late in August, “cost relatively little to run, are remarkably successful and create jobs.” Clifford points out that while the aid to state small business loan programs is just one small provision tucked into the Small Business Jobs Act, “it could be a game changer.”

Sources used:

Associated Press. “Senate passes small-business aid bill.” The New York Times. Sept. 16, 2010.

Clifford, Catherine. “Senate OKs small biz jobs bill.” CNN Money. Sept. 16, 2010.

Clifford, Catherine. “Small business loan programs need cash ASAP.” CNN Money. Aug. 24, 2010.

Cornwall, Jeff. “Small business bill won’t actually help small businesses.” The Christian Science Monitor blog. Sept. 17, 2010.

Murphy, Patricia. “Bill giving loans to small businesses clears the Senate.” Politics Daily. Sept. 16, 2010.

Self Storage Association. “2010 Fact Sheet.”