Archive for

Your Business Can Access Working Capital

The number one reason that businesses fail is due to insufficient capital (they run out of cash). According to Bloomberg 8 out of 10 business owners fail within the first 18 months. Another 50% fail in the first 5 years. Other reasons businesses fail include; lack of experience, bad location, entering over saturated markets, over investment in fixed assets, unexpected growth and poor credit arrangements. Let’s add one more to the list; not knowing where to go to access working capital.

Most businesses owners invest their own personal money to keep the business going. Some will go to friends and families. Some will try the bank. But if you don’t have a lot of assets to pledge, a proven track record, a good credit rating or are not yet profitable, the chances are the bank is going to turn you down. So where do you go to get a loan to take your businesses to the next level?

There are private companies that will provide a loan to a business that has daily cash flow, as long as some basic requirements are met. A business owner does not have to pledge assets or have a great credit rating. There are viable financing alternatives, to receive business funding that are not considered loans. Business funding programs do exist where you are not required to pledge assets, have great credit or a long proven track record. A word of caution, do not expect to get the same rates you would get from a bank. These private lenders are taking on more risk than a bank, so a higher return on their investment is expected. Some of the available business financing options include, a Merchant Cash Advance, a Small Business Loan, Purchase Order Financing, Invoice Factoring and Supply Chain Financing.

Merchant Cash Advance

If your business accepts credit cards and debit cards there is a program called a Merchant Cash Advance that has very high approval rates. A business owner does not have to sign personally or have good credit. A Merchant Cash Advance is not a loan but rather a purchase of your future credit card / debit card receipts. The advancer will buy a future amount of credit card receipts / debit card receipts at a discounted rate. A small portion of a businesses daily sales will be taken by the advancer until the amount is re-paid. Typical payback is 6 to 10 months.

Small Business Loan

There is a small business loan available for business owners. The lender is more concerned about a company’s daily cash flow then about credit ratings and the ability to pledge assets. The business owner does not have to sign personally. This small business loan has very high approval rates, with some basic requirements for funding. The lender will take a small fixed amount of daily sales until the loan is repaid. The term of the loan is one year.

Purchase Order Financing

Has your business been working on landing a large contract? Congratulations you just received that long awaited purchase order. As you admire your new conquest you see some small print with the words Net 30, 45 or 60. Your business may have a cash flow issue. Vendors and payroll may have to be paid before you receive payment from your customer. If your business does not have enough available working capital or access to working capital to wait to get paid before you have pay your vendors and staff then what do you do? If your purchase order is from a reputable company then your business may be able to receive a cash advance against that purchase order. The purchase order itself is a legal agreement to purchase a product or service from your company. A lender will know that the customer will pay as long as you fulfill your end of the contract and advance you enough money to ensure you meet your contractual obligations. A lender will be concerned with the customer’s ability to pay, and your ability to fulfill the contract. They will not be as concerned about a businesses credit rating or the pledging of additional assets.

Invoice Factoring

A company can be profitable and still go out of business due to poor cash flows. What a profound statement. A cash flow gap can be created when a customer pays slower than a company has time to pay its employees and vendors. The company is waiting for customers to pay before it can pay its own expenses. This can be a very serious situation and cause a profitable company to go out of business. Fortunately there is an alternative financing solution called Factoring of Invoices.

Factoring invoices is a business financial transaction where by a business sells its accounts receivable (invoices) to a lender (factoring company) at a discount. For this type of business financing there are three parties involved. One is the company that provides the service or goods to the customer, two is the factoring company that will provide the company with an advance, and three is the end customer that received the goods or services. When the company provides goods or services to the end customer an invoice is created. That invoice is then purchased by a factoring company at a discount. The factoring company will advance the company a large portion of the value of that invoice.

The end customer will then pay the factoring company directly the value of the entire invoice. When the end customer pays the invoice, the factoring company will send the remaining amount of the invoice minus a small fee to the company that factored the invoice. Consider the following scenario: A company completes a service or sells goods to an end customer that typically takes 30 days to pay. Almost immediately after the transaction happens a factoring company will advance the company a large portion of that invoice. The company now has most of its funds available, almost immediately, to pay it’s suppliers, complete payroll or what ever else they would like to do with the funds. Once the end customer pays the invoice the remaining amount is forwarded to the company minus a small fee. Factoring of invoices can help out tremendously with cash flows, especially if a company is in a growth period. Factoring companies are not as concerned about the companies credit rating as they are more concerned about the customers ability to pay.

Reverse Factoring or Supply Chain Financing

This method of business financing is much like invoice factoring. The difference is, traditional factoring is when a supplier chooses to factor the invoices to their customers but with reverse factoring or supply chain factoring, the customer initiates the factoring to help their suppliers to finance their receivables. Reverse Factoring or Supply Chain Financing can be an effective way to improve your cash flows. The benefit to both parties is that the company providing the goods or services can get the outstanding value of their invoices paid very quickly and the ordering company can delay the payment of the invoices, thus improving their cash flow position.

In business today, it is so important to be able to access working capital. Rest assured that there are business financing options available to you. Know your options.

7 Small Business Tax Deductions That You Don’t Want To Miss

Are you neglecting to deduct business expenses on your tax return?

You could be leaving money on the table. Whether you’re an established entrepreneur or just setting up shop, you can save thousands of dollars in tax deductions. So which expenses qualify? To receive a tax deduction, business expenses must be necessary and typical for the type of business you run.

There are exceptions to the rule. You can’t write off speeding or parking tickets. But don’t let this stop you from saving serious money on your tax return. Place those dollar bills back into your wallet by adding these commonly overlooked business expenses to the list.

1. Costs to Keep Your Business Running

As you maintain your business, you’re bound to purchase office supplies and advertising. But did you know that you can also write off equipment repair, business calls, and office furniture payments?

There are limits though.

  • If your business goes under, you can’t deduct costs for exploring a business opportunity. But you can deduct costs for products, materials, and supplies in your inventory.
  • You also can’t completely deduct costs from starting your business. Instead, you can deduct up to $5,000 the first year and write off any remaining startup costs periodically over the course of 15 years.
  • Every cent you invest into your business is referred to as either a capital expense or a current expense.

Capital expenses are your business asset purchases, long-lasting equipment that will continually improve your business in subsequent years. Because capital expenses normally don’t wear out after the first year, these expenses are depreciated and deducted over a period of time.

Current expenses are charges for equipment or services used every day to maintain a profitable business. They’re normally used up in the first year, so you can deduct the total cost of current expenses on your tax return.

  • Repairs that add value to equipment, prolong the lifespan, or adapt an item to a different use can be deducted on your tax return.
  • Advertising fees to create promotional materials like business cards and print, radio, yellow pages, and banner advertisements are completely deductible.
  • If you regularly use the phone to call clients or customers, you can deduct charges relevant to your business.

Be forewarned though: if you try to mask personal purchases by claiming them as business expenses, you might be in deep waters when your tax return triggers an audit.

2. Home Office Fees and Rent

Do you work from home? Deduct a portion of rent, insurance, and utility payments if you have an office that is dedicated to business.

There is one drawback. Your office has to be exclusively for business use.

It’s fine to work in your slippers, but you can’t take a home office deduction if your bed is in the room unless your office is sectioned off. You also can’t let your children play Legos in your workspace. And you most certainly can’t watch TV in your office during downtime.If you do, your office won’t be considered exclusively for business.

You also have to use your office consistently to take advantage of the home office deduction. Feel free to call clients, bill customers, take notes, set appointments, meet with clients, order materials, or write reports in your office. But an office that you only use occasionally doesn’t count.

There are exceptions to the rule. If you run a daycare business or you have a room set up for inventory storage, you can still take the deduction even if the room isn’t used 100% for business.

3. Auto Payments

Did you know that you can deduct the cost of gas consumed while driving to and from client meetings?

Whether you own a real estate business, regularly meet with clients, or rent an office away from home, you can save hundreds of dollars on your tax return.

Use your car for business? You can calculate your deduction one of two ways.

  • Deduct based on the standard mileage rate. If your regular business routine requires that you constantly be on the road, you might be able to save more by deducting a certain amount of money after every mile driven, along with toll and parking costs.
  • Deduct actual expenses. If you occasionally meet with clients or your car consumes more gas than average, you can save a great deal more by deducting a portion of expenses for gas, replacement tires, oil changes, insurance, and car registration.

Always keep an organized record of your car usage, and filing your federal and state income taxes will be as simple as doing a few math calculations.

4. Travel and Entertainment Costs

Do you remember that vacation deal you purchased right before your last business trip?

Write off a portion of your plane fare, depending on how you spent your vacation. Part of your transportation costs is qualified as a deduction if over half of your trip was spent on business. The more time you devoted to your business, the higher the deduction.

Needed to pay for clean clothes while you were away? You can deduct laundry and dry cleaning expenses. You can also deduct commuting costs, lodging fees, tips, fax charges, and costs to ship product samples and display materials.

Moreover, if you’ve ever hosted an event for your business at your office, restaurant, or another location, you can deduct entertainment expenses that helped promote business growth or well-being. Keep in mind that only 50% of meals are deductible.

You can even deduct moving costs if you had to relocate your home because of work. If the move wasn’t directly related to your business though, you can’t claim the deduction.

5. Educational Materials and Professional Fees

Have you purchased a book to learn a skill that would directly impact your business? How about that copywriter you hired to craft a sales page that would later transform a product launch into a massive success?

Business-related books, legal fees, and professional services are all fully deductible on your tax return.

You’re not just limited to books and independent contractors though. If you pay an accountant or purchase a tax program every year, you can deduct tax preparation fees.

Own a business with hired staff? You can reduce taxes by deducting salaries, bonuses, and fringe benefits like health insurance and sick leave.

6. Bad Debts

If you sell your own services, you’ve likely stumbled across an occasional troublesome client. Your client might refuse to pay you for work performed, lowering your profit margin for the month. Maybe you’ve even loaned money to customers or suppliers, but the loan was never paid off.

Luckily, this income loss is completely deductible as long as you provide written documentation stating the amount of the debt, interest rate if applicable, and the steps you took to collect the debt. If you can prove that you’ve made several attempts to receive payment and the debt is impossible to collect, you can write it off on your tax return.

Save your hard-earned cash at the end of the year by keeping a detailed record of business-related purchases and activities. You can use financial software to help with this, but simply opening an excel spreadsheet to jot down expenses as they pop up works as well.

Separate payments into clearly marked categories and you’ll save both time and money the next time you file taxes.

7. The Hummer Deduction

Has your business purchased a car or a large machine recently? This can be converted into a large tax benefit using “The Hummer Deduction”, also know as section 179 of the tax code. Learn More

Disclaimer: You should consult with your tax advisor before following any of the ideas in this article. This article is a starting point for discussion with your advisor. I am not a tax professional and while I believe that what is contained in this article is generally true, it may not be true in your particular case.

10 Common Online Business Blunders

Because of the internet we all have the opportunity to make our own success and live the life of our dreams. But this does not mean that building a thriving internet business is easy or a way to “get rich quick”.

Starting and building an established online business takes commitment, persistence, hard work, and the drive to make it succeed. Unfortunately many people are led to believe it is as simple as putting up a website, placing a few ads and watching the money pour in.

That is exactly what I thought over 16 years ago when I first started online. I learned fast that building an online business would be much more than I ever imagined. While teaching myself how to make my business successful I made many mistakes. But I persisted and worked very hard. Then a very exciting thing happened. I started experiencing the benefits of success – both financially and personally. I find this work to be very rewarding in many ways and would recommend to anyone to stick with it and make it happen for yourself!

Mistakes are a very valuable part of building a business if you learn from them. Use your mistakes to your advantage. Below are some of the most common mistakes we can make when developing an online business.

1. Not Choosing Your Passion – In order to build a successful business you have to do something you are passionate about. It is hard to work 16 hours a day on something in which you are not interested. What do you love? What can you see yourself doing that you would not consider a “job”? I have always been a lover of books and wanted to own my own bookstore. The internet allowed me the opportunity to make this dream come true!

2. Unrealistic Expectations – As I mentioned earlier, so many people are misguided into believing that making money online is quick and easy. Please do not fall into this trap! Make sure you are ready and able to put the time and effort into your business. Be prepared to work months or even years before reaping the benefits of success. Expecting unrealistic success is one of the main reasons people give up too quickly.

3. Too Much Preparing, Not Enough Doing – It is a good idea to plan for your business but at some point you actually have to start doing something to get your business going. I know one lady who spent years going to seminars, paying money for complete business packages, buying books, etc. In all this learning, listening and paying out money, she never did start a business. This is also an easy trap to fall into. Yes, you do need to do research and learn but don’t make that your business.

4. Too Much Flash – A business website should be clean, sharp, easy to navigate and professional. Don’t buy into the idea that you need music, flashing lights, or excessive clutter on your site. If you do offer music or a video give people the choice to listen or watch. Don’t have it automatically play when a visitor arrives. Don’t put too many banners, ads or flashy graphics on your site either. This will only result in slow loading time and losing visitors.

5. Being Too Personal – Although a small personal touch added to your business is a good thing, don’t fill your site with pictures of friends, family vacations, or your life in general. Don’t overdo on telling of family stories, get-togethers, etc. Business and personal life must maintain a degree of separation. Create a personal bond with your customers but don’t overload them with your own personal life.

6. No Online Support – Don’t try to go it alone. Contact other online entrepreneurs. Join groups. Network and obtain support from business associates. When I first started I knew a lady online who encouraged me to start my own newsletter. I had many doubts but she convinced me I could do it and that was a big step towards my success. I will never forget her or the help she gave me when I needed it. You can find many more experienced online business owners who will gladly help beginners and other business owners.

7. Treating Your Business Like a Hobby – I have seen this so many times. People mistakenly start an online business thinking they can work it when they have the time. They say their family comes first and will get to it when they can. This is definitely not true. Your business needs your full attention and you must give it the time it needs to flourish. Yes, my family came first as well which is exactly why I started online. You cannot treat your business as a, “I’ll get to it when I can” project.

8. Doing Too Much – Another unfortunate trap I have seen many people get caught in is signing up for multiple business opportunities and thinking they can make them all work. I have seen people trying to run as many as five different businesses. Spreading yourself too thin will accomplish nothing. You should decide on one business at which you will work your hardest and focus your complete attention on making it a success.

9. Not Keeping Up to Date – Running a business is an ongoing process. You need to always be learning, studying new marketing techniques, watching your competitors, etc. Don’t fall into the “if it works, don’t fix it” routine. Just because your methods are working now, doesn’t mean they always will. You have to keep on top of things!

10. Grammar and Spelling – This is an oldie but a goodie! Over the years I have seen some grievous errors in spelling and grammar. Please be sure to proofread and correct any mistakes made. If necessary, have someone else proofread for you. Fresh eyes can catch mistakes you may have missed. I have made some of these mistakes as well so I regularly have someone proofread my work. If you are not sure of the spelling of a word or proper use of grammar, look it up. Your business and your reputation are certainly worth the extra effort!

I have made several of these errors and have definitely learned from them. Developing an online business can certainly be overwhelming and frustrating at times but if we commit to it, we can do it. Do not give up! Make your dream come true!