What a Best Buy for Business Program Can Offer Your Business (and What It Can’t)

If you’re a business owner who constantly shells out working capital for electronics, you might be wondering if there’s a Best Buy business program for people just like you. And your hunch is right, because there are Best Buy perks for business owners. But it’s not a Best Buy business credit card like you might think.

There’s no actual Best Buy business credit card, but Best Buy does offer a Best Buy Business Advantage Account. This is essentially a corporate purchasing program that offers business owners a long list of perks, along with a nice, shiny Best Buy for business purchasing card. It’ll make you feel like you’re actually spending with a Best Buy business credit card.

But is the Best Buy for business corporate purchasing program the most lucrative way to shop for electronics for your business? Let’s look at what Best Buy’s business program can offer you, as well as its top alternatives:

TL;DR: What Can Best Buy for Business Offer You?

Although a Best Buy business credit card doesn’t exist, Best Buy does offer a corporate purchasing program that extends you a purchasing card. That said, you won’t see many returns for your business by spending through this program. The main pull of joining this program is the customization that Best Buy allows for purchases.

However, this upside doesn’t quite make up for the fact that you won’t be able to make purchases with your business credit card through the Best Buy Business Advantage program.

If you want to access more returns for your business’s spend on electronics, then you should consider choosing a business credit card like the Amex Business Gold or the SimplyCash Plus that will reward your business with points or cash back.

Alternatively, if you want access to flexible financing, look to the Blue Business Plus, which comes with the longest 0% intro APR period on the market. With this card, you’ll have 15 interest-free months to gradually pay off any big electronic purchases your business has to make.

Best Buy for Business: The Details

If you want to streamline and discount your electronic purchases, then the Best Buy Business Advantage program is a solid, store-specific upgrade for you to consider. You’ve likely gathered that, generally speaking, this Best Buy for business program will give your business access to exclusive perks and optimizations for your Best Buy shopping.

Getting into specifics, Best Buy Business Advantage does come with a lengthy list of features. But there are a few that are most notable.

Detailed Net 30 Invoices

For starters, all of your purchases through the Best Buy Business Advantage program will come with detailed net 30 invoices.

What that means plainly is that purchases you make with your Best Buy for business account will be invoiced with detailed documents that require your business to pay in full within 30 days of purchasing an electronic from Best Buy.

Best Buy for Business Website Access

Another top perk of participating in the Best Buy Business Advantage program is that you’ll have access to Best Buy’s business purchases website, Best Buy for Business. This site offers up exclusive deals and financing options to businesses that participate in the Best Buy Business Advantage program.

With Best Buy for Business, you can access discounts for purchasing electronics at a high volume. Plus, you’re able to choose from flexible payment options, which can open up even more possibilities for the electronics your business can afford.

Option to Purchase by Phone

Additionally, if you join the Best Buy Business Advantage, you can make purchases over the phone. So, if you’re not able to make it to a brick-and-mortar Best Buy, but you’d prefer to purchase through a human-to-human interaction, this program opens up the third option of buying electronics through the phone.

Customizable Account Features

Finally, you can customize multiple facets of how the Best Buy Business Advantage program works for your business.

With your business’s account, you’ll be able to manage individual buyers’ accounts while even allowing multiple buyers to purchase under a single account. Plus, if your business has tax-exempt information, you could keep this info on file through this program, so you won’t have to file every time you make a purchase.

Earning More for Your Electronics Purchases Than With Best Buy for Business

One notable downside to purchasing electronic through Best Buy for Business and the Best Buy Business Advantage program is that you won’t be able to purchase with a business credit card. Because you’ll only be able to purchase through paper, electronic debit, or a combination of the two, your spending won’t be rewarded with points or cash back for any of the purchases you make through the Best Buy Business Advantage program.

And if you do spend that much on electronics that you’re weighing joining a Best Buy program for business, you’ll likely want to get some sort of reward to benefit your business. Whether that’s cash back, travel rewards, or whatever you’re hoping to earn, you should be maximizing your spending for your business.

Opting to shop instead at another electronics provider that will let you purchase with a business rewards credit card could potentially show your business greater returns than the savings that you would see through Best Buy for Business.

Alternatives to the Best Buy for Business Program

Check out these business credit cards that can show your business huge rewards for all of its electronic purchases:

For Rewards Points, Look to the Business Gold Rewards Card

First up, the American Express Business Gold Rewards Card is one of your very best business credit card options if your business does most of its electronics spending on computer hardware and software.

If you pick the Amex Business Gold card, then you can receive an unlimited 3x rewards in your choice of one of the following spending categories:

• Airfare purchased directly from airlines
• Purchases at gas stations in the U.S.
• Purchases for print advertising in select media in the U.S.
• Purchases for shipping in the U.S.
• Purchases for computer hardware and software in the U.S.

This means that your business could basically see a 3x rewards return for every single dollar spent on computer hardware and software, should you opt for the Amex Gold and choose to earn the most for this category.

But you also won’t have to completely say goodbye to earning for the other four categories you didn’t opt to earn more for. In fact, you’ll earn a solid 2x rewards for every dollar spent in those four other categories for up to $100,000 in purchases every year.

Finally, you’ll also earn 1x rewards for every other dollar you spend on everything else for up to $100,000 spent a year.

Be sure to keep in mind that this business credit card, unlike the Best Buy Business Advantage program, comes with an annual fee, at $175. And it’s definitely high, especially for small businesses that aren’t working with astronomical budgets.

That said, Amex will waive your annual fee for your first year with the Amex Gold, so that will be the perfect test run to see whether or not this business card shows you enough returns on your business’s electronics spending to justify its eventual fee.

For Cash Back Rewards, Consider the SimplyCash Plus for Business

Another great option for business owners who want to see big returns for electronics purchases is the American Express SimplyCash Plus for Business. In contrast to the Amex Business Gold, this business credit card rewards spending with cash back rather than rewards points.

The SimplyCash Plus’s cash back rewards program is a tiered rewards program that lets you earn for multiple types of tech and electronics purchases at varying rates.

At its top rewards tier, the SimplyCash Plus will get you a solid 5% cash back on office supplies and wireless phone service providers. This rate will apply for up to $25,000 of what you spend within those two categories every year.

The second rewards tier will earn a little less but is far more customizable—you’ll earn 3% cash back for you business spending within your choice of one of the following categories:

• Airfare (when purchased directly from airlines)
• Hotel stays (when booked directly through the hotel)
• Gas stations in the U.S.
• Car rentals from eligible agencies
• Restaurants in the U.S.
• Advertising in the U.S.
• Shipping in the U.S.
• Computer hardware, software, and cloud computing purchases made in the U.S. and directly with select providers

Again, this rate will apply to up to $25,000 of purchases every year.

Finally, you’ll earn an even 1% cash back for every other dollar you spend, whether you spend outside of these categories or spend beyond their caps.

You’ll be able to access these cash back returns for no annual fee at all, so you won’t have to measure your cash back returns against an annual lump sum, unlike with the Amex Gold.

If You Need to Pay Off a Huge Electronic Purchase Gradually, Opt for the Blue Business Plus

On the other hand, you might be looking for another option that affords the flexible financing that Best Buy Business Advantage offers.

In which case, you should consider making larger purchases on a business credit card that comes with a 0% intro APR period. And with 15 months of 0% intro APR, the American Express Blue Business Plus comes with the longest intro APR period on the market.

This intro period means that your business can carry an interest-free balance on the Blue Business Plus from month-to-month, provided that you make your minimum monthly payments on time, every time.

So, if you need to make a big-ticket electronics purchase for your business, then you can make this purchase with the Blue Business Plus and pay the cost off gradually over 15 months without garnering a single cent of interest.

The Blue Business Plus will also reward you for the spending your do with the card—you’ll get 2x rewards for the first $50,000 you spend every year, and 1x rewards thereafter.

Plus, the Blue Business Plus doesn’t come with an annual fee, so the flexible financing and rewards returns it comes with could be yours for free.

Best Buy for Business: The Bottom Line

So, what’s your next move on Best Buy for Business?

Well, though your next move is certainly up to you—you’re now well equipped with all of the knowledge you need to make the best decision for your business. From our vantage, we’d highly suggest that you spring for a business credit card over the Best Buy Business Advantage program.

By upgrading your business spend on electronics with a business credit card, you’ll be able to access high returns and optimal flexibility that a Best Buy-specific program simply can’t offer.

The post What a Best Buy for Business Program Can Offer Your Business (and What It Can’t) appeared first on Fundera Ledger.

from Fundera Ledger https://www.fundera.com/blog/best-buy-business-credit-card

ICOs vs. IPOs: the Big Differences Explained, Plus Other Financing Options

Bitcoin mania, startup unicorns, blockchain technology, ICOs vs. IPOs—and lots of other things that don’t sound real but completely are. Welcome to the world of modern business! If you’ve been lost on the definitions on any of these, you’re not alone. This world moves very fast.

Since it’s impossible to go through everything, let’s focus here on the difference between ICOs vs. IPOs. They’re both ways to garner funding from your business, but they’re actually very different.

You likely know by now that the rising popularity of cryptocurrencies means that the decentralized recordkeeping technologies powering these currencies—including blockchain—are here to stay. In the process, new strategies such as ICOs (short for “initial coin offerings”) and cryptocurrency-based funding are now happening for startup financing alongside IPOs (“initial public offerings”), crowdfunding, equity financing, and debt financing.

Yes, exploring ICOs vs. IPOs is definitely an exciting time for entrepreneurs—digital currency in itself is pretty exciting. At the same time, these new options aren’t necessarily for everyone, and can come with legal risks that could make more traditional financing options more attractive.

As your company balances the benefits and drawbacks of the ICOs vs. IPOs debate, it’s helpful to have at least some knowledge about how initial coin offerings work and how they differ from the more traditional initial public offering.

ICOs vs. IPOs: What’s the Difference?

Both ICOs and IPOs encourage investors to invest in growing companies, for sure. But the chief difference between ICOs vs. IPOs is an investor receives in exchange. And it’s a big difference.

Initial Public Offerings (IPOs)

In an IPO, a company works with an underwriter to sell ownership units of its company—known commonly as stock—to investors and the public to purchase and sell on regulated exchanges. We’re talking the NYSE, NASDAQ, etc.—the big guys.

Although companies can offer different classes of stock, owning stock usually entails ownership rights in the company, along with perks such as shareholder voting and eligibility for dividends. Stocks and stock trading are also regulated by the Securities and Exchange Commission (SEC).

We’ll get back to this regulation point in a second.

Initial Coin Offerings (ICOs)

Investors participating in ICOs, however, don’t receive any kind of ownership stake or rights in the company conducting the ICO. Instead, ICO investors exchange run-of-the-mill fiat currencies such as dollars and euros—or, more commonly, established cryptocurrencies such as Ether and Bitcoin—in exchange for bulk amounts of the company’s own newly established cryptocurrency.

The ICO company therefore receives the cash influx it needs to fund its activities, while the investor walks away with bulk amounts of the company’s own cryptocurrency tokens. The hope for investors here is that the coins they receive later appreciate in value—much like Bitcoin and Ether did in dramatic fashion last year.

Although this strategy is risky, investors could reap major rewards if the value of their tokens skyrockets.  

Regulation Differences Between ICOs vs. IPOs

ICOs have grown into a popular investment vehicle for fintech and cryptocurrency companies—particularly because unlike IPOs, ICOs are unregulated. (Like we said, that regulation thing would become important again.) The format can allow startups to raise equity directly from individual investors without dealing with the cumbersome securities regulations tied to IPOs. In 2017, companies raised more than $5 billion in ICO funding, while 2018 ICO rounds have already raised nearly $3 billion since January.

Governments are only just starting to consider cryptocurrency regulations, which could make launching ICOs risky from a legal standpoint. The SEC has already warned that some ICOs may need to be registered with and regulated as securities if they fall under federal legal definition for securities—which goes beyond traditional stocks.

In July 2017, for example, the SEC found that a company offering DAO Tokens should have been registered with the SEC because the tokens were determined to be a type of security called an “investment contract.” Although the SEC didn’t impose sanctions against the company, it did warn that some ICOs may need to be registered with the SEC depending on the facts and circumstances of each offering.  

With these fuzzy regulations, if you’re not 100% sure this is the right avenue for your company, know that some companies might want to lean away from ICOs in the ICOs vs. IPOs debate.

Alternative Financing Options for Entrepreneurs Besides ICOs

If you’re looking into the differences between ICOs vs IPOs, it’s very possible that you’re looking for ways to finance your business.

Beyond the question around SEC regulations, ICOs aren’t quite right for a lot of small business—and this’ll likely be the case if you’re launching your company outside the fintech space, or if you don’t want to bring in outside investors.

Fortunately, you have some business loan options through traditional financing routes. If you haven’t already explored these, here’s a top-level look at some small business loans and other types of credit that could help your business get the cash it needs, no ICO necessary:

1. Apply for a bank or SBA loan.

Commercial bank and SBA loans can be a great option for receiving capital without needing to relinquish equity to outside investors. A heads up that these are hard to get, and your personal credit score and business’s cash flow history will factor into your loan eligibility.

But if your business has a stellar profile, these are the most coveted small business loans available, with the most competitive rates and best repayment terms.

2. Open a business line of credit.

Similarly, you can look into opening a business line of credit. This works similar to a credit card in that you can borrow up to certain maximum agreed-to amounts, and you’ll only pay interest on what you use—but sometimes, the interest rates are lower than business credit cards if you tend to carry balances.

Here, you’ll have easy access to capital, and there are a range of products available depending on your creditworthiness.

3. Take on a crowdfunding effort.

Depending on the types of investors you’re targeting, crowdfunding may be a good way to promote your product and collect funds from friends, family, and others interested in what you’re doing.

You should definitely be aware, though, that the SEC has adopted crowdfunding regulations specifying what types of crowdfunding activity are permissible and legal.

4. Applying for grants and competitions.

Sure, this might not be your best route for companies needing immediate cash flow, but grants and competitions can also be a great way to receive free funding and attention for your company with no strings attached.

While you work on getting access to capital now, plan for the long term, too, and consult this comprehensive list for federal and state small business grants.

***

In the end, you have lots of choices at your disposal for funding your business—including those outside the ICOs vs. IPOs equation. You just need to make sure your financing strategies meet your business goals. Consulting with experienced business attorneys who know your business needs well could help you learn about which forms of financing are best for your business.

The post ICOs vs. IPOs: the Big Differences Explained, Plus Other Financing Options appeared first on Fundera Ledger.

from Fundera Ledger https://www.fundera.com/blog/icos-vs-ipos

6 Important Lending Terms for Business Owners to Know

Whether you’re in the beginning stages of launching your small business or have been around for 20 years, seeking business financing can feel overwhelming. Having a good grasp of the essential terms to make an informed decision about financing your business can make this process much more comfortable for you. What’s the difference between a... Read more

The post 6 Important Lending Terms for Business Owners to Know appeared first on Kabbage Small Business Blog.

from Kabbage Small Business Blog https://www.kabbage.com/blog/6-important-lending-terms-for-business-owners/

How to Pick the Best Tax Preparation Software for Your Small Businesses

Tax season is creeping up. Which means you really, truly, actually do have to start getting your business taxes together. And if you’re an entrepreneur doing tax prep yourself, you should make certain that you’re using the best tax preparation software for small business that’s available to make the process as painless as possible.

Then which, exactly, to use? There’s no one answer—just like there’s no one small business. The best tax preparation software for your business, in particular, depends on several factors, including how in the weeds your needs are and just how dirty you’re willing to get with the filing, plus the actual forms you need to file.

Let’s start with the essential questions to ask yourself when choosing the best tax prep software for your small business:

Before Picking Tax Prep Software, Answer 5 Important Questions

1. How comfortable are you with DIY tax filing?

Different software programs provide varying levels of support, including, in some cases, in-person consultation via phone or videoconferencing.

2. Are you self-employed or a sole proprietor?

If you have no employees and your business entity isn’t registered as a corporation, LLC, or LLP, your tax preparation needs are less complex.

3. What’s your form of business?

If you have employees or you’re not a sole proprietor, your business structure is the primary factor in your choice of tax preparation software.

4. What tax forms do you need to file?

You want to make sure the software you choose supports your required tax forms, such as a Schedule C, Schedule 1040A, or 1099 forms. Plus, if you have employees or hire independent contractors, being able to upload their W-2 forms or 1099 forms directly into the tax preparation app is helpful.

5. Do you want to use a web app or download something?

Most tax preparation software companies offer both online, cloud-based versions and downloadable version of their software. Online tax prep software has some big advantages—it’s easier to share your data with others, you know the software is always up-to-date, and it’s generally easier to get started with than software you have to download or install. In addition, you can usually buy a more basic version of online software and easily upgrade if needed. Obviously, with something on your local drive, this isn’t as simple.

Now that you’ve thought about your needs, see how these tax preparation software providers—known as the “big three”—could work for your small business come Tax Day.

The Best Tax Prep Software for Small Businesses

TaxAct

TaxAct’s goal is to create an easy way for both businesses and individuals to file their own taxes online. The company promises that if your tax return isn’t accurate, they’ll refund the cost of the software, pay any difference in your lower refund or higher tax liability, and cover related legal or audit costs up to $100,000.

Small business owners, including self-employed, freelancers. and independent contractors, can use TaxAct Freelancer ($44.95, state filing additional). If you need to file specialized tax forms, such as for a C Corporation or LLC, TaxAct walks you through choosing the correct product to get the software and forms you need.

There’s also TaxAct Premium ($59.95, state filing additional), which includes Audit Defense—comprehensive response and resolution strategies, including assistance with tax debt relief, denied credits, fraud, and correspondence with the IRS and state on your behalf.

You can get help online from the Answer Center or contact TaxAct for free support if needed. Another nice feature here is that once you’ve used TaxAct to file your taxes, you have unlimited access to your previous year’s tax return for seven years after the filing deadline.

TurboTax

TurboTax Self-Employed ($119.99, state filing additional) is designed to help self-employed individuals, freelancers, and independent contractors maximize their tax credits and deductions. Whether you’re a real estate agent, craftsperson, consultant, or digital designer, the software helps you find tax credits and deductions specific to your industry.

You can get on-screen guidance and answers to your questions. This is a cloud-based product that you can start using for free; pay only when you actually file your taxes. (The downloadable equivalent product is TurboTax Home and Business. It costs $119.99, but you’ll have to pay for that upfront.)

TurboTax runs error checks on your tax returns as you complete them, and double checks your return before it’s filed. If TurboTax miscalculates and you have to pay a penalty, they will repay the penalty plus interest.

If you own a partnership, C corporation, S corporation, or LLC with more than one member, you’ll want to step up to TurboTax Business ($169.99, state filing additional). This downloadable tax preparation software for small business automatically imports your QuickBooks income and expenses into your tax returns and classifies them. It can also automatically import last year’s tax return (provided you used TurboTax to create it). You can also create unlimited W-2 and 1099-MISC forms, among others, which is useful if you have employees or use independent contractors.

Is your business tax situation unusual or complex? For a few dollars more, TurboTax Live ($179.99, state filing additional) gives you access to a one-on-one review by a CPA or Enrolled Agent (EA) before you file your taxes. You answer questions and then prepare your taxes with real-time help from experts on-screen. Ask them any questions you want. You can feel confident the CPAs and EAs are up on the latest tax law changes. They can search more than 450 tax deductions and tax credits to find the ones you’re entitled to.

H&R Block

H&R Block lets you choose how you want to handle your tax filing—do-it-yourself or totally hands-off.

If you want to do it yourself, use the Self-Employed software ($74.99, state filing additional) to file your taxes online. H&R Block helps you find industry-specific deductions and tax credits, as well as those related to startups. The product includes the Stride app, which automatically tracks your mileage, receipts, and business expenses. It supports schedule 1040, Schedule 1040A, Schedule 1040 EZ, W-2s, 1099s and schedule Cs, among many others.

If you want to let the pros handle your tax filing, H&R Block Tax Pro Go ($59.99, state filing additional) is for you. Just upload your tax documents, and H&R Block matches you with a tax pro who has the right expertise for your business. Your returns are prepared virtually within five days—you can message your tax pro at any time, too.

Whichever product you choose, you can add Tax Pro Review for an additional fee. A tax professional reviews your return to make sure it’s accurate and that you received all the deductions and credits you are entitled to. They can also file any tax form you need, even if it’s not included in the tax preparation software you purchased. Finally, their “Peace of Mind” tax notice services are available at an additional cost.

If you get notified of an audit, an H&R Block Enrolled Agent will accompany or represent you. H&R Block also reimburses up to $6,000 toward any taxes you owe due to errors on their part.

Choosing the Best Tax Preparation Software as a Small Business Owner

Five more questions for you to ask once you’ve considered the options! When you assess your top contender for tax prep software, find out:

1. Are features such as checking the accuracy of your returns, guarantees, and audit support included as part of your package, or do they require additional fees?
2. Is it free to file electronically, or does this cost extra?
3. What type of support is offered for the software and for tax questions? For example, can you get support by phone, email, online chat, video conferencing, etc.? Also, is this support included or is there an extra charge?
4. How quickly can you expect a response to your questions?

Although prices among tax preparation software packages do vary, this isn’t really the time to dither over saving $50. Instead, focus on finding the tax prep software package for your small business that has the features, support, and security you need to make tax preparation as easy as it can be.

The post How to Pick the Best Tax Preparation Software for Your Small Businesses appeared first on Fundera Ledger.

from Fundera Ledger https://www.fundera.com/blog/best-tax-preparation-software

7 Vital Questions to Ask When Hiring Your First Employee, Straight From Entrepreneurs

As a soon-to-be-former solopreneur, you have every right to be nervous (read: terrified) hiring your first employee. After all, this business—your business—is everything to you, and bringing on another person not only requires precious time, money, and energy … but how do you know if this person will care as much as you do?

It’s risky. Of course. There’s no other way to put it, and we totally get it.

But think about the upsides, which is why you’re doing this in the first place. Greater revenue potential, more time with your family, or even gaining efficiencies in places where you aren’t especially strong. There are so many more. That’s only a fraction of the reasons why hiring your first employee can be a fantastic idea, and a weight off your shoulders. And you should feel great that you’re even successful enough to hire an employee!

Now that you know you’re in a position to hire, how do you actually know if you’re doing it right? Although experience is a great teacher, it also helps to have a foundational understanding of what it takes to hire, train, and manage an employee before you make the move.

These seven entrepreneurs across various industries and niches have great advice regarding the necessary questions you should ask when hiring your first employee:

1. Does This Person Have a Direct Impact on Revenue?

Mitchell Harper sold his first company when he was only 22. He’s currently the founder and CEO of seven tech companies, and also advises a number of other startup CEOs and boards.

When it’s time to hire your first employee, Harper says, you need to look at whether the candidate you’re considering can help you grow your bottom line—especially for cash-strapped startups: “If they have a direct impact on revenue hire them. If they don’t, don’t hire them!”

In this critical stage of growth, it’s important that any employee, especially your first, have the ability to add revenue to your business. If you can’t make the direct connection between revenue and their proposed job duties, it’s best to fill another position or create a plan for the position that will help with revenue growth.

2. Are You Willing to Raise Prices?

Mike Campion, who hosts the podcast Grow My Cleaning Company, teaches small entrepreneurs in the cleaning business how to launch and scale their operations.

He says that many small business owners never make their first hire because their prices are too low to support another worker while also leaving enough room in the budget for owner’s pay and company needs. In this scenario, the answer almost always lies in raising prices.

Especially with agency models, raising your prices works because you’re responsible for booking business for a set price and will use a subcontractor to fulfill the demand. So, if your profit margins feel too low to hire someone, consider raising prices, even if it’s a small amount. Campion advises entrepreneurs afraid of raising prices, “Don’t confuse your pricing with loyalty or morality.”

He says that even a 10% or 20% price adjustment can make the numbers work so you can hire someone else and maintain enough profit for your company and your own take-home pay.

3. Does This Person Have a Complementary Talent?

Patrick Betdavid, CEO of financial services firm PHP Agency, recommends that business owners hire someone who is naturally gifted in areas they lack. So, while you may be especially talented in sales and marketing, your first hire might be someone who can develop products that you can effectively market to the masses.

Betdavid says you should take out a piece of paper and write the answer to the question, “What is my strength?” Then you need to follow up with the answer to this question, “What are the opposing strengths that I need to make my company successful?”

Once you answer these questions, you will be able to hire the person you need most. Hiring someone who possesses a skill set that you lack can really help you grow your business in ways you quite literally couldn’t before.

4. Have You Documented the Role?

Jim Wang, founder of personal finance site Wallet Hacks, says that business owners need to ask themselves if there’s sufficient documentation for the role that they’re hiring for.

He says, “A lot of entrepreneurs seem to know what they do fairly well but rarely document it. They just ‘know’ it.” He goes on to explain, “When you bring someone new, there may be certain things you do that are part of a job that you don’t even realize it.”

That’s why you should have some documentation in place around systems that not only apply to your daily business activities, but also to your potential employee’s activities.

This documentation doesn’t have to be set in stone. It can change as you refine your processes and workflows, but something should exist well before you hire someone. This way, you’ll know exactly what they should be doing to help your business.

5. Have You Defined Your “Breaking Point”?

Nicki Morris is a startup business coach who also helps business owners hire the right person. Her company, Ignite Your Passion, was born out of a common need she saw among entrepreneurs. Working in a small business herself, she knew that many needed help learning to hire employees effectively and at the right time.  

She recommends determining ahead of time the point at which you’ll need to hire someone. It can be an amount of revenue, number of orders a month, or a “breaking point,” like when you consistently find yourself working more than 10 hours each day.

Morris suggests business owners set this standard well before the time comes to hire so that you can sufficiently plan for the hiring process. After all, hiring the right person is a long process—and you don’t want to scramble and end up with the wrong employee, especially as your first.

She gives an example of the timeline a business owner should consider: “By the time you advertise the position, get résumés, interview, and train someone, it can take a long time.”  

6. Do You Understand Local, State, and Federal Requirements for Hiring?

Bringing an employee on board isn’t quite easy as inviting them to your office to start work. Oh, if only! Josh Hartwell, CEO of Mobile Deluxe, a software firm that develops mobile gaming apps, stresses, “Go to your state’s website on hiring and find out all the requirements.”

Understanding proper hiring requirements includes correctly classifying and paying employees. You need to know whether your new hire will be a 1099 or W-2 employee and if they’ll be hourly or salaried. Oh, and then there are benefits, too. How will those be  structured?

Making a mistake with these designations could cause big problems down the line, so be sure to connect with a CPA or labor attorney who can point you in the right direction.

“If you make a mistake [with hiring practices], don’t stress about it,” Hartwell says. “But try to get as much information as you can to get hiring requirements out of the way.”

7. Do You Know How to Manage an Employee?

This seems like a simple question, but it might be the most important and surprisingly complex one on the list. Once your business grows to include employees, you need to have systems in place to manage and lead them. You need to have guidelines to help you evaluate how the engagement is going. That’s doubly important if your employees are remote and you won’t be there to watch them.

Jonathan Pototschnik of Lawn Care Millionaire and Service Autopilot is a fan of the SCRUM framework to help him gauge employees’ productivity—especially those who work remotely. His daily SCRUM routine includes having employees give him updates, each day, that answer the following questions:

1. What did I get done today?
2. What do I need help with?
3. What do I plan to do tomorrow?

He says, “With this method, you can have some level of accountability with this individual along with some means to measure them. [With daily updates] you’ll get some feeling that you know what’s going on.”

Managing an employee does take time away from your day, it’s true—so make sure you have a plan for gauging an employee’s progress (or lack thereof) along with productivity. You want to know if the objectives you envisioned for the role are being met.

Above All, Be Prepared!

You can be nervous, but don’t be afraid! There’s a method to the madness of making your first hire, especially if you’re prepared.

Take your time, put systems in place as best you can. When you’ve done what you can in advance, pull the trigger, and get ready for a huge learning experience. It’s going to be good—remember, you’re doing this for a reason! (And if it doesn’t work out, it’s not permanent. Don’t worry.)

You might not do everything correctly the first time, sure. But learn as you go, just like every other business person, and you’ll be passing on your own wisdom soon. Happy hiring!

The post 7 Vital Questions to Ask When Hiring Your First Employee, Straight From Entrepreneurs appeared first on Fundera Ledger.

from Fundera Ledger https://www.fundera.com/blog/hiring-first-employee-questions

How To Brainstorm Brilliant Ideas (Infographic)

Whether you are coming up with a fresh marketing campaign or dreaming up innovative product ideas, brainstorming is essential for businesses of all sizes and types. Though fresh ideas are essential to the success of a company, learning how to brainstorm is a tough skill to master. Creativity doesn’t grow on trees, and good ideas must be consciously cultivated.

Common problems experienced during brainstorms include groupthink, attendees joining without proper preparation, and work cultures that make people uncomfortable expressing ideas that feel too out there. Following brainstorming best practices can help companies consistently generate top notch ideas, while avoiding common brainstorming pitfalls.

If you’re feeling stuck trying to come up with an idea, consider changing up your environment by going for a walk. Spending time working in groups and by yourself is another strategic way to maximize creativity. Some people will even create a mood board of things that inspire them to help get the ideas flowing.

Alex F. Osborn, an advertiser who created the term “brainstorm” in the 1940s, developed 4 success pillars that can also be implemented to facilitate successful brainstorming. These elements, when coupled with other brainstorming wisdom, create a foundation for consistent, no-fail idea generation.

Check out the infographic below to learn how to brainstorm brilliant ideas:  

Sources: Pierobon | Russell A Wheeler | SkyMark | Design Kit | Hat Rabbits

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from Fundera Ledger https://www.fundera.com/blog/how-to-brainstorm

Can You Apply for Business Credit Cards Without a Social Security Number?

It might come as a surprise that business credit card applications typically require your personal social security number. One of the main reasons to get a business credit card is to make sure that your personal finances and your business finances stay tidily isolated. (It’s super important for your accountant to make sure your taxes are squeaky clean!)

So, then, why is it so difficult to get business credit cards without a social security number?

It’s a frustrating reality, but, applying for business credit cards without a social security number will be difficult and involve a lot of paperwork. But if you’re curious about any options available, here’s everything you can do for getting business credit cards without a social security number.

TL;DR: Getting Business Credit Cards Without a Social Security Number

Put simply, getting a hold of any business credit cards without a social security number won’t be a simple task.

No matter which way you choose to approach your applications, you’ll likely have to fill out a lot of paperwork and deal with equal amounts of bureaucracy. And, even after that, there’s no guarantee you’ll be able to find a business credit card issuer that will let you apply without a social security number.

As you can see, it’s a super-important part of any business credit card application. And that’s why we encourage you to apply for a social security number as soon as you can.

If you’re unwilling or unable to apply for a social security number, though, your most direct route to applying for business credit cards without a social security number is:

1. Apply for an Individual Taxpayer Identification Number, or ITIN.
2. Use that ITIN to apply for an Employer Identification Number, or EIN.
3. Find a business credit card issuer, like a corporate credit card issuer, that will let you apply with an EIN instead of an SSN.

Why Do You Need a Social Security Number to Apply for a Business Credit Card?

Here’s the biggest question we need to answer before anything: Why do you typically need a social security number to apply for a business credit card? Like, what’s the point?

It’s a reasonable ask, especially if this is for your business, right? Except the thing is that a business credit card application is heavily contingent on a business owner’s personal finances. You are the primary decision maker in the business, after all, and will have the jurisdiction over how the credit card is used and then subsequently paid off. So it makes sense that the card issuer would use your personal credit history as a track record for risk.

As such, almost every business credit card issuer will ask you to provide your personal SSN on your business credit card application in order to run an inquiry on your personal credit score.

What If You Don’t Have a Social Security Number for a Business Credit Card Application?

First, Consider Getting a Social Security Number

There’s really no way to sugarcoat this: Getting business credit cards without social security numbers will be a tricky, convoluted process. Although it is possible to get a business credit card without a social security number, it’s … a pain. It involves a ton of paperwork, red tape, and a pretty circuitous route that you have to be willing to travel.

That’s why we’re major advocates of encouraging you to consider applying for a social security number if you don’t already have one.

No matter how you approach it, you’ll have to get some kind of identification number to apply for a business credit card, and getting a social security number will be one of the most useful, future-proof decisions you can make. You’re going to need it a lot in your life. If you’re dreading the paperwork, maybe just get it over with, since applying for a business credit card without a social security number involves a lot of paperwork anyway!

How to Apply for a Social Security Number

Any non-citizen who’s authorized to work in the U.S. is eligible to apply for a social security number and social security card for free. Plus, the process to apply for a social security number is pretty simple—you just need a few documents and a bit of patience.

You’ll have to gather some paperwork to prove your identity and work-authorized immigration status. This paperwork includes:

• A filled-out Application for a Social Security Card, known as Form SS-5
• Your unexpired foreign passport
• Current U.S. immigration documents, which will need to be one of the following:
  • Form I-551, which is your Permanent Resident Card with your machine-readable immigrant visa
  • Admission stamp showing a class of admission permitting work
  • Form I-94, which is your arrival and departure record
  • Form I-766, which is your employment authorization document (EAD) work permit

In order to formally apply for a social security number, you’ll have to make a visit to your nearest social security office with your documentation.

Or, Go Ahead Applying for Business Credit Cards Without a Social Security Number

If you’re not willing or eligible to apply for a social security number, then your next move is to access another form of identification number.

Two types identification numbers potentially allow you to apply for business credit cards without a social security number:

• Employer Identification Number (EIN)
• Individual Taxpayer Identification Number (ITIN)

Let’s take a look at the logistics of applying for a business credit card without a social security number—but with one of these alternative identification numbers:

Using Employer Identification Number

In some cases, you might be able to apply for a business credit card with an Employer Identification Number, or an EIN. This identification number works much like a social security number for your business. The thing here is that many—if not most—credit card issuers will hesitate to let you apply for a business credit card with an EIN only.

The reason why? Well, applying with only an EIN will not only make it impossible for a card issuer to run a personal credit check on you, but it’ll also exclude them from requiring you to provide a personal guarantee for any of your spending on the business credit card.

As a result, your business will have to have some stellar financial credentials and a robust financial history in order to access the ability to apply for a business credit card with an EIN.

Using Individual Taxpayer Identification Number

If you have an Individual Taxpayer Identification Number, or ITIN, then you’re another step further removed from applying for business credit cards without a social security number. You’ll literally have to apply for an EIN with your ITIN, and then do the step above.

See, fun! Paperwork! Lots of little, indirect steps! But that’s what you’ll have to deal with in order to apply for business credit cards without a social security number.

Applying for Business Credit Cards Without a Social Security Number: The Paperwork

Now that you know the avenue you’ll have to take to access business credit cards without a social security number, if you still want to pursue it, here’s what you’ll have to do to make it happen:

Getting an ITIN

Before anything, you need to make sure that you have some form of Taxpayer Identification Number to your name. And if you’re not willing or able to apply for a social security number, your only other option will be a Individual Taxpayer Identification Number.

You’ll apply for a ITIN through the IRS by simply filling out an application, called a Form W-7.

Getting an EIN

Once you have a form of taxpayer identification number to your name, apply for an EIN through the IRS. You can apply for an EIN with your SSN or with an ITIN, but if you already have an SSN, then getting an EIN to apply for a business credit card is an extraneous step.

That’s why you should really only apply for an EIN if you need to get business credit cards without a social security number.

The Actual Application Process

You still have the actual application process left before you can secure a business credit card without a social security number.

One of the most difficult steps ahead of you is finding business credit card issuers that are willing to accept EINs instead of SSNs in their applications.

Luckily, if your business finances are in tip-top shape, credit card issuers will be more willing to let you apply for a business credit card without a social security number but with an EIN instead.

For steps beyond the process of applying, consult our resource on getting a business credit card with an EIN only to get more details on your options.

Getting Business Credit Cards Without a Social Security Number: The Bottom Line

The real scoop on getting business credit cards without a social security number, if you haven’t already gathered since we’ve been sort of unsubtle, is it’s pretty difficult. Also, arguably not worth all of the worry, paperwork, and government bureaucracy.

What is arguably worth the effort, though, is applying for a social security number.

Although it takes a bit of paperwork and patience, applying for a social security number is much less of a headache than going through all of the steps of applying for a business credit card without a social security number.

Not only will you use it again in your daily life, it’ll be hugely helpful for you in your life as a small business owner. You can easily apply for a business credit card now, and as you build your business credit, you’ll set yourself up for way more later. For instance, you’ll need that social security number if you ever want to apply for a small business loan, because lenders will need to run a credit check.

So, bite the bullet, get your SSN, build your business and personal credit, and set yourself up for a great financial future.

The post Can You Apply for Business Credit Cards Without a Social Security Number? appeared first on Fundera Ledger.

from Fundera Ledger https://www.fundera.com/blog/business-credit-cards-without-social-security-number

The 10 Basic Accounting Principles Every Small Business Owner Must Know

You have a lot to do running a small business—and your own books generally isn’t one of them. Why should you be concerned with mastering even the most basic accounting principles when you have bigger fish to fry? After all, didn’t you hire an accountant so you wouldn’t have to study this sort of thing?  

Well, theoretically yes. But knowing basic accounting principles—or at least the gist of them—will help you understand why that accountant you hired is doing such seemingly specific things. If you’ve ever gotten frustrated by your accountant’s adherence to a set of seemingly arbitrary rules, you might be more relaxed to know that they’re not arbitrary at all.

Actually, accounting is governed by a series of 10 principles or rules. These rules are often referred to as GAAP (pronounced “gap”)—which stands for generally accepted accounting principles. (Somehow anticlimactic, right?)

The more you understand about the purpose of generally accepted accounting principles, the more you’ll know why (and how) these principles of accountancy help protect business owners, consumers, and investors from fraud. They also guarantee a measure of consistency in the accounting reports among all businesses. In order to work in harmony with their accountants, small business owners need to at least know the spirit of these rules!

We’re going to save you the driest stuff within these basic accounting principles—like we said, you’re not training for to be a CPA, but because you want to work better with yours. So we’ll err on the side of that “brief” part. But believe us, this is a recipe for better business zen down the road.

The 10 Basic Accounting Principles

Basic Accounting Principle 1: Economic Entity Assumption

Ever wonder why your accountant harps on you about keeping your business transactions separate from your personal transactions? This isn’t because your accountant wants to make their job easier (although, yes, separate transactions definitely do help!).

The reason they won’t budge on this? The economic entity assumption principle. It basically means that a business is an entity unto itself, and should be treated as such (which is also why this is sometimes called the “separate entity assumption”). This basic accounting principle is a large part of the reason why your accountant insisted you open a separate business bank account when you opened your business.

Even in a sole proprietorship, where your business activity appears on your personal tax return, the economic entity assumption still applies. This is because, legally, your business can exist independently of you.

Basic Accounting Principle 2: Monetary Unit Assumption

The monetary unit assumption principle dictates all activity be recorded in the same currency. This is why you have to go through the extra effort to complete your bookkeeping for foreign transactions.

Another assumption under this basic accounting principle is that the purchasing power of currency remains static over time. In other words, inflation is not considered in the financial reports of a business, even if that business has existed for decades.

Basic Accounting Principle 3: Specific Time Period Assumption

A balance sheet always reports information as of a certain date. Profit and loss statements, also called income statements, encompass a date range. All financial statements have to indicate the time period for the activity reported in order for them to be meaningful to those reviewing them.

In short: Dates are really, really important! Always check your financial statements for dates. A balance sheet will indicate the report is “as of” or “at” a certain date. Profit and loss statements will indicate they are for a specific date range.

Basic Accounting Principle 4: Cost Principle

The cost principle in accounting outlines that the cost of an item doesn’t change on the financial reporting. So, even if you’ve bought something within the year that’s skyrocketed in value—let’s say a building, for instance—even though its relative market value has changed, accountants will still always report the asset at the amount for which it was obtained.

The basic account principle teaches something pretty important for small business owners in general: It’s important not to confuse cost with value. The value of things does change over time, and this is reflected in the gain or loss on sale of assets as well as in depreciation entries. If you need a true valuation of your business without selling off your assets, you’ll need to bring in an expert in business valuations rather than relying on your financial statements.

Basic Accounting Principle 5: Full Disclosure Principle

The full disclosure principle is the generally accepted accounting principle that grabs the most headlines. Under this basic accounting principle, a business is required to disclose all information that relates to the function of its financial statements in notes accompanying the statements. This principle helps make sure stockholders and investors are not misled by any aspect of the financial reports.

Basic Accounting Principle 6: Going Concern Principle

Also referred to as the “non-death principle,” the going concern principle assumes the business will continue to exist and function with no defined end date. This principle is what lets a business defer the recognition of expenses to a later accounting period. If an accountant is concerned the business might be forced to liquidate, they have to disclose this under GAAP principles.

Basic Accounting Principle 7: Matching Principle

For tax purposes, most small businesses are on a cash basis, meaning revenue is reported when cash is received and expenses are reported when cash is spent (or your business’ credit card is charged). Certain businesses are required to report all financial information on an accrual basis, largely due to the matching principle.

Under the matching principle, sales and the expenses used to produce those sales are reported in the same accounting period. These expenses can include wages, sales commissions, certain overhead costs, etc.

Even if your tax return is on a cash basis, your accountant might prepare your financial reports on an accrual basis. Accrual basis reports reflect the matching principle and provide a better analysis of your business’ performance and profitability than cash basis statements.

Basic Accounting Principle 8: Revenue Recognition Principle

Under the accrual basis of accounting, revenue is reported when it’s earned, regardless of when payment for the product or service is actually received. Similar to the matching principle, the revenue recognition principle accurately reports income, or revenue, when the sale was made, even if you bill your customer or receive payment at a later time.

Basic Accounting Principle 9: Materiality

The materiality principle is one of two basic accounting principles that lets the accountant use their best judgment in recording a transaction or addressing an error.

We often see the materiality principle at play when an accountant is reconciling a set of books or completing a tax return. If the account is off by a relatively small amount in relation to the overall size of the business, the discrepancy may be deemed immaterial. Immaterial discrepancies can be disregarded, but material discrepancies must be addressed. Similarly, immaterial expenses can be recognized at the time of purchase, but material expenses must be depreciated over time.

It’s important here for the accountant to be empowered to use their professional opinion. Since businesses come in all sizes, an amount that might be significant—or material—for one business may be insignificant—or immaterial—for another.

Basic Accounting Principle 10: Conservatism

The principle of conservatism is the other principle that lets the accountant use their best judgment in a situation. When there’s more than one acceptable way to record a transaction, the principle of conservatism instructs the accountant to choose the option that’s best for the business they’re working with.

It’s important to understand this principle is only invoked when either way the accountant can record the transaction is acceptable. It doesn’t allow the accountant to completely disregard other accounting principles.

How Familiarity with These 10 Basic Accounting Principles Can Improve Your Relationship with Your Accountant

So, not every business is required by law to comply with GAAP. However, most accountants will insist on following them, regardless of whether your business is bound by law to comply with GAAP. And as Tax Day approaches, we can imagine the idea of getting an audit might give you the scaries—so adherence to these basic accounting principles ensures there’s never a question about the integrity of your financial statements.

Understanding the basics of these accounting principles will help demystify some of those requests your accountant makes, or help you understand why a process is set up just so. And that’ll make your interactions with your accountant smoother. Plus, you’ll be armed to identify when something seems amiss in your financial records, so you can address issues as they arise rather than when they become insurmountable.

Learning basic accounting principles doesn’t seem like such a bad idea anymore, eh?

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from Fundera Ledger https://www.fundera.com/blog/the-10-basic-accounting-principles-every-small-business-owner-must-know

4 Reasons Why Your Small Business Needs to Invest in Digital Marketing

Small and medium-sized businesses are putting more and more emphasis on their digital efforts. Borrell’s 2016 survey showed that 75 percent of SMBs planned to increase their advertising spend in 2017. However, research carried out by web design company Clutch found that 29 percent of small businesses do not have a website. On the one... Read more

The post 4 Reasons Why Your Small Business Needs to Invest in Digital Marketing appeared first on Kabbage Small Business Blog.

from Kabbage Small Business Blog https://www.kabbage.com/blog/4-reasons-to-invest-in-digital-marketing

Business Loans for Low-Income Earners: What Are Your Options?

Coming into the small business loans process, you wouldn’t be alone if your instinct is that your business’s annual revenue is the determining factor for qualification. And if you’re a low-income earner seeking a business loan, or you’re running a startup business that’s not generating any revenue, that’s probably terrifying.

The picture actually isn’t so grim! The options for business loans for low-income earners certainly exist—especially if you’re willing to be a little but flexible on the type of financing and amount of your loan.

In reality, your current revenue is only one piece of a multi-slice pie that’s examined by lenders when determining your eligibility for a business loan. That’s why, before you let low income (or no income) hold you back from your entrepreneurial ambitions, dig into the various options that could still be available.

You might just find that being a low-income earner doesn’t have to hold you back from obtaining a business loan.

What Defines “Low” in Low-Income Earner?

Since “low” is a relative term, let’s begin by defining what we mean here when we talk about business loans for low-income earners.

Although most lenders do require a minimum annual revenue to qualify for a business term loan, there’s not a universal bar for income—each lender sets their own minimum. This often falls somewhere between $25,000 and $150,000. And that’s certainly a big range. But they don’t come out of nowhere—often, lenders look at how much you’re looking to borrow, and their income requirement is around 8% to 12% of the business’s annual revenue.

If your annual revenue falls below the minimum set by a specific lender, it’s important to seek out other lenders and see what they require for business financing. If you’re struggling to find a traditional loan from a lender that fits your annual revenue, you should investigate other types of credit.

Remember that the rise of alternative lending means you have lots of options out there, and if you’re not already working with a lending marketplace, this might be a good time to start. Small business specialists know the requirements for each individual lender and loan type, and can match you with the financing products that you’re qualified for and that are in your best interest.

What Else Lenders Look at When Deciding on Business Loans for Low-Income Earners

For many low-income earners, securing a small business loan might feel impossible. Fortunately, your annual revenue is only one piece of the financial puzzle that lenders use to understand and assess your ability to afford a loan.

In addition to income, lenders also look at your credit score, business profitability, debt obligation, cash flow, financial history, investment, time in business, and business plan:

1. Credit Score

If there’s one aspect that lenders weigh as heavily as annual revenue, it’s your credit score. And that’s because your credit score is a single number that shows a lender your track record with paying back debt. It’s a huge signal in either direction of your risk as a borrower.

Some lenders will look at your personal credit score, your business credit score, or some combination of the two when deciding how much and if they should fund your loan request. Before applying for a loan, it’s important to check your personal and business credit reports to remove any mistakes.

2. Profitability

Your business’s revenue is important to lenders, but so is your profit. A lender will want to know whether or not your business has been profitable, for how many years, and at how high a percentage.

A profitable business isn’t a requirement, but if you’re looking for a business loan as a low-income earner, it will certainly help. Particularly if your business has low annual revenue but has shown consistent profitability over time, you might have a better chance of obtaining a business loan than if your business had higher overhead costs.

3. Current Debt Obligation

When you apply for a business loan, your potential lender will want to know whether your business has any other debt obligations, such as other business loans, credit card debt, or a tax lien against your business.

Most lenders don’t like to take a second position to another lender as it raises their risk. That’s because in this situation, if your business goes bankrupt, the proceeds of your bankruptcy will go to the first lender, leaving the lender in second position out of luck in recouping their investment. (It’s also worth noting for you as a borrower that if you’re looking for a second loan, it may be against the terms of your first lender’s agreement entirely to stack loans.)

If you’re looking for a business loan as a low-income earner, having an existing loan with another lender will make it more difficult to receive approval for a second loan.

4. Business Cash Flow

Most importantly, lenders evaluating your business loan application want to know whether your business will have the consistent cash on hand to make your loan payments on time, every time. By looking at how you manage your cash flow and how much cash your business keeps on hand, a lender can assess how likely you are to be able to pay them back.

Most lenders will request and examine three months of business bank statements to assess your cash flow and management. They will want to see that you’ve had consistent income coming in, and that you’ve maintained an average minimum bank balance of at least $2,500 in the few months preceding your loan application.

5. Past Financial History

This might seem like a nebulous term, but essentially it covers anything that a lender will discover by looking at your credit report. Again, this might include not only your business credit report but also your personal credit report, depending on the lender.

Your credit report will show:

• Bankruptcies
• Foreclosures
• Debt repayment
• Vendor payment history

All of this gives a lender information about your ability to handle and repay debt as well as managing of business assets.

6. Owner Investment

Some lenders want to know how much time and money the business owner has invested. This is especially true for smaller businesses and startups seeking business loans, and many low-income businesses also fit into those categories.

Essentially, this means that the lender wants to know that you’re personally committed to the business and have a personal financial stake in whether the business is successful:

• Are you in this business for the long haul, or will you throw in the towel when the going gets tough?
• Have you put in capital yourself?
• Have you put in serious hours and invested a lot of energy into getting your business off the ground?

Before a lender invests their money in your business, they want to see that you take seriously your own investment in the business’s future. All off this helps add to the way lenders evaluate risk.

7. Time in Business

Similar to owner investment, a lender might want to assess how long your business has been operating. Low-income startups have a reason to not be turning a profit yet. There are specific small business loan opportunities for startups.

Also, a business that has been in operation for a number of years but isn’t turning a large profit may have some red flags that a lender is looking for. Again, this info gives a lender a good picture of—you guessed it—risk.

8. Business Plan

Some lenders will want to examine your business plan, especially for younger or startup businesses.

Your business plan is your time to prove to the lender that you know how to manage assets and capital to become profitable and pay the lender back. Show them your investment to the business and intelligence, and your low income won’t be as important a factor.

Types of Business Loans Available to Low-Income Earners

Lenders will assess lots of factors before making a decision as to whether a business is creditworthy or not. It’s not impossible to find business loans for low-income earners—it just takes a little more planning and research.

With that in mind, you have to know what to look for. Some traditional lenders do offer term loans business loans for low-income earners, yes. But if you don’t qualify, other types of financing and credit options rely less heavily on annual revenue as a determining factor, or offer only small amounts of loaned funds:

Invoice Financing

If you’re a B2B business that invoices its customers, invoice financing might be a fantastic loan option for your low-income business.

Invoice financing is a loan based on unpaid invoices. You choose which invoices you’d like to borrow against and the lender forwards you between 80% and 100% of the worth of those invoices.

When the customer repays the invoice, the lender repays itself plus a small fee and the leftover comes to you.

This is a good business loan choice for low-income earners since your business’s annual revenue isn’t considered for this type of loan. Invoice financing lenders examine your business’s financial history, the likelihood that your customers will pay their invoices on time, and how many outstanding invoices you have. That’s it.

Equipment Financing

If your low-income business is in need of new equipment, you’ll be glad to hear that you may have even more options available than you may have previously thought.

With equipment financing, the equipment itself acts as collateral for the loan cost, lowering the lender’s risk. If you fail to repay an equipment loan, the lender repossesses and sells the equipment to recoup their costs, meaning that lenders can be less stringent in their income requirements than they may be for other types of loans.

A lender will likely look at your annual revenue and financial history for an equipment loan, but only to assess that you can actually afford the equipment. Because the value of the equipment is so important for equipment financing, a lender is less likely to judge your business harshly for low annual revenue.  (As a result, there are even options for equipment financing with bad credit.)

Short-Term Loans

Because they’re typically issued for a small and a short period of time, short-term loans are a great business loan option for low-income earners. A short-term loan might not offer you all of the cash you desire, but it will help you get your foot in the door.

Short-term loans are available for $2,500 to $25,000 with interest rates starting at 10%. Repayment typically takes place weekly over three to 18 months.

Along with these more manageable terms, short-term loans also provide low-income earners with the opportunity to build a business credit history and establish rapport with a lender. Show the lender you’re a good borrower, and they’ll be more likely to work with you in the future for higher loan values.

Short-term loans for low-income earning businesses are typically a step toward more substantial term loans and annual revenue. It’s important to break down your needs as a business and assess just how much of a loan you need right now to get by and build up your annual revenue.

SBA Microloans

SBA loans are the gold standard for business loans. Most SBA loans will be out of reach for low-income earners, but not SBA Microloans. These were government business startup loans keep funding in reach for those just starting out, with low annual revenue.

Similarly to short-term loans, SBA Microloans are small loans that are available to smaller and lower-income businesses. SBA Microloans are available for up to $50,000, with interest rates between 8% and 13%.

Because SBA Microloans are available for only small amounts, this is a great opportunity for low-income businesses to build credit and lender rapport.

***

Many business owners worry that their low annual revenue will prohibit them from being able to find a business loan. That might have been the case 10 years ago, but no more. There are now many online lenders that work specifically with low-income earning business owners and offer specific loan products to work with their annual revenue.

So, even if you’re currently a low-income earner, there are business loan options that apply for the business funding you need.

The post Business Loans for Low-Income Earners: What Are Your Options? appeared first on Fundera Ledger.

from Fundera Ledger https://www.fundera.com/blog/business-loans-for-low-income-earners