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Democratic nominee Kamala Harris proposed several policies this week designed to help create and grow small businesses across the country if she wins the presidency in November. She spoke to a crowd in New Hampshire about these new policies as well as making the country’s overall business climate friendlier to startups.
Among the most ambitious of her plans is to expand the small business tax credit from $5,000 to $50,000. Considering that the average new business owner spends around $40,000 in the first year, this tenfold increase in tax breaks could go a long way in helping new entrepreneurs get through difficult beginnings.
This proposal would also give new businesses the opportunity to claim the credit after they turned a profit, which can carry some significant tax benefits. Harris talked, too, about making it easier for businesses to file taxes and offering federal incentives to relax local and state regulations to better foster small business growth.
The speech aligns with Harris’ goal to see 25 million new businesses formed within the first term of her presidency. If she succeeds, this would be a substantial increase from Joe Biden’s presidency in which a record 19 million new business applications were filed.
Republican nominee Donald Trump has made a number of promises during his own campaign to help small business owners. Should he win in November, Trump has pledged to reverse or weaken many of the Biden administration’s labor regulations, which could help employers. He also plans to build on his 2017 Tax Cuts and Jobs Act and allow larger tax deductions for partnerships and S-corporations. However, Trump has promised to increase tariffs on foreign goods — a move that could significantly increase the cost of core materials for many companies and customers alike.
Current challenges for small businesses
These campaign promises come at a time when many consumers and businesses alike are feeling the pressures of inflation. Small businesses face a challenging landscape — especially when the cost of living rises — and while higher tax breaks can be helpful, some think that isn’t enough to make meaningful change.
Todd Miller — president of Isaiah Industries, a metal roofing manufacturer based in Piqua, Ohio — believes startup funding should play a bigger role in candidates’ economic policies, regardless of who wins in November.
“The promise of a tax credit is not going to provide the immediate funds that startups need. And banks are reluctant to fund privately held startups,” Miller says.
A popular way of getting that funding is through Small Business Administration (SBA) loans. These loans are coveted by business owners because they are among the most flexible and affordable ways to secure funding for companies. These loans, which are backed by the federal government, tend to have more favorable terms and longer repayment periods than plans from other lenders. However, they are notably difficult to obtain and have a high rejection rate. In 2023, fewer than 60,000 applicants were deemed eligible for SBA 7(a) loans and even fewer were approved for 504 loans.
“Currently, the SBA only guarantees loans that banks are willing to make,” says Miller. “Banks loan against cash flow more so than against assets when it comes to business. In my opinion, the SBA stepping out and providing direct loans with no intermediary bank to startups and even existing businesses seeking growth would be more beneficial than tax credits or deductions.”
While there are plenty of other SMB lenders on the market, the application process can be arduous and uncertain, especially for those with poor credit and high debt. Businesses in bad financial shape are often forced to go with a bad credit business loan with less favorable terms than what the SBA or other lenders offer.
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