Where's The Stimulus For Small Business?
Melanie Lindner and Maureen Farrell 02.24.09, 3:20 PM ET

You could hear plenty of groans as President Obama signed the $787 billion American Recovery and Reinvestment Act into law--not a few coming from entrepreneurs and their small-business advocates.

"The stimulus is not awful, but I don't know why there isn't more money for small businesses," says Scott Hauge, president of CAL Insurance & Associates, and founder of Small Business California, a nonprofit organization. "We'll probably be the ones to take out these problems. That's traditionally been the case."

While Congress pushed through spending increases for federal agencies, critics say there are relatively few juicy set-asides for small businesses. As for the Small Business Administration, the law allocates an additional, one-time $730 million infusion for the agency (which encourages bank lending by subsidizing small-business loans), on top of its $570 million operating budget last year. Critics argue that the additional funds are a far cry from what is needed to give many small businesses a legitimate boost in this economy.

Dig into the 1,000 page law, though, and there are some bright spots for small fry--including grant programs, tax cuts and public works projects. Here are a few:

Green for Green

Of the estimated $80 billion aimed at "greening" the economy, a big chunk will boost demand for solar-powered homes. Under the law, all Americans can now qualify for a tax credit equal to 30% of solar-based renovations. Prior to the law, homeowners who had received green credits from states or municipalities wouldn't be eligible for additional federal help--now they can double dip. (Of course, there are fewer home improvement dollars to go around these days.)

The government also will offer grants of up to 30% of the cost of major commercial renewable energy projects, including windmills and solar-panel-covered rooftops and windmills. Federal buildings will get a green makeover, too. Those projects ought to keep a few small contractors busy for awhile--assuming, of course, they can nab the work.

Restorative Refunds

Tiny businesses (those with less than $15 million in gross receipts) can now claim tax refunds by applying operating losses suffered in 2008 and 2009 to shield taxable income from the previous five years, up from just two before the law.

Greater Research Grants

Federal agencies, including the National Science Foundation and the Departments of Energy and Defense, will enjoy some of the largess--and that means increased funding for start-ups via affiliated research efforts, such as Small Business Innovation Research (SBIR) grants and Small Business Technology Transfer (STTR) programs, which together now account for $2.2 billion in grants. The research being funded must be in line with an agency's mission, but it can certainly have commercial potential. For instance, $100,000 Phase 1 grants are for early-stage research; later-stage study can garner grants worth up to $750,000. (One exception: There will be no additional funding for National Institute of Health's SBIR program, despite a $10 billion increase in that agency's annual budget.)

Healing Health Care

About $140 billion of the $787 billion will go to spruce up the health care industry, including $19 billion to install systems required to store and transfer medical records online. That should give a boost to small technology contractors.

Busy Broadband Bees

Small broadband providers are poised to grab a chunk of the $7.2 billion allocated to the expansion of broadband access throughout the U.S., says Shawn Osborne, chairman of the Telecommunications Industry Association, a group of 1,500 equipment manufacturers and service providers. Much of that money will come through grants doled out by the National Telecommunication and Information Administration and will be aimed at improving broadband access to rural areas. Small providers will be eligible to bid on the same grants as their larger counterparts, says Osborne.

Charging Up

Some $2 billion will go toward battery research and development, where many small players--many funded by venture capital--are duking it out. Once American automakers start cranking out more hybrid and electric cars, the battery market will break wide open says Scott Chou, partner at Gabriel Venture Partners in Silicon Valley. The grants could be the final push for small outfits on the verge of a breakthrough.