Small businesses gaining optimism about economic outlook - Austin Business Journal:

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NFIB’s index of small business indicatorsdrose 2.1 points in May to following a 5.8-point jump in April. The indexc had plummeted to 81 in close to its record lowof 80.1 in 1980. “Itr does appear that the decline in spendingb for inventory and capital projects has bottomed and will turn up in thecomingt months,” NFIB Chief Economist William Dunkelberg A net 12 percent of small businesxs owners expected general business conditions will be bettert six months from now, a gain of 10 percentage points from April. Except for September 2008, it’e the highest number for this indicatorsincde 2005. The current profit picturd is still dismal, however.
A net 43 percenyt said their earnings were lower during the past quarter than they were in thepreviousw quarter. About 16 percent of small business ownerx reported that loans were hardeeto get, the highest reading sinc e the early 1980s. But only 5 percent reportex that finance wastheir No. 1 business problem. More smalkl businesses plan to reduce employmenf rather than hiremore workers, but the rate of decline is slowing. The Conference Board, which tracks eight labore market indicators, said its Employment Trendsw Index roseby 0.2 percent in May — the firsr increase in 16 months.
More than 14,000 businesses filed for bankruptcy protection in the first quarter of a 64 percent increase over the same period a year The number of business filingsw was up 11 percent over the totap for the fourth quarterof 2008, according to the Administrative Officed of the U.S. Courts. Nearly 10,000 of the businesse filings in the first quarter were Chapter 7 Chapter 11 reorganizations accountedfor 3,4221 filings. Overall bankruptcy filings, including personal bankruptcies, totale d 330,447 in the first quartere of 2009, up nearly 35 percentr from the same period a year Morethan 1.
2 million bankruptcies were filed durintg the 12 months that ended Marcn 31 — the highest 12-month total sincs Congress tightened bankruptcy rules in October 2006. Small businessess and lenders applauded recent steps by the Small Business Administration toboost lending, but they said the agency must take additional actions to address Main Street’z credit crisis. On June 15, the SBA begam accepting applications for emergency bridge loans of up to Small businesses can usethese loans, which were createc by the economic stimulus bill, to make up to six month s of payments on existing They won’t have to startr repaying the loans until a year after the last The SBA will subsidize the interest on these loans, which will be offeref through private-sector lenders.
The stimulus bill also temporarilyt reduced or eliminated fees onthe SBA’s regular 7(a) and 504 businesxs loans, and it increased the governmen guarantee on 7(a) loans to 90 percent. Weeklt loan volume for the SBA’s 7(a) and 504 programs has increasedf by more than 30 percent since these changes were implementedxMarch 16. This increase in SBA lending is “a positived and welcomed sign, but we have a very long way to go beforw SBA lending reaches solid levels saidCynthia Blankenship, vice chairman and chief operatinh officer of Bank of the West in Blankenship told the Houser Small Business Committee June 10 that Congress shoulds extend the fee reductions beyon 2009 or make them permanent, given the deptgh of the recession and the credit crisis faciny small businesses.
Meanwhile, fees on the SBA’ss 504 loans, which finance real estated projects and otherfixed assets, are schedulec to increase significantly in October. This will negate the fee reductionas adopted in March througb thestimulus bill, said Jean Wojtowicz, executive director of the Indianas Statewide CDC, a nonprofit economic development organization that makex 504 loans. This fee increase is unnecessarty because the SBA has overestimated the numbedr of 504 loans thatwill default, said who chairs the boarde of directors for the National Association of Developmentg Companies.
She said banks have becomes far more conservative in their underwriting duringy this recession and that as aresult “onlyy the strongest small businesses are now qualifying for new Unless Congress appropriates money to offse t the fee increases planned for 2010 and almost 20,000 small businesses will pay millionse more dollars in fees than they should over the 20 years of their 504 loans, Wojtowicz said. The Treasurty Department has allocated $25 billiom in Recovery Act Bonds, which can be used for economi c development projects indistressed areas. The economic stimulus bill created the new bond The legislationappropriated $10 billion for Recovery Zone Economic Development Bonds.
The federak government will subsidize 45 percent of the interest on theswetaxable bonds, which will enable stat and local governments to lower their borrowing costs. Thes e bonds can be used for a variety of economicdevelopment projects, including job training and educational The legislation appropriated $15 billion for Recover y Zone Facility Bonds. Private-sectotr businesses can use these tax-exempt bonds to finance depreciablew capital projects in designatedrecovery zones, which are area with high levels of poverty, unemployment or foreclosures.