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Is it time for a small business loan?

Posted By Julie Smith, Horizon Community Bank, Tuesday, September 13, 2016

It’s time to invest in your business assets, be it a better location, new talent or updated machinery… and you’ve toyed with the idea of a business loan.

You’ve probably explored a million and one funding options, knowing funds from family, friends and credit cards isn’t an effective solution. But still, you hesitate taking on debt.

Is it time? Are you ready?

Let’s explore some possibilities.

IS THE TIMING RIGHT?

An honest evaluation of your business will help you decide if taking on debt is the right “next step” or something that isn’t in your best interests.

A few questions to consider include:

  1. Is your business profitable or operating at a loss?
  2. Are you borrowing funds to remain in business?
  3. Do you want loan funds for a want or a need?
  4. Do you have a strong business plan already written?
  5. What kind of personal AND business credit history do you have?
  6. How would you spend the borrowed funds?
  7. Will the investment directly impact revenue? Does that matter?
  8. Can you afford loan payments, even if accounts receivables were significantly late or if you lost a major client?
  9. What assets do you have available that a bank would consider as collateral?
  10. How will the borrowed funds provide a positive ROI or increase the value of your business?

UNDERSTAND WHAT TYPE OF LOAN YOU NEED

Business finance is complicated. Because there are dozens of types of business loans–short-term loans to cover temporary cash flow problems, equipment purchase loans, commercial mortgage loans–it’s important to understand the type of loan you need. After all, the “loan du jour” at the closest branch of a big bank might not be the best choice.

Once you understand exactly what type of loan you need, it’s easier to consider alternative funding options for that loan.

Not all banks or online lenders provide all types of loans. As a consumer, for example, you wouldn’t pay for a new car with a second mortgage on your home or a credit card – business loans are similar. You also wouldn’t go to a bank that specializes in consumer lending for a commercial loan.

There are dozens of types of loans, and you’ll want to match the need with the right lender, type of loans and terms you can afford.

It helps to discuss these things with a qualified banker (see our recent article on Right Financing) or spend time educating yourself online about options.

Looking for more information on smart reasons to get a business loan? We like this article on Entrepreneur.com.

If you’ve done your research and explored your options, but still feel uncertain it’s the right move, all is not lost. You have several other options.

THE ULTRA-CONSERVATIVE CHOICE: SAVE

To pay for new assets without taking on debt, the most conservative option is to take it slow and save your profits until you can afford the purchase, or wait until profits can consistently support an increase in payroll or accounts payable demands.

This zero-risk choice is safe, but the time required might be impractical or even harmful to your business.

PARTIAL-FUNDING

If you’d like to move a little faster, a combination tactic might serve you well: saving until you have a significant portion of the funds you need, then financing the rest. After all, who says you need to borrow 100% of the amount you need, right?

Just remember to keep enough cash on hand for emergency situations, such as a shortfall with payroll, or covering slow account receivables.

FIRST THINGS FIRST: REVIEW YOUR BUSINESS PLAN!

Once you’ve evaluated the options and you start to consider taking a loan, it’s always good to go back to the core of your business before you move forward. Review your business plan and improve it. Include financial projections for the next 3-5 years and make sure everything is in order.

By doing that, you will get a clearer vision of your future goals and will be able to make a more informed decision. Having everything organized in one place will also help your case in the bank in case you do decide to take out the loan.

Ready to talk to a banker? Give us a call today and schedule an appointment with a small business specialist. We’re here for you, no matter what’s on your horizon.

Tags:  arizona small business  business loan  small business 

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Can you use a business line-of-credit to purchase big-ticket equipment?

Posted By Julie Smith, Horizon Community Bank, Tuesday, July 26, 2016

New phone systems, specialized machinery, software with a hefty price tag, bulldozers or fleet vans… sooner or later, many businesses need to invest in some form of equipment.

It’s a natural progression as a business grows and ages.

For many, the knee-jerk reaction is to use an “already available” line of credit or operating capital loan to buy the needed equipment. It’s sitting there pre-approved and waiting to be used, the interest rate is reasonable and it saves time… it seems like an easy answer.

While it may be as simple as writing a check, a line of credit might not be the best financing solution for new equipment purchases, however. It pays to think through alternatives and the long-term impact of each one.

LACK OF A FIXED TERM AND INTEREST RATE

Line of credit loans can have very attractive interest rates, but typically it’s not a fixed rate. It can flex based on the market at the time you borrow against the line of credit, so a major purchase might lead to a higher payment than you expect.

It also can flex based on the amount borrowed. If you use it to purchase equipment then need to withdraw funds to cover a payroll shortfall that pushes you over the borrowing limit, for example, your interest rate could increase substantially.

Even a single late payment can have a serious impact, turning a once low-interest loan into an expensive liability with years of payments remaining before the new equipment is paid off.

The variable rate on a line of credit can be very different than a fixed term loan, where a late payment might result in a one-time fee but won’t impact the interest rate.

Not only are the terms less friendly for this kind of expensive purchase, but you’re giving up the “insurance” of having readily available funds to draw on for immediate needs.

GOODBYE, SAFETY CUSHION

Most open a line of credit to have funds available if needed, which can then be paid down and re-used as needed. Unlike a fixed term loan that is paid off then closed, a line of credit is designed to be flexible as business needs ebb and flow. It remains open. If you use it to finance high-ticket items like equipment, your safety cushion is no longer available for unexpected emergencies, such as a payroll shortfall or holiday inventory needs. It can take years to pay off the balance.

Plus, once you’ve borrowed against the line of credit to its limit, there’s no guarantee a bank will be willing to risk lending additional funds if you have an emergency. You’ve backed yourself into a corner.

SHORT-TERM LOAN VS. LONG-TERM DEPRECIATING ASSET

Lines of credit are intended to be a short-term solution to a financing need. They’re also intended to be paid off quickly, much like a credit card. Using it to pay for expensive items that require longer terms to pay off and depreciate slowly might not make financial sense.

As a general rule-of-thumb, it’s a good idea to match short-term financing resources to pay for short-term needs, and long-term resources to pay for long-term needs. Here’s an example. If you need $30,000 for equipment that would have an expected lifespan of five years—say a new set of computers for your team of 18 graphic designers–and your business revenue would require around the same length of time to pay off that balance, financing it through a separate fixed rate loan would be a much better option than using a line of credit.

Not only is the line of credit free for other things, but matching your cash flow to how long something is expected to benefit your business makes sense. It helps you manage your cash flow effectively without draining cash reserves to make a monthly payment or reaching your borrowing limit.

SHOULD YOU CONSIDER LEASING THE EQUIPMENT?

Financing options for equipment aren’t limited to an outright purchase. If a start-up or small business doesn’t have the creditworthiness or profit margin that a bank requires, if the equipment loan dollar amount is high enough to exhaust its borrowing capacity, or if the equipment will require replacement in less than three years due to obsolescence, leasing can be a solid choice.

It results in a less expensive monthly payment and can offer opportunities to purchase, return, exchange or renew the lease on equipment once the original term ends. It also has a completely different impact on your company financials. An equipment purchase shows up on your balance sheet and may have deductible interest, but a lease payment is likely to be 100% deductible as an operating expense. Smart business owners might consider speaking with their tax attorney or accountant before making a lease versus purchase decision, along with bankers and lenders.

Obtaining multiple quotes on a leasing arrangement is also wise from a down payment and term perspective. If considering a non-bank lender, terms can vary drastically due to a general lack of regulation in their industry (compared to banks), and shopping your purchase can be very enlightening.

It’s also helpful to discuss different lease formats, such as a capital lease versus an operating lease. Each has a different impact on your bottom line and balance sheet.

QUESTIONS TO ASK BEFORE YOU DECIDE

According to William Sutton, president and CEO of the Equipment Leasing & Finance Association (ELFA), these ten questions can help you decide if a lease or purchase is your best option. While it’s not an exhaustive list and speaking to a banker is suggested, it’s a great place to begin.

  1. How long will the equipment be required?
  2. What is your monthly budget?
  3. Will the equipment become obsolete?
  4. Can it be used for other projects?
  5. How much cash is required upfront?
  6. Who receives the tax benefit?
  7. How will a working-capital facility be impacted?
  8. How flexible are the financing terms?
  9. Is additional equipment anticipated?
  10. Who can help determine the best option?

 To get more information about equipment funding alternatives and right finance options that fit your specific needs, visit a Horizon Community Bank branch today, or call to make an appointment with one of our loan officers. We’re committed to your business success!

Tags:  assets  lending  loan  small business loansmall business 

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New App Connects Directly to an Attorney to Resolve Traffic Tickets with Snap by LegalShield

Posted By Kenyatta Turner, LegalShield Independent Associate, Monday, June 27, 2016

— LegalShield is making it easier than ever for customers to resolve traffic tickets with Snap by LegalShield, a new feature in the updated LegalShield app that will be available on July 1. Snap allows members to take a picture of a traffic ticket and, through the app, send it directly to their dedicated LegalShield law firm. Compared to similar apps, Snap is more cost effective, offers access to more legal services and is more widely available.

This app is important because it makes it simple for consumers to take immediate action and get help from a trusted resource. In addition to the cost of the ticket, traffic violations can add points to a driver’s motor vehicle record that may lead to higher insurance premiums for the next several years. For example, only five percent of people contest their speeding tickets in court, meaning more people choose to pay the ticket, court and insurance costs over paying high attorney’s fees to fight the ticket.

With Snap, users don’t have to choose between costs associated with the ticket and costs associated with representation by an attorney. Snap is included in a monthly LegalShield membership, which starts at $17.95 per month. Other apps have starting attorney costs of more than $100. Hiring an attorney directly can cost $250 or more per hour. Snap, as with all LegalShield services, is available in 49 states (with coverage in Alaska coming soon). Competitor services are available in fewer than 20 states or in “select cities and states.”

In addition, all tickets are serviced by LegalShield’s dedicated, one-of-a-kind network of law firms and experienced attorneys. LegalShield offers the convenience of DIY technology with the assurance of a high-quality, full-service law firm. In fact, to ensure member satisfaction and quality, members are surveyed after every interaction with a lawyer and rate their experience using a Net Promoter Score (NPS). The average NPS for LegalShield is 56, putting the company on par with companies like Apple and Nike.

“Every year, more than 41 million people receive speeding tickets across the country, and now the LegalShield app can serve all Americans, especially during the Fourth of July holiday—iconic for fireworks, bar-b-ques and moving violations,” says Jeff Bell, CEO of LegalShield. “Police activity increases nearly 50 percent around the peak holiday travel times, which undoubtedly results in more tickets. We want everyone to obey the law and be safe, but this app is ready when a ticket is issued.”

But Snap is for more than speeding tickets. For no additional fee, Snap includes:

  • consultation and representation for moving violations—like speeding tickets and failure to yield tickets—that do not result in a misdemeanor or felony;
  • consultation and representation for motor vehicle collisions, including defense by an attorney on any criminal charge for manslaughter, involuntary manslaughter, negligent homicide or vehicular homicide, arising from permitted use of a licensed motor vehicle;
  • up to 2.5 hours of attorney assistance to collect property damage claims of $5,000 or less when a member experiences property damage as a result of driving, being a passenger in or being struck by any motor vehicle;
  • up to 2.5 hours of attorney time when a driver's license is denied, cancelled, suspended or revoked and the right to appeal is provided;
  • up to 2.5 hours of attorney time when legal assistance is needed to reinstate or maintain a driver's license because of job-related matters or medical reasons;
  • consultation and representation with an attorney who has a minimum of two years of experience practicing law and is in good standing with the state bar association; and
  • response from an attorney within eight business hours.

For other violations or moving violations that do result in a misdemeanor or felony, LegalShield members are afforded a preferred member discount to their attorney’s fees, which can greatly reduce the financial burden of legal proceedings[i].

Snap is just one feature of a broader array of benefits for LegalShield members. For as low as $17.95 per month, LegalShield members get access to a dedicated attorney with an average of 19 years of experience in areas such as family matters, estate planning, financial and business issues, consumer protection, tax, real estate, benefits disputes and auto/driving issues. LegalShield also includes 24/7 emergency access to a dedicated provider, meaning members are always protected.

“It took decades to build our network of attorneys—one firm at a time, one state at a time. The relationships we have with our providers and the commitment they have to helping our members is unparalleled,” says Bell. “And together, we are furthering our commitment to broadening access to legal advice by not only providing the best legal services, but the best technology to access legal help.”

To purchase a LegalShield membership, visit www.LegalShield.com/hub/KenyattaTurner or call 602-367-1069. Note there is a 15-day waiting period between the start of a LegalShield membership and eligibility for coverage on some traffic violations. - LegalShield Blog

 

For more information about LegalShield or IDShield for yourself, your family, your business, or your employees, please contact Kenyatta Turner, Independent Associate at 602-367-1069 or KenyattaTurner@LegalShieldAssociate.com.  Worry Less...Live More!

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Tags:  attorney  court  driving  law  lawyer  legal advice  legal services  legalshield  mobile apps  safety  traffic 

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IRS Updates

Posted By ASBA, Friday, June 17, 2016

Did you know? One of the best ways to get information is by visiting the IRS Small Business Tax Center where you can learn everything from how to get an Employer Identification Number (EIN) online to how to best navigate an audit.

IRS Launches More Rigorous e-Authentication Process and Get Transcript Online

https://www.irs.gov/uac/irs-launches-more-rigorous-eauthentication-process-and-get-transcript-online
With the assistance of top digital experts at U.S. Digital Service and other security authorities, the Internal Revenue Service launched a more rigorous e-authentication process for taxpayers that will significantly increase protection against identity thieves impersonating taxpayers to access tax return information through the IRS Get Transcript online service.  This enhanced authentication process will also provide a foundation for additional IRS self-help services in the future. After being disabled last spring, Get Transcript Online is now available for all users to access a copy of their tax transcripts and similar documents that summarize important tax return information.

As part of the new multi-factor process, the IRS will send verification, activation or security codes via email and text. The IRS warns taxpayers that it will not initiate contact via text or email asking for log-in information or personal data. The IRS texts and emails will only contain one-time codes. See Fact Sheet 2016-20 for details on what you need to successfully access Get Transcript Online.

Winners of “Tax Design Challenge” Announced; Taxpayer Experience of the Future Illustrated with Creative Displays of Tax Data
https://www.irs.gov/uac/winners-of-tax-design-challenge-announced-taxpayer-experience-of-the-future-illustrated-with-creative-displays-of-tax-data

The Internal Revenue Service announced the winners of its first crowdsourcing competition, called the “Tax Design Challenge,” that encouraged innovative ideas for the taxpayer experience of the future. The three-week competition invited the public to imagine the taxpayer experience of the future and specifically design an online experience that better organizes and presents a person’s tax information.  The goal was to make it easier for a person to manage their tax responsibilities, and use their own tax data to make informed and effective decisions about their personal finances.

IRS Warns of Latest Scam Variation Involving Bogus “Federal Student Tax”
https://www.irs.gov/uac/newsroom/irs-warns-of-latest-scam-variation-involving-bogus-federal-student-tax
The Internal Revenue Service today issued a warning to taxpayers about bogus phone calls from IRS impersonators demanding payment for a non-existent tax, the “Federal Student Tax.”  The scammers try to convince people to wire money immediately to the scammer. If the victim does not fall quickly enough for this fake “federal student tax”, the scammer threatens to report the student to the police.

Remember, the IRS will never:

Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.

Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.

Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.

Require you to use a specific payment method for your taxes, such as a prepaid debit card.
Ask for credit or debit card numbers over the phone.

If you get a phone call from someone claiming to be from the IRS and asking for money and you don’t owe taxes, here’s what you should do: Do not give out any information. Hang up immediately.
Contact TIGTA to report the call. Use their IRS Impersonation Scam Reporting web page or call 800-366-4484.

Report it to the Federal Trade Commission by visiting FTC.gov and clicking on “File a Consumer Complaint.” Please add “IRS Telephone Scam” in the notes.
If you think you might owe taxes, call the IRS directly at 1-800-829-1040.
More information on how to report phishing or phone scams is available on IRS.gov.

IRS Explains Application Process for New Certified Professional Employer Organization Program

https://www.irs.gov/uac/irs-explains-application-process-for-new-certified-professional-employer-organization-program

The Internal Revenue Service today released further details on how a business entity can become certified under the tax agency’s new certified professional employer organization (CPEO) program. These organizations handle various payroll administration and tax reporting responsibilities for their business clients and are typically paid a fee based on payroll costs. To become and remain certified under the new program, CPEOs must meet tax status, background, experience, business location, financial reporting, bonding and other requirements. Under the revenue procedure, interested applicants will be able to apply electronically (paper applications will not be accepted) and submit supporting documents through a new online system. For more information, see Revenue Procedure 2016-33.

Health Care Tax Tips

http://www.irs.gov/uac/Newsroom/Health-Care-Tax-Tips2
Check out the tax tips for your health care questions on this page.
Online Tools Help Individuals and Employers Estimate Health Care Law’s Effect on Taxes
Five Facts about the Small Business Health Care Tax Credit

Small Business Health Options Program (SHOP) Marketplace
https://www.healthcare.gov/small-businesses/
The Small Business Health Options Program (SHOP) Marketplace helps small businesses provide health coverage to their employees. The SHOP Marketplace is open to employers with 50 or fewer full-time equivalent employees (FTEs). This includes non-profit organizations. You can enroll in SHOP any time of year - there’s no restricted enrollment period. For more information, visit HealthCare.gov.


The Affordable Care Act and Employers

Information on Key Tax Provisions Affecting Employers

Tags:  IRS 

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Avoid These Six Debt Collection Pitfalls

Posted By Kenyatta Turner, LegalShield Independent Associate, Tuesday, May 24, 2016

Small Business News


Avoid These Six Debt Collection Pitfalls 

Your ability to collect a debt owed to your business hinges on the processes and policies you have in place. You can avoid some of the most common mistakes and improve your chance of successfully collecting a debt by understanding where problems often arise. Your LegalShield provider law firm is ready to help you understand the laws that govern collections, draft letters to debtors and assist you in taking further legal action if necessary. Call your LegalShield provider law firm if you need assistance with a collection matter or have any questions.

  1. “We didn’t have a payment policy or written contract.” Handshake deals and verbal agreements are difficult to legally enforce. It is essential to have a signed contract for any product or service for which payment will be made at a later date. Your contract or agreement should include a uniform payment policy. Your policy should include exact due dates or a timeline for payment, the name of the individual or business responsible, accepted forms of payment and any potential fees or interest for delinquent payment.

  2. “Our accounting records are a disaster.” Accurate and detailed records will help you quickly identify and manage delinquent accounts. Your customers and clients should know exactly where their account stands. Provide itemized invoices that include a specific due date for payment. If an account is delinquent, include the total amount owed, the number of days past due, the original due date and any late fees or interest owed.

  3. "We waited because we didn't want to upset the customer." If a customer's account becomes past due, consider placing a hold on the account and contact the customer. The longer a customer's account is delinquent and the more debt they accrue the more difficult collection becomes. You may have to make the determination to stop providing additional services or products until payment is made. Always remain professional and courteous.

  4. “We don’t have any documentation but I remember talking to the customer.” Good accounting practices will insure you retain copies of bills and invoices. You must also document your collection efforts. Your records should include letters and emails, as well as the dates and times of any phone calls or meetings. This information will be extremely important if legal action becomes necessary.

  5. “I was so mad I couldn’t stay calm.” Remain professional and friendly during each interaction with delinquent customers. It is illegal to threaten, harass or intimidate customers who are unable to make payment. Never threaten an action you are not willing or legally allowed to make. Making the issue personal or becoming aggressive will hurt your chances of successfully collecting the debt and could land you in legal trouble.

  6. “I didn’t really think the attorney could help.” Utilize your LegalShield small business membership. Call your provider law firm for assistance with collection matters. Your attorney can help you understand the law, draft a collection letter on your behalf, review your contracts and answer other legal questions you may have. If a collection letter does not resolve the matter, your provider law firm will advise you on additional legal remedies available to your business.  

 

For more information about LegalShield or IDShield for yourself, your family, your business, or your employees, please contact Kenyatta Turner, Independent Associate at 602-367-1069 or KenyattaTurner@LegalShieldAssociate.com.  Worry Less...Live More!

 

Tags:  accounting  Bookkeeping  contracts  CPA  debt cancellation  debt collection  family-owned business  finance  financing  legal advice  legal services  small biz  small business  Taxes 

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