Across the US, new small businesses like Northtown Pharmacy of Jackson, Mississippi are opening their doors, signaling the tides turning toward economic recovery. With the help of a Small Business Boost (SBB) loan, Dr. Andrew Clark was able to launch his independent pharmacy on June 1st. SBB loans are offered by financial institutions like BankPlus and the Federal Home Loan Bank (FHLB) of Dallas, which funded Clark’s new enterprise.
What Exactly are Small Business Boosts?
Small businesses like Northtown Pharmacy face the obstacle of freeing enough capital to purchase inventory, hire employees, and generally get their operations off the ground. If the business does not have enough equity, they may not qualify for the loan amount they need. The Small Business Boost is intended to help with this challenge. Through this economic development program, small businesses can get loans from financial institutions like BankPlus who are members of the FHLB of Dallas—a government-sponsored bank that supports community investment. The FHLB provides “gap” funding to cover the difference between the loan the business requested and the amount the lender can offer.
What Benefits Come with Small Business Boost Loans?
Small Business Boost loans come with certain benefits that are key for small business growth. For example, the borrower does not have to start repaying the loan until the second year after taking out the loan. This can be critical to helping a small business build cash flow. The SBB focuses on affordable housing, stimulating small business development, and providing small business technical assistance. Member institutions in Arkansas, Louisiana, Mississippi, New Mexico, or Texas can apply.
SBB funds can be used to start or expand small businesses by funding working capital, building or land purchase, construction, or other foundational costs. In turn, the business must contribute to the local economy by creating or retaining at least one job for every $50,000 loaned. Northtown Pharmacy expects to hire up to five employees.
Borrowers interested in SBB loans must run a qualified small business as defined by the SBA. Many government benefits seek to support this category of businesses, including the federal tax exemption for qualified small business stock (QSBS). QSBS can be sold without incurring capital gains tax, which can make investment in small businesses a much more attractive option for investors.
To explore the benefits of a small business investment, visit our QSBS Basics webpage.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.