Where’s YOUR bailout?
Good question!! Apparently your business isn’t “too big to fail.” Well, neither is mine. Federal assistance really IS available for businesses like yours and mine. You don’t need to be a minority, and it’s not charity. It’s simply the tried and true federal Small Business Administration (SBA) loan guarantee program designed to improve availability and attractiveness of debt financing and refinancing for small U.S. companies.
Take care when you borrow from or lend to your business. You don’t want loans to the business reclassified by the IRS as equity contributions. Loan repayments would become taxable income to you. You also don’t want amounts borrowed from the company to be reclassified as compensation or dividends to you and thereby be subject to tax.
Are you laboring to salvage a past investment? Letting a large, failed investment influence your current decisions?
No matter the amount of time and money you or your business have invested in something or someone, current decisions should be based solely on a sober estimate of present value of future returns. That is, time and money previously invested should not enter into the equation you use to assess which course of action will provide the highest future yield. This is the principle of sunk costs — a well-established and widely accepted principle of rational investing and sound decision-making.
If you’re having financial difficulty, don’t wait too long to refinance your debt. Attractive business lending programs are still in place through the Small Business Administration (SBA). You might be surprised by what’s possible. Just ask David Laughrey* of The Laughrey Company. He’s an SBA loan specialist who helps small businesses around the country put new financing in place. He attests that SBA loan programs put in place in February 2009 have kept good businesses in business.
Want to improve cash flow and enhance profitability over the next 5, 10, even 20 years? Convert variable-rate debt to fixed? Look into refinancing fixed-rate debt that’s currently higher than 7 percent or so.
Have a line of credit that is never fully paid off? Consider taking out a term loan and using the proceeds to pay off the portion that doesn’t “revolve.” You may want to consider doing the same with credit card debt.*
More than an insider’s account of events that led to the collapse of Lehman Brothers, it’s also a truly amazing story of a young man’s ”by hook or by crook” determination to break into the ultra-exclusive club that is Wall Street. Although the story could have been told in fewer pages, it’s chock-full of tales of hustle, determination, greed, ego, intelligence, big bets and the chase for big bonuses. It also reveals the complexity of the world’s economic system and financial markets; how relationships and power struggles at this level can swing billions, if not trillions; and how even the smartest people can, and often do, get it wrong.
Tanner Eckler, assistant vice president for Bank of Oklahoma, answers some key questions about the SBA’s new loan programs.
Credit cards are a significant source of capital for small businesses. In fact, The National Small Business Association (NSBA) recently surveyed 288 small businesses and found 86 percent use credit cards as either their primary or sole source of funds! Nearly a quarter reported juggling more than four credit cards used for business purposes.
Pretty shocking, given the punishingly high cost. And since respondents reported using their credit cards as sources of funding, we can safely assume they carry balances. Add to this the turmoil in the credit card market today and we have at hand a real challenge for small companies.
The U.S. Small Business Administration is trying to make it easier on small businesses with loan programs that go beyond the norm. The SBA has hiked the guarantee percentage to lenders and waived the annual fees. In addition, the SBA has started an interest-free, 100 percent loan guarantee program that benefits business owners and lenders.
Certain terms are important to know when calculating your net worth. The terms will help you better understand your overall financial picture as you push forward with your business.
© 2012 DL Perkins LLC. All rights reserved | The Business Owner is a trademark of DL Perkins, LLC. Registered in the U.S. Patent Office. | Call (800) 634-0605
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