Small Business
How to Use Factoring for Cash Flow
Companies facing a cash-flow squeeze and slow-paying customers often sell their invoices or accounts receivable to specialized companies called factors. The factor advances most of the invoice amount — usually 70% to 90% — after checking out the credit-worthiness of the billed customer. When the bill is paid, the factor remits the balance, minus a transaction (or factoring) fee.
Companies that use factoring like it because they get money quickly rather than waiting the usual 30 or 60 days for payment. After sending an invoice to a factoring firm, a business can have money in its hands within 24 to 48 hours.
Some businesses use factoring to get started. Whereas banks focus on a business’s creditworthiness in considering whether to make a loan, factors look at the Continue Reading
Tax Strategies for the Newly Self-Employed
If you’re a staffer turned contingent worker, you need to rethink your business status, retirement funding, and deductions
It used to be that the vast majority of people worked in staff jobs.
But in a tough economy, the number of independent contractors, temps, part-timers, and freelancers expands.
If you become a contingent worker, you’ll need to rethink your taxes. For someone used to being on staff, “It’s a mindset shift,” says Eddie Gershman, a partner in Deloitte Tax’s private client group. The common perception is that you’ll pay more tax if you work for yourself, since you’ll cover the employer portion of Social Security and Medicare taxes. While you will be on the hook for that self-employment tax, the tax Continue Reading
Will Small Business See Health-Care Cost Relief?
Yes, insurers are price-gouging small companies. Bills in the House and Senate would help them fight back
Entrepreneurs have long groused that their health plans are charging them premiums far in excess of the amount required to provide care for their employees. Now a Senate Commerce Committee analysis of just how much insurers spend on health care offers some support for that complaint. In 2008, five large insurers—WellPoint (WLP), UnitedHealth (UNH), Aetna (AET), Humana (HUM), and Coventry Health Care (CVH)—spent just 80% of the premiums they collected from small companies on actual health care. (The rest goes to items such as marketing, administration, and profits.) For big-company clients, the five paid out slightly more—84%. Len Nichols, director of the health policy Continue Reading
Online Retailers: An Early Holiday Peak?
Aggressive, early discounts by e-tailers prompted heavy buying through “Cyber Monday,” but consumer holiday spending could falter overall
What began as a strong shopping season for online retailers may fizzle as cash-strapped consumers quickly exhaust tight holiday budgets.
Lured by steep discounts, consumers showed a propensity to spend as yearend shopping got under way after Thanksgiving. By late afternoon on Nov. 30, the day’s online sales were up 11% from a year earlier, according Continue Reading
Goldman Sachs Announces $500M in Aid to Small Business
Lords of high finance may seem unlikely sources of aid for small businesses. But Goldman Sachs (GS), along with Warren Buffett and several education and nonprofit groups, today announced a $500 million charitable project to aid small businesses over five years.
Goldman will invest $300 million in community development financial institutions, lenders that focus on economic development in low-income neighborhoods. The program will also provide $200 million in scholarships for business owners to get training at community colleges and other institutions. Loans and classes funded through the program are set to begin early next year.
The initiative, dubbed 10,000 Small Businesses, seeks to drive smalll business job growth by combining business education, mentoring and Continue Reading
Snowe’s Push to End the ARC Loan Program
The SBA’s ARC program has faced criticism for onerous paperwork, meager bank participation, and high default rates. Maine’s Senator Snowe now wants to repeal it
Senator Olympia Snowe (R-Me.) introduced a bill Nov. 16 to repeal the small business ARC loan program, a stimulus-package initiative she helped create. Too many borrowers are defaulting on the government-backed loans intended to buoy struggling businesses, Snowe says.
As the ranking Republican on the Senate Small Business & Entrepreneurship Committee, Snowe originally supported the ARC loan program along with other small business committee leaders in Congress from both parties. But she reversed course because the loans are projected to default at sky-high rates approaching 60%, according to the Continue Reading
How to Not Go Out of Business
Start by studying how your best customers interact with your brand and its competitors, then brainstorm ways to address any shortcomings
Have you ever thought about how banking has evolved over the past 20 years?
The other day, as I maneuvered my car past the drive-up ATM, I was telling my kids about the way things used to be. Like when I had to plan ahead and make sure I got to the bank by 3 on Friday to deposit my paycheck and get spending money for the weekend. Or how I had to buy travelers checks so I didn’t risk losing a wad of cash while on vacation. Or when I actually had to hand-write checks, one at a time, then stuff, seal, stamp, and mail the envelopes to pay my bills.
My kids, not surprisingly, found this description of how banking Continue Reading
Can The Free Market Save Small Businesses and Nonprofits?
The fantasy of conservatives and progressives alike is that the free market will solve the increasingly desperate woes of small businesses and nonprofits. It’s not entirely impossible, but it does require an entirely new way of thinking about the problems of these struggling entities.
Earlier this week, we announced a new service, The Cost Savings Guy. For the past six months, I have been leading the development of this initiative, which I passionately believe has the potential to change the fortunes of the millions of small businesses and nonprofits that are struggling to stay afloat.
This article is a discussion of what I learned over the past six months and its broader implications for how the nation approaches job creation. In the first part of this article I Continue Reading
Small businesses call for more bank lending to help recovery
They are the backbone of the economy, but small businesses are still finding credit expensive and hard to come by
The recovery of the British economy is being hindered by the problems of the crucial small business sector in accessing credit, according to lobby groups.
As official figures show lending to businesses is continuing to fall, the country’s largest companies are bypassing the banks and issuing corporate bonds in record volumes to get funds.
But small and medium-sized firms (SMEs), which are the backbone of the British economy and crucial to any prospects of recovery, cannot tap the international capital markets. They have to go to their bank Continue Reading
Start Your Own Business, Now
With the national unemployment rate near double digits and credit markets tight, now is a great time to start a business. Really, it is. Think about it: thousands of workers can’t find jobs, so the talent pool is large and cheap. Good jobs seem less secure as companies cut hours and salaries so people are more likely to risk working for a startup. True, loans and venture capital funding are harder to secure. But even that is more of a hurdle than roadblock. Bootstrapping an entrepreneurial idea with your own capital is often the best way to go, says James Shein, a professor at the Northwestern University Kellogg School of Management. “It’s so hard to raise money during a recession that people now have to sort through their ideas.”
Many successful companies Continue Reading
Minimal Requirements for Working as an Independent Contractor
When you do freelance or consulting work, there are a few things you must do to stay out of trouble with the law.
Many independent contractors and service providers start earning money without really planning on it. Before they know it, their sideline projects have become legitimate businesses — which means that they have to fulfill some basic business start-up requirements. Whenever you provide services and get paid, you must comply with a few governmental rules, even if you work only a few hours per week for one or two clients.
At a minimum, do these three things when you’re first starting out as an independent contractor:
- Choose a business name (and register it, if necessary).
- Get a business license (and any vocational license required Continue Reading
Seven Ways to Boost Productivity
For many small-business owners, the recession created unprecedented pressure to cut costs, trim their staffs or enact hiring freezes. Slow sales and a tight lending environment left human capital at a high premium.
With few options but to get creative or close up shop, many small-business owners devised new ways to squeeze more productivity from their existing workers.
At Skip’s Florist & Gifts, owner Sanford Skolnik saved his company roughly $65,000 a year by making it more efficient. When the economy began to turn, Skolnik examined his Toms River, N.J., flower shop’s expenses and looked for ways reduce costs. He renegotiated contracts with vendors, stopped ordering items that weren’t selling and let go three of his workers.
Skolnik not only Continue Reading
The Rise of the Homepreneur
New research shows the economic importance of home-based businesses: They account for more than half of all U.S. businesses and employ more people than venture-backed companies
More than half of all U.S. businesses are based at home. These companies often are dismissed as quaint hobbyist ventures, but new research suggests that’s a mistake. An estimated 6.6 million home-based enterprises provide at least half of their owners’ household income. Together these “homepreneurs” employ one in 10 private-sector workers, and by many measures they’re just as competitive as their counterparts in commercial spaces.
Ask Stephen Labuda, the 35-year-old president of Agency3, a Web development firm he Continue Reading
Small Businesses Could Face New Credit Squeeze
Business owners could face a new credit squeeze as early as next month, in what amounts to a gap period between the expiration of two popular stimulus provisions and the ramp-up of President Barack Obama’s plan to boost loans for small companies.
To be sure, the stimulus provisions – which lured hundreds of banks back to the small-business lending arena – could survive Continue Reading
How to calculate small business start-up costs
GOT a pen handy? To best estimate your start-up costs, you’ll need to make a list — and the more detailed the better.
A smart way to start is to brainstorm everything you’ll need, from tangible goods (such as inventory, equipment and fixtures) to professional services (such as remodeling, advertising and legal work). Then, start calculating how much you’ll need to pay for all those goods and services.
Some of the expenses incurred during the start-up phase will be one-time costs, such as the fee for printing up your brochures, creating your company or acquiring a permit, while others will be ongoing, such as rent, insurance or employees’ salaries. In general, it’s best to use a two-step process.
First, come up Continue Reading
Accounting 101: How to Keep Financial Records
Let’s take a look at the basic financial statements that every business owner should prepare and review on a regular basis: the profit-and-loss statement, the balance sheet and the cash flow statement. I asked Libby Ladu, founder of Right Brain Ventures and a financial advisor to entrepreneurs, to describe how each of these statements can help you understand your company’s overall performance and health.
Profit-and-loss statement.
This is a historical record (also known as an income statement) that shows how much you’ve made in revenues, how much you’ve spent and what your net income is over a specific period of time. The time period could be a week, a month, a quarter or a year, although monthly is the most common, Ladu says. The Continue Reading
Small Business Gets Breaks in House Financial-Overhaul Bill
Lawmakers are adding sweeping exemptions to financial-regulation legislation that would benefit small businesses, a move that is irking some consumer groups and liberal lawmakers who contend that could compromise the effectiveness of the overhaul.
Bills currently under consideration in the House exclude thousands of community banks from oversight by the proposed Consumer Financial Protection Agency, and transfer oversight of small investment advisers to state regulators. The latest move came Tuesday, when a House panel voted to exempt small public companies from complying with a provision of the 2002 Sarbanes-Oxley law, which was passed after a series of corporate scandals earlier this decade.
The task for Continue Reading
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