How does the Real Estate Crisis Affect Small Business?

Restoring confidence in the housing market is crucial to restoring economic growth.

It is estimated that 45 percent of outstanding small business loans are collateralized by some type of real estate asset. Many business owners often rely on the equity in their homes and widely use home equity loans and lines of credit.

The housing sector's weakness affects not only home builders, realtors, mortgage brokers, and others directly involved in home sales, but also related small businesses that provide services such as home improvements as well as home products.

Many small business owners in these industries will most likely not to see a turnaround in their own bottom lines until the real estate market rebounds.

The House Small Business Committee is studying a number of tax incentives that benefit small firms caught up in the housing crisis. Among the initiatives being discussed is a Super SBA Small Business Loan Program. It would provide "low-doc," expedited SBA 7(a) loans of up to $250,000, with reduced lender and borrower fees. The government would guarantee 85 percent of the loan. The idea is to expedite loans to small businesses to help them expand and create jobs.

Another measure proposed would grant immediate relief from the Alternative Minimum Tax (AMT) for the 2008 and 2009 tax years and would increase after-tax income for small business owners by sending rebates directly to taxpayers.

These measures are just being discussed and are not a sure thing.