New Bill Could Make Small-Business Loans More Affordable
The ABC Act would give community banks a tax break on interest income from small-business loans.
A new bill, the Access Business Credit (ABC) Act, introduced by Rep. Andy Kim, D-N.J., would encourage banks to make small-business loans more affordable amid rising interest rates.
The ABC Act would allow community banks to exclude qualified interest on small-business loans from their gross income.
The bill “would allow banks not to pay taxes on the interest income they receive from these smaller loans,” Jeff Bush of The Washington Update told ThinkAdvisor Tuesday in an email. “Theoretically, banks could pass along those savings in the form of a lower interest rate to the borrower.”
Under the bill, eligible banks can deduct two types of interest, if neither type exceeds $5 million:
- Interest incurred in the ordinary course of business of a small business
- Interest secured by land used or held by a small business in conjunction with farming operations
Qualified lenders could have no more than $50 billion in total assets.
The ABC Act has been endorsed by the Chamber of Commerce and the Independent Community Bankers of America, or ICBA.
If the bill were to pass, advisors could inform their clients of the more affordable loans, Bush notes.
The bill, according to Kim, a member of the House Committee on Small Business, “would utilize the U.S. banking system to incentivize small business lending and help expand credit availability and job opportunities for local entrepreneurs.”
Small businesses, Kim added, “employ roughly half of the nation’s private-sector workforce.”