SBA Announces That 504 First Mortgage Loan Pools Assembled, Ready For Sale On Secondary Market

WASHINGTON - Bank of America and United Midwest Savings Bank have
become the first financial institutions to assemble SBA 504 first mortgage
pools
to be sold on the secondary market, the U.S. Small Business Administration
announced today.

The announcement follows the launch of the 504 First Mortgage Loan Pooling
program on July 1, 2010. Authorized as part of the American Recovery and
Reinvestment Act of 2009, the measure is expected to jump start the
secondary market for the first mortgage loans made in conjunction with
Section 504 Certified Development Company loans. The ability to sell loans
into this secondary market will provide liquidity to those lenders that want
to
partner with a Certified Development Company to provide real estate and
fixed
asset financing to small businesses.

"The 504 loan pool guarantee program is one more tool we've added to SBA's
toolbox to expand access to capital for America's small businesses," SBA
Administrator Karen Mills said. "By jump starting the 504 secondary market,

more banks will have greater opportunity to strengthen their liquidity and
in
turn increase their lending to small businesses and entrepreneurs."

Bank of America pooled $32.07 million in loans it purchased from other
lenders,
with $25.65 million guaranteed by the SBA. United Midwest Savings Bank
assembled a pool of $7.96 million, with $6.4 million guaranteed by the SBA.

Under the program, the SBA provides a government guarantee on pools of
portions of eligible 504 first mortgage loans assembled by approved pool
originators who sell them to third-party investors. Lenders retain at least
15
percent of each individual loan, pool originators assume 5 percent of the
risk,
and the SBA guarantees the remaining 80 percent.

Typically, a 504 project includes three elements: a loan (or first mortgage)

secured with a senior lien from a private-sector lender covering up to 50
percent of the project cost, a second mortgage secured with a junior lien
from
a Certified Development Company (backed by a 100 percent SBA-guaranteed
debenture) covering up to 40 percent of the cost, and a contribution of at
least 10 percent equity from the small business borrower. Brokers, or pool
originators, purchase portions of the first mortgages, package and sell them
on
the secondary market.

For additional information on the pool originators, visit
http://www.sba.gov/aboutsba/sbaprograms/elending/secondarymarket/index.ht
ml. The list will be updated regularly as new originators are approved.

Release Date: Sept. 29, 2010
Internet Address: http://www.sba.gov/news

#smallbusiness #smallbiz

How to apply for an unsecured small business loan for up to $100,000

http://www.acdfinancial.com/bizloan2.htm  #smallbusiness #smallbiz #Atlanta #Nashville #Memphis

Three Small Business Jobs Act Benefits

Let's take a look at three key provisions the Small Business Jobs Act offers small business owners:

 

1. Thirty-billion dollars will go directly to community banks specifically for lending to small businesses. According to Senate reports, small business lending has dropped by 17.8 percent since the year 2008. The Bill's money is expected to encourage small banks to increase lending, and once things get rolling, they expect the creation of around 500,000 jobs.

 

2. Startups will get bigger deductions in 2010 or 2011. The Small Business Jobs Act would increase the amount you are allowed to deduct in your startup costs from $5,000 to $20,000. Plus, you'll more favorable deductions for real estate related to their business.

 

3. Microloans will be available for to help create small and home based businesses by aiding in their short term capital requirements. Prior, a business could only access a maximum of $35,000 in microloan funds. These microloans can be used for up to five years to pay existing loan payments to continue growing the business.That amount increased to $50,000 with the passage of this bill.

Source: IFG Network

 

#smallbusiness #smallbiz

 

How to apply for a micro small business loan for up to $50,000

http://www.acdfinancial.com/microloan.htm   #smallbusiness #Atlanta #Memphis #Nashville #smallbiz

For Non-Profits - How to Convert One-Time or Annual Donors into Monthly Givers

A great article from Network for Good….Thinking about monthly giving is one of the smartest things you can do as a fundraiser. At Network for Good, we find that 30-40% of the donation volume for a nonprofit website is monthly giving, and that would be a great situation to find all nonprofits in-thanking people every month instead of asking them for donations every few weeks.

How do you do that? How do you turn your annual givers into monthly supporters?

• Make sure your donation form asks what type of gift the donor wants to make ("Do you want to give us a monthly gift?"). Whenever you're asking for money, ask for the monthly pledge, not just a one-time gift.
• Revisit the language you're using in your appeals. Frame your ask in such a way that it's a win-win situation-monthly donations for you, convenience and budgeting for your donors. (Read more about the four parts of a great fundraising appeal.)
• Package the appeal in an exciting way. For example, some organizations have an ambassador program or a sponsor-a-child every month program. Put a face on that sustainable gift. This way you're creating some tangible tie to the idea of giving every month. Remember: To increase charitable donations, you should appeal to the heart--not the head.
• Don't be afraid to ask for a monthly gift of support after someone completes a one-time transaction. It can be ingrained as a nice thank-you message: "Thank you so much for making a one-time gift. This is how you can put your support to work for us each and every month. Would you consider becoming a monthly supporter?" We've seen great success in converting first-time online donors into monthly donors by doing that within the first three days of them making their first online gift.
  
  
  **We’ve seen great success in converting first-time online donors into monthly donors by doing this within the first three days of the donors making their first online gift. Think of using this strategy during the holidays when you're experiencing high traffic of one-time gift donations!

By Katya Andresen and Alia McKee: Sep 23, 2010 and Network for Good

 

#Nashville #Atlanta #Memphis #nonprofit

Small Business Cash Flow Management (Online Chat)

Every month, SBA hosts a free online Q&A chat. This chat is about managing
cash flow. It will be Thursday, 9/30 @ 1 pm and the expert answering the
questions is Julie Brander, past chair of SCORE's New Haven Chapter.

Check it out at the link below.

http://web.sba.gov/livemeeting/Sep10/

 

 

#Nashville #Atlanta #Memphis

4,000 Year Old Tactic for Business Cash Flow

One strategic way for small businesses to find and use cash to grow centers around a 4,000 year old tactic called factoring.  This allows companies to move beyond reliance on loans, and borrowing money from credit cards to survive and grow. Invoice factoring or spot factoring, enables companies to get short-term working capital and improve cash flow and grow their businesses. Factoring makes  business success more predictable.

Since most companies do not get paid immediately for delivered products or services, spot factoring benefits businesses that do not get paid for 30, 60 or 90 days by advancing up to 90 percent against the company's invoices. A factoring company like ACD Financial Services purchases selected invoices at a discount.

#Atlanta #Nashville #Memphis #smallbiz #loan #non-profit

Source:  IFG Network

 

New Temporary Commercial Real Estate Program

Here is a program that might help small business owners who have purchased a
small commercial building or office or warehouse condo with a short-term bank
loan.  I am monitoring the program's status and will provide an update, but here is a short overview.

New Temporary Commercial Real Estate Program

The Small Business Administration is proposing legislation to temporarily allow small
businesses to refinance existing, qualified, owner-occupied, small business
commercial mortgages into SBA’s 504 program, which provides guarantees
supporting loans for the development of real estate and other fixed assets.
Currently, 504 loans must be used for new development or construction—and can
only include a limited amount of refinancing when businesses are expanding.

* Refinance Existing Loans into SBA 504 Structure: SBA’s existing
network of Certified Development Companies and private lenders already help
small businesses finance long term investments like real estate and heavy
equipment through a financing structure that includes a 50% private first
mortgage, a 40% SBA-backed debenture, and 10% borrower equity. With collateral
values falling and many banks pulling back on CRE lending, even
refinancing well performing loans has become harder. Under this new proposal,
borrowers with either existing 504 loans or conventional CRE loans could apply for
refinancing through the 504 program.

* Leverage Existing Infrastructure and Programs: SBA’s existing
network of Certified Development Companies and participating first mortgage
lenders will be able to deliver this program to borrowers quickly. Eligibility
would be similar to the existing SBA 504 program. Certified Development
Companies are SBA’s critical partners in this program, linking small
businesses and private lenders and helping to manage program risk.

* Target Performing Real Estate Loans: Eligible small businesses
will have commercial first mortgage loans or existing 504 first mortgage loans
that are maturing in the next year. In order to qualify, businesses will
have to be current on all loan payments for the previous year.

* Help Finance up to 90% of Current Property Values: Lenders that
are refinancing mortgages for existing customers will make a loan for up to
70% of the current property value; and SBA will help finance the remaining
20%. For lenders taking on a new refinancing project, SBA will take on a
greater share of financing, up to 40%.

* No Cost Program through Incremental Refinancing Fee: SBA’s
proposal for a temporary, zero-subsidy rate CRE refinancing program would be
funded through an additional fee for refinancing projects, and would not require
credit subsidy appropriations.

* Prevent Foreclosure: Borrowers can finance up to 90% of existing
property values through this program. By allowing eligible small businesses
to refinance their CRE mortgage into an SBA 504 loan project, this program
would provide creditworthy small businesses the opportunity to lock in
stable, long-term financing—and save jobs—by protecting small businesses from
unnecessary foreclosure.

* Free up Capital for Community Banks: Market research shows that a
large percentage of CRE mortgages are set to mature within the next few
years, and that nearly half of these mortgages are held by community banks. By
removing a percentage of existing CRE mortgages from their books, lenders
will free up capital that they can use to make more small business loans.

Source: SCORE

#smallbiz #Atlanta #Memphis #loan #smallbiz

ACD Financial Services www.acdfinancial.com

 

New Small Business Bill Expands Microloans

President Obama is expected to sign a new small business bill into law on
Monday. Here is briefly how the Microlending program will change, according to
GulfCoast Finance, a certified development company in Florida.

Microloans: Permanently increases the maximum per small business borrower
to $50,000 and per intermediary to $5 million. Also authorizes SBA to
waive intermediary match requirements during fiscal years 2011 and 2012.
Intermediary Lending Pilot: Establishes a 3-year pilot program to provide
capital to 20 non-profit intermediaries annually, to make loans targeted to
startup, newly established and growing small business concerns. CDCs should be
eligible to participate.

 

#smallbiz #loan #Memphis #Nashville # Atlanta

 

Source: SCORE Atlanta

The Great Recession is Over! Says Who

According to a panel of leading economists at The National Bureau of Economic Research (NBER), the Great Recession that began in December 2007 ended in June 2009.  Go figure.

 

The unemployment rate hovers around 10% nationally and 27 states saw their unemployment rate increase.  The residential real estate market is still shattered and most Americans have seen a substantial decline in their wealth. Small businesses that drive the economy and create the majority of jobs are unable to obtain capital to grow and expand.  I am sure most small business owners and consumers without jobs don't agree with these economists. 

 

Well, we don't either.  That's why at ACD Financial Services (www.acdfinancial.com) we are constantly working to help small business owners obtain the capital they need to be successful.

Determining Your Business' Capital Needs

Let's start with two definitions.

"Capital," in investing terms, is money used to finance purchases of equipment, supplies, or products. If you want to buy a new piece of equipment, the money you will spend to purchase that equipment is considered Capital.

"Working Capital" is the money you need to spend to cover the day-to-day operating costs of your business. Working Capital is cash − or accounts that can be converted into cash, like accounts receivable or inventory − and cash you need to spend to cover financial obligations falling due in the current operating year. To keep it simple, think of working Capital as the money you need to pay the bills.

So: To determine your Capital needs, you'll need to consider both Capital and working Capital; the total is the amount you'll need to operate your business.

Let's start with Capital you'll need to make major purchases. Potential sources of Capital outlay include:

• Buildings, facilities, etc.
• Major equipment.
• Office equipment and furnishings.
• Materials, supplies, parts, etc.
• Initial inventory.

If you are planning the Capital needs of a start-up, simply write down the costs of setting up the business. If you run an existing business and need Capital to expand, write down the costs of that expansion. (But don't include items like salaries, utility costs, insurance, etc − we'll get to those items in a moment.)

Then focus on your working Capital needs. To make it simple, we'll assume you run an existing business and are looking to expand. In that case, to determine working Capital requirements create projections for items like accounts receivable, inventories, and accounts payable. Then compare your current actual costs to the figures you forecast. Then subtract the increase in current liabilities from the increase in current assets. The difference is your change in working Capital and indicates how much money you'll need.

If you are seeking Capital for a start-up, it's even easier: You don't have current actual costs, so the difference in liabilities and assets equals your working Capital needs.

Here is an example. Say you plan to open a new restaurant. (We'll keep the math simple.) You estimate the following Capital costs:

• Facility (building and land)	$500,000
• Equipment (stoves, freezers, etc)	$150,000
• Furnishings (tables, chairs, etc)	$75,000
• Other items (silverware, plates, etc)	$20,000
• Etc.
Total	$745,000

You determine you require $745,000 in order to open the restaurant. But that is not all the Capital you will need; you'll also require working Capital to keep the operation going while the restaurant gets on its feet. You estimate the following in working Capital needs for the first twelve months you are in business:

• Salaries	$400,000
• Utilities	$25,000
• "Groceries" (supplies)	$50,000
• Advertising	$15,000
• Etc.
Total	$490,000

Adding Capital and working Capital together indicates you'll need $1,235,000 to cover the first year's expenses. (You'll probably need more, since neither list above is in any way complete.)

On the other hand, you will bring in cash as customers patronize your restaurant. You run a variety of different scenarios and decide you feel comfortable assuming you will do $800,000 in sales over the course of the first year.

The math is simple: $1,235,000 minus $800,000 equals $435,000. You need $435,000 in Capital to open the restaurant.

But take a step back first. While you have estimated you will do $800,000 in sales, those sales are unlikely to be spread evenly across twelve months; your first few months are likely to be lean as customers learn about your restaurant and your sales build over subsequent months. Plus you need at least $745,000 to cover the costs of getting the restaurant started.

In addition, to cover potential shortfalls, you decide you need an additional $200,000 as a buffer for lean months and in case unforeseen expenses arise.

Taking into account your initial needs, and a buffer, you determine you'll need a total of $1,435,000 for the first year, but since you expect sales to rapidly increase as customers flock to your restaurant, you cut that total amount by $300,000 because you can use income to offset some of your working Capital needs.

Then, to present a great case to investors and lenders, you lay out those Capital needs on a month-by-month basis, showing working Capital requirements and offsets due to accounts receivable. In short, you show lenders and investors what you need, justify those needs based on solid forecasts and estimates, and show how you will pay back the money you borrow. The key is to factor in Capital needs and working Capital needs; don't let your business fail because you didn't estimate and plan for working Capital required to cover operating expenses

 

Thinking About Starting A Non-Profit?

To create a non-profit you have to file articles of organization with your state government.   Before you do that, you should visit www.irs.gov and read Publication 557.  It is a must read if you are going to start a non-profit. To receive tax exempt status you must file Form 1023 with the IRS.   Form 1023 and instructions can also be found on the IRS's website. The reason why you want to read the IRS documents first is because filing articles of organization with your state's government does not grant you tax exempt status.  Only the IRS can do that if they approve your non-profit for tax exempt status. Tax exempt status allows donations to your non-profit to be tax deductible for your donors. Applying for grants involves finding organizations that provide grants that support your non-profit's mission and completing their grant applications.

Grants To Start A For-Profit Business

Grants to start a for-profit business do not exist.  Grants generally are for and support non-profit organizations.  Most start-up businesses get started with personal funds from the owner, a combination of a business loan and personal investment, or a combination of both and private investment.  You should  develop a business plan if you are thinking about starting a business.  You will need a business plan to obtain any type of funding and at a minimum to serve as road map to be successful. 

How To Control Spending

It really does not matter whether business is facing financial challenges, growing at a manageable rate, or booming, without oversight a company's spending can easily spiral out of control. Have you established company spending policies? Because if you have not,  it will be difficult to set boundaries, or create controls, let alone enforce spending policies. Anyone who runs a business - whether small or large - has expenses. As a small business matures the need for spending controls is eminent. Here are a couple of strategies to support the process.

One company known as ExpenseWatch.com can help  you control  expenses by offering best-of-breed modules for Expense Reports, Purchasing and AP Invoice Management, which can be subscribed to individually to control specific company spending issues, or as a fully integrated expense control suite. An open expense control platform, companies have the flexibility to integrate spending data with a wide range of business solutions used—travel management tools, accounting/enterprise resource management systems and payroll providers, credit cards, budgeting applications, customer relationship management systems, ecommerce vendors and more.

If your business expenses get out of control thanks to a new product launch, or traveling for trade shows, there is another solution that can help you get funds in the door fast -- factoring.  As you may know, many companies pay their invoices 30/60 or 90 days out. If you have outstanding invoices for a job that you have completed, and are owed apx. $20,000 or more, invoice factoring might just be the solution to get funds in fast to cover outstanding expenses. 

Here's how it works. IFG looks at the creditworthiness your customers and can fund within as little as 24 hours. Most factoring companies do not expect to buy 100 percent of a company’s receivables, and there are no minimum or maximum sales volume requirements. IFG’s professional rates are competitive; each client's circumstances will vary and may have an impact on the fees.

Because IFG offers clients a “use it as you need it” funding option, each invoice purchase is a separate transaction and does not form part of a portfolio lending approach. The transaction is modeled as a buy-sell transaction. IFG first undertakes a due diligence that typically takes one to two business days. Once completed the client is at liberty to offer invoices to IFG for purchase. Upon receipt of invoices, IFG checks the credit of the debtor named on the invoice and makes sure that the sale represented has been satisfactorily completed. Once this is done the debtor is advised of the purchase by IFG and the client receives their funding. At the end of the credit period the debtor pays IFG directly. The transaction is completed.

ACD Financial Services

www.acdfinancial.com

Putting Financial Skills into Action: New FIELD Whitepaper

There's a renewed awareness today that it's not enough to simply be knowledgeable about financial concepts–it's about applying that knowledge–even in simple ways. We all know that eating vegetables are good for us yet, more often than not we reach for the french fries instead. This simple scenario also holds true in the realm of financial skills. Many of us know that we need to save, budget and work on our credit score but all too often we give in to impulses and put things off until tomorrow. This move from gains in financial knowledge toward putting these skills into practice has been termed 'financial capability'. A commitment to building financial capability is growing amongst microenterprise organizations, as discussed by the Aspen Institute's FIELD program's new white paper on the topic.  Microenterprise organizations like ACCION USA use financial products coupled with financial education, allowing microentrepreneurs to not just learn about managing finances, but to effectively put that knowledge into practice with a financial product. How is ACCION USA building financial capability?  ACCION USA's small business loans, secured loans (guaranteed with the money of the applicant) and small dollar credit builder loans (for individuals with no credit history) allow microentrepreneurs to build a strong installment credit history through on-time payments over an extended period of time.  Financial education on credit and other small business fundamentals is provided by AUSA staff throughout the application process and the life of a small business loan, building skills around credit management that lead to long-term financial success. Keep your eyes peeled for new tools that are emerging to support work around financial education for microentrepreneurs, like ACCION USA's e-learning course on credit, or other web-based training sites like assetplatform.org. Author: Elizabeth Garlow Subject: Putting Financial Skills into Action: New FIELD

View article...

Uniquely Crafted Business Plans Are Needed to Raise Capital

http://www.huffingtonpost.com/jerry-chautin/uniquely-crafted-business_b_664139.html

Balance Sheet

Balance Sheet

The Balance Sheet details what a business owns, what a business owes, what a business is worth, and how shareholders financed the business. While some are more complicated than others, the average Balance Sheet will look something like this:

Current Assets Fixed Assets	(What the business owns) _
TOTAL ASSETS
Current Liabilities Long-Term Liabilities	(What the business owes) =
TOTAL LIABILITIES
NET ASSETS	(What the business is worth) =
Capital Retained Profit	(How shareholders have funded the Net Assets)
SHAREHOLDER FUNDS

 

Here's an example:
Current Assets	$20,000
Fixed Assets	$100,000
Total Assets	$120,000
Current Liabilities	$30,000
Long-Term Liabilities	$70,000
Total Liabilities	$100,000
Net Assets	$20,000
Capital	$4,000
Retained Profit	$16,000
Shareholder Funds	$20,000

 

What did you learn? The company has $120,000 in assets and $100,000 in short and long-term liabilities; as a result, it has Net Assets of $20,000. Of that $20,000, $4,000 was capital provided by shareholders, with the other $16,000 the result of profitable operations.

So why is it called a Balance Sheet? Assets, or the means used to operate the company, are balanced by financial obligations, equity investment, and retained earnings. It's a simple formula: Assets = Liabilities + Shareholder Equity. Both sides of the equation must be equal, or balanced.

You can learn a lot from a Balance Sheet, like whether how much a business owns is more than it owes, whether its debt is mostly in short-term notes or long-term obligations to suppliers or long-term loans to the bank, whether the shareholders invested a majority of the capital up front, or whether the business has grown organically with profits it has made.

Balance Sheet Terms

• Current Assets . Assets with a life span of one year or less; can be easily converted into cash. Include cash, inventory, and accounts receivable.
• Fixed Assets. Assets with a life span of over a year, not easily converted into cash. Includes equipment, buildings, land, and even patents or copyrights.
• Current Liabilities. Debts which must be paid within one year. Includes accounts payable, interest on long-term loan payments, and short-term financing (for example, company credit card payments).
• Long Term Liabilities. Debts and other financial obligations due over a year from the date of the balance sheet.
• Capital. Funds provided by investors.
• Retained Profit. Profits kept and not spent. Can be used to finance additional assets or just put away for a rainy day.

In short, the Balance Sheet shows assets and how much is still owed on those assets. The result, Net Assets, is the value of the business.

Evaluating a Balance Sheet

Once you create a Balance Sheet you can use it to evaluate the financial performance and health of a company. Here are a few calculations you can perform.

Quick Ratio (QR)

The Quick Ratio is sometimes called the "liquidity ratio" or the "acid test ratio." The Quick Ratio measures the liquidity of a company by determining the ratio between current liabilities and assets that can be quickly converted into cash (therefore the use of the term "quick ratio.")

Quick assets include things like cash and accounts receivable. Inventory is excluded from liquid assets since one of the goals of the QR is to determine if current liabilities can be paid without selling inventory. Inventory should hopefully always be sold to generate profits, not simply to cover expenses.

Here's the formula:

QR= QA/CL
QA	= Quick Assets, and
CL	= Current Liabilities

 

Here's an example. Say a business has $40,000 in cash and $20,000 in liabilities.

40,000 / 20,000 = 2.0. The QR is 2.0; the company has double the liquid assets available needed to pay off current liabilities.

The Quick Ratio is exactly what it's called − a quick way to measure the short-term health of a company. A company with a QR lower than 1.0 may not be able to meet debt obligations without taking drastic measures like selling assets or borrowing additional funds. A low QR creates another problem, because lenders are often unwilling to make loans to a company with a QR below 1.0; if the company is struggling to meet current liabilities, adding more debt may only aggravate the problem.

The QR is in no way an absolute measure of business health, but it does indicate whether a company can put its hands on funds in hours or days without having to resort to selling inventory or hard assets. A company with a high QR is relatively solvent and has a built-in buffer against short-term cash flow problems.

Current Ratio (CR)

The Current Ratio (sometimes called the Working Capital Ratio) measures a company's liquidity. A high CR indicates the company has sufficient cash or assets to meet normal operating conditions. A low CR could mean the company uses more of its assets to grow the business. Assets include cash and other items including inventory that could be converted to cash; liabilities include debts and obligations that are expected to be settled within a year.

Here's the formula:

CR =CA/CL
CA	= Current Assets, and
CL	= Current Liabilities

 

Here's an example. Say a business has total assets of $500,000. Its current liabilities (the money it owes) total $120,000.

500,000 / 120,000 = 4.16. The Current Ratio is 4.16. (Keep in mind that if assets equal liabilities, the Current Ratio is 1.)

In most industries, if the CR is over 2 a company is generally considered to have good short-term financial strength. If the CR is under 1, and liabilities exceed assets, the company is clearly struggling, at least in the short term.

Another way to view CR is in dollar terms. Say your company has assets of $100 and liabilities totaling $34. The CR is 2.94, or, put another way, the company has $2.94 in assets for every dollar you owe.

Comparing CR over time is helpful. If CR decreases, that could be an indication a company is carrying too much inventory or is struggling to collect receivables in a timely fashion. If the company is not taking on more debt and revenues are increasing, then its CR should improve − or something is wrong.

 

Source: First Tennessee Bank

 

Basic Accounting Methods: Accrual and Cash

Basic Accounting Methods: Accrual and Cash

There are two basic ways to maintain your books and keep track of income and expenses: The cash method and the accrual method. ( It is possible to use both, choosing one for accounting and another for tax purposes, but most business do not − talk to your accountant before you make that decision. )

Most businesses with sales under $5 million a year can use either accounting method. Businesses with sales greater than $5 million a year , or businesses that maintain an inventory of supplies or finished goods with gross receipts over $1 million a year must use the accrual accounting method. And In addition, all publicly-held companies must use the accrual method. ( There are a few other tests used in special circumstances; see your accountant for specifics. )

With those constraints in mind, which is the best method? The answer depends partly in part on the type of business you run; start-ups and small companies often use the cash basis because it's simple and less tine time consuming, but most businesses operate using the accrual accounting method in order to maintain a clearer financial picture.

Let's look at both methods:

• Accrual Method: Expenses are booked when goods or services are received, and income is booked when you make a sale − regardless of when you actually pay the bill or receive the check. If you order office supplies, you'll book the expense when the supplies are received, even if you do not intend to pay the bill for another thirty days. Income is booked on the day you perform a service, not when you actually receive payment.
• Cash Method: Expenses are booked when actually paid for and income is booked when actually received. For example, if you order office supplies, you book the expense when you pay the invoice even if you received the supplies a month earlier. If you sign a contract to perform a service, you do not book the income until you receive the check for that service, even if you perform that service well in advance of payment.
• Cash Method: Expenses are booked when actually paid for and income is booked when actually received. For example, if you order office supplies, you book the expense when you pay the invoice even if you received the supplies a month earlier. If you sign a contract to perform a service, you do not book the income until you receive the check for that service, even if you perform that service well in advance of payment.
• Accrual Method: Expenses are booked when goods or services are received, and income is booked when you make a sale − regardless of when you actually pay the bill or receive the check. If you order office supplies, you'll book the expense when the supplies are received, even if you do not intend to pay the bill for another thirty days. Income is booked on the day you perform a service, not when you actually receive payment.

Think of it this way: You handle your personal finances using the cash method. When you write a check you enter the amount in your register; when you receive a paycheck you enter that amount. In a nutshell, that is cash basis accounting. It's simple, easy to understand, and lets you know exactly how much cash you have on hand.

Advantages and Disadvantages

A major negative with cash accounting is the risk of misunderstanding your company's true financial position. If you extend credit to customers, buy on credit from suppliers, or receive advance payment for services, using the cash method could cause you to assume your business is performing a lot better − or a lot worse − than is actually the case. For example, if you purchase $10,000 worth of materials on credit, a quick glance at your books may indicate you are in great shape… because the $10,000 will not "hit the system" until you pay for those materials.

The accrual method provides a more accurate picture of income and debt, but it can be misleading in terms of cash flow. For example, you may show major income for a certain period − since a number sales have been booked − but until you actually receive payment for those sales, you do not have access to those funds. Many businesses face cash flow problems because they lose sight of the amount of funds actually on hand as opposed to shown on the books.

Recording Dates

Determining the recording date under the cash method is simple: When you pay a bill, record the expense. When you receive payment, record the income.

How do you choose the date to record income or expense under the accrual method? It's easy:

• Income Recording: Income is entered in the books when you have completed providing a service or have delivered all the items requested by the customer. In terms of income, think "finished."
• Expense Recording: The same is true for expenses; don't record the expense until service is completed, items are received, etc. If a service is 90% complete, for example, and the remainder of the work will be completed a few weeks later, typically you won't enter the expense until the remaining work is complete.

Tax Implications

The IRS allows most businesses to use the accrual method for accounting purposes and the cash method for income tax purposes. But However , and this is a key point, once you choose a method to use for tax purposes, you must stick with that method − even if it would be to your advantage to switch to the accrual method for tax purposes. ( You can request a change, but the IRS must approve that change. )

Let's use a theoretical purchase to illustrate the tax implications of both methods. Say you purchase new office furniture on December 15th ; and the total cost is $2,500. The furniture is delivered on the 22nd , but you are not required to pay the invoice for thirty days from receipt of goods.

Using the accrual method, you book the expense on December 22nd , because that is when the furniture was physically received. As a result the expense is shown on this year's taxes and you can show the deduction this year, even though you will not actually pay for the furniture until late-January next year.

Under the cash method, the expense is booked in January when you write a check to satisfy the invoice, and you cannot use the deduction against income on this year's taxes.

One last note: If you run an all-cash business − receiving cash for goods sold and paying for all goods and services upon receipt − your books will look the same regardless of which accounting method you use. Credit − either extended or received − will change the picture dramatically.

Source: First Tennessee Bank

Five Top Financial Tips Includes Factoring

In today's economic times, it is sometimes challenging to make ends meet, particularly if you are running a small business. But the basics for how to be financially successful, no matter how much money you earn, remain the same, both personally and for your company. Here are the top tips for getting ahead financially.

1. Make a budget and stick to it – For both your personal life and business, it is important to budget. Set spending and saving goals and stick to these goals.

2. Spend less money than you earn -- It does not matter how much or little you earn personally, or how much the business makes, simply spend less and earn more. Take a look at those areas where you can cut corners which will usually result in big savings.

3. Make a plan for saving -- Save first, because if you wait until you've met all your other financial obligations before seeing what's left over to save, chances are you'll never save. Put aside a minimum of five to ten percent of your income for savings each month before you pay bills or spend money.

4. Maximize any benefits -- 401(k) plans, medical and dental insurance, or even flexible spending accounts are worth a lot. Make sure you're maximizing these programs and take advantage of the ones that can save you money.

5. Think about accounts receivable factoring -- If your company's invoices are being paid 60 to 90 days out, and often times these are late, invoice factoring is an excellent solution to get paid right away.

SBA's Inspector General recommend that Community Express loans expire in December.

http://www.sba.gov/idc/groups/public/documents/sba_homepage/oig_report_10-12_community_exp.pdf

 

The U.S. Small Business Administration's America's Recovery Capital Loan Program will finally die on Sept. 30.

http://www.heraldtribune.com/article/20100906/COLUMNIST/9061059/2267/BUSINESS?Title=Small-business-loan-plan-flawed-from-start-to-finish

 

 

 

Factoring News: Trusting Your Gut in Business

Research has proven over and over again that successful entrepreneurs know when to trust their gut. This research is coming in from all kinds of research from a number of different fields including neurology, cognitive psychology and even economics. The research proves intuition is a real form of knowledge -- a skill that anyone can develop and strengthen.

Gut instincts or intuition is something that could be of particular help in today's chaotic, stressed economic world. Making the right business decisions under pressure sometimes means you need to use your intuition as opposed to when you have more time to be rational. But then again, trusting the gut also enables entrepreneurs to try new ventures, and in some cases develop new products or money saving strategies.

Let's take an example, what if you see the need for a product or new service and just know it will work. However you don't have sufficient cash flow to develop and produce the product. You may not have the cash on hand to commission a market study or conduct a focus group, but you're still willing to stake your reputation and money on the idea because of what your gut is telling you.

And if you need the funds to develop a product that you know in your gut is the right product for your customers, that's when invoice factoring comes in handy. We all know that a business must have cash on hand in order to grow. Well if you need cash, and have outstanding invoices, then you can simply contact a factoring company and you could get the cash needed to begin development on that new product in as little as 24 to 48 hours.

Source: Interface Financial Group

Invoice Factoring Helps Businesses Go Global

Today many businesses are no longer just competing domestically. With the Internet and expansion worldwide it might be a good idea to expand, but before you even think about taking your business global, here are a few things to ask yourself:

Do new and old customers like your products or services?
Do you get repeat customers?
Can new customers easily find you?

If you can answer yes to these questions, and you have strong revenues, then you might be ready for expansion internationally. You may want to start small and go after a foreign market that's easy to enter. For instance, one that speaks your language, or one where there are fewer competitors. Next, when that market succeeds, like your domestic market, enter the next couple of markets … one at a time, using the same business strategy, but with customization. Start by adapting the resources, skills, and values in order to develop a global corporate culture.

Hire the right team for your expansion, and accelerate your learning curve. Look online for resources for new companies, international export and government aid. Learn the global financial differences and pitfalls. Keep your business expenses in check. And if you run into tough times, think about using invoice factoring to keep the business growing strong until it is able to sustain on its own.

We have funding source for businesses all over the world, with offices in the United States, Canada, the United Kingdom, Australia, New Zealand, and Singapore. If you need guidance for global expansion or for trade finance transactions, factoring services, or to fund cross border invoices we can assist - so be sure to call at 678-868-1885 or visit our website at www.acdfinancial.com

You will soon see your business go from domestic to international successfully.

Invoice Factoring Can Aid Strategic Planning for Your Business

The strategic planning process should result in identifying broad directions and approaches for your company as a whole, and it is usually intended to provide direction -- with all the more tactical details to be worked out later. Most companies look at planning every quarter, so a good strategic plan will be comprehensive in scope, developed with considerable input of data and thinking. You should look at the business as it stands now - it strengths - for instance, technical excellence, strong production, excellent marketing, or customer service. This kind of objective analysis will, of course, also bring out the weaknesses of your company. Clearly identifying any weaknesses will allow you to see where you needs to seek external help, or hire professionals with the skills required to resolve the issue.

In today's difficult economic times, one area where companies are often weak is knowing how to maintain enough cash flow. This is an area where your bookkeeper, or financial management team should think about solutions that can keep cash flow going, so your company can continue to meet bills and pay its employees on time, or purchase new equipment as needed. Invoice factoring, for example, is strategy that can help. Sometimes businesses use a "use it as you need it" invoice factoring funding option, where each invoice purchase is a separate transaction and does not form part of a portfolio lending approach. The transaction is modeled as a buy-sell transaction.

Upon receipt of invoices, the factor checks the credit of the debtor named on the invoice and makes sure that the sale represented has been satisfactorily completed. Once this is done the debtor is advised of the purchase by the factor and the client receives their funding. At the end of the credit period the debtor pays the factor directly, thus completing the transaction.

Factoring is a Cost Effective Solution

Today's banking environment has created a plus for the concept of small business factoring, mainly because it is a cost effective solution to obtain necessary working capital for them to sustain and grow. When a business owner gets cash from factoring invoices it can be used as a short term working capital funding source. There are many reasons why a businesses should consider factoring, also known as accounts receivable factoring, but primarily if they are in a business where they experience a slow accounts receivable cycle -- 60 or 90 days - or if the business is recovering from some unforeseen circumstance such as a loss due to a natural disaster.

Many businesses today are having a hard time keeping up with their bills, and some are just eeking by to meet payroll every month. Factoring is a great way to secure money as a business gets clients, makes money and grows. It is safe. You can continue doing business, buy more supplies in order to continue to do more business. Plus it is a smarter solution than going into debt via a bank loan, if you can even get one today given current economic conditions with banks less likely open new lines of credit or increase current credit limits. The bottom line. Factoring support business growth.

Factoring is Used to Reduce Administration Overhead

Factoring is also known to be called debt factoring, and it basically involves selling your invoices to a third party, or a factoring company. In exchange,  they will process the invoices, allowing you to draw funds against the money owed to your business. Essentially, these companies provide a finance, debt collection and ledger management service.

 

Factoring is commonly used by businesses to improve their cash flow but can also be used to reduce administration overheads. Businesses that supply this service are called factors or debt factoring companies.

Further, invoice discounting is an alternative way of drawing money against your invoices. However, your business retains control over the administration of your sales ledger. As well as providing finance, it offers valuable support services and credit insurance.

 

Factoring provides a fast prepayment against your sales ledger. It allows you, at a cost, to flexibly increase your working capital and improve cash flow.

 

Factoring is offered to businesses trading with other businesses on credit terms. It is not normally available to retailers or to cash traders.

 

Factoring companies can be subsidiaries of major banks and financial institutions, or independent businesses.  Regardless,  they will want to talk with you to learn more about your business, review your financial situation and study your business plan.  This is how they evaluate your suitability for a factoring facility. Credit limits might be required - if so, you must agree how they will operate.

 

After signing an agreement, the factoring company will typically agree to a percent of the approved invoices, and typically payment is usually made available within 24 to 48 hours.

 

Check the notice period to the end of the service because many factors require three months' notice, but some require longer. Negotiate if you are not agree with the notice period.

 

 

ACCION USA Green Business Client Featured in “Entrepreneurship Interviews”

 

By Cailey Ryckman Entrepreneurship Interviews, a popular blog that features interviews with real life entrepreneurs and their businesses, recently highlighted one of ACCION USA's green loan recipients, Cheney Brand. Cheney owns the solar energy design and installment company SunBug Solar. Read more about Cheney and how he put his ACCION USA loan towards green business success.

View article...

How a Factoring Company Works

Many business owners have turned to alternative funding methods such as factoring, otherwise known as accounts receivable factoring, because it offers clients a "use it as you need it" funding option. Therefore every invoice purchase is a separate transaction and does not form part of a portfolio lending approach. The transaction is modeled as a buy-sell transaction.

A factoring company undertakes a thorough due diligence program that usually takes about 24 to 48 hours. Once the due diligence is completed, the client is at liberty to offer invoices to IFG for purchase. After receipt of the invoices, the factor will check the credit of the debtor named on each invoice and make sure the sale represented by each invoice has been satisfactorily complete.

Once credit has been verified, each debtor is notified of the purchase by IFG and the client is paid for the invoices. At the end of the credit period the debtor will make payment directly to the factor.