Round Two of Payment Protection Program: Here’s What You Need to Know

How To Apply For Small Business Loan Corona Virus
Sticky Note With Handwritten “Apply”

Small businesses across the United States have all been impacted in some way by coronavirus (COVID-19) pandemic. Forced closures, reduced hours and layoffs have affected employees and employers everywhere. In an attempt to provide some relief and help for small businesses. The CARES Act was enacted to provide much needed help to individuals, business and others in response the economic distress. One of the programs, is called the Paycheck Protection Program. The loan program will allow businesses suffering due to the coronavirus outbreak to borrow money for a variety of qualified costs related to employee compensation and benefits. The CARES Act calls for a portion of the above-mentioned paycheck protection loans to be forgiven on a tax-free basis.

The initial round, in late March 2020 of funding, provided nearly $350 billion guaranteed paycheck protection loans for small businesses. However, these funds ran out extremely quickly. With a passage of the paycheck protection program and health care enhancement act which was recently signed provides additional relief by providing an additional $310 billion more in funding. Here’s additional information you need to know about the second funding of the coronavirus relief loans for small businesses.

Assistance for Smaller Businesses
Of the $310 billion, $60 billion will be specifically set aside for smaller banks and credit unions. The law also expands the Economic Injury Disaster Loan (EIDL) program by $60 billion: $10 billion for grants and $50 billion for loans. This is welcome news for businesses that desperately need funding to weather the economic uncertainty created by the COVID-19 pandemic. The legislation greatly expands the number of businesses, including individuals who operate as a sole proprietor, or independent contractor (including non-profits). Each business can qualify for a loan to pay employees and other payroll costs and cover other non-payroll expenses like mortgage interest, rent and lease payments as well as utilities. All loans granted will have a 1% fixed interest rate and will be 100% forgiven if the money is used appropriately and within the guidelines set by the SBA.

How Much Money Can I Receive?
The maximum amount you can receive is your businesses’ monthly average payroll cost in 2019, multiplied by 2.5 with a maximum of up to $10 million. If you are a newer business, existing after June 30th, 2019, the SBA lender will look at costs from January and February 2020. Seasonal employers’ costs will be calculated differently, using a 12-week period beginning in either February or March 2019 and ending June 30th, 2019.

In an effort to provide the necessary help for small businesses, the goal of these government issued loans is to keep people employed during the span of the pandemic. The loans will be seen as grants from the government as long as the requirements mentioned above are met. The forgivenesses will be reduced, and businesses will be expected to repay the loan if employee counts and employee salaries are reduced by more than 25% under the Protection Payment Program. If you rehire or restore decreased salaries before June 30th, 2020 you will not be penalized or expected to pay back the loan. Adequate record keeping to prove your expenses will be required and your business will need to have spent at a minimum 75% of your loan on payroll to qualify for forgiveness.

We understand that our environment is constantly changing due to COVID-19 and at SD Associates in Elkins Park, PA, we want you to know that we are here for you. From questions about the Payment Protection Program for your small business to financial guidance and payroll assistance, our accountants are here to help you navigate these constantly changing waters. Contact us today for all your needs.

Practices That Can Help Your Small Business Raise Capital

As a small business owner, you need to increase profits and maintain a healthy equity. But if you’re currently acting as your own accountant, you may be missing out on crucial ways to do this. The accountants at SD Associates are here to explain why an accountant will benefit your small business in more ways than one.

Manage Your Business’s Cash Flow

Cash flow is the lifeline for any business, but more often than not, small business owners don’t have the resources or time to effectively track cashflows properly. If you’re looking to apply for a business loan, the strength of your cash flow is one of the factors that lenders look, so you have the ability to repay a loan. Whether you need a loan to help cover your business’s working capital needs or a loan restructuring to help expand your business, our accountants will be able to assist you in tracking your cash flow and ability to provide the bank solid information when applying for that new loan.

Help Improve Your Business Credit

When you need apply for a business credit card or for a loan, having good (or great) credit is crucial for being able to access capital. But just because you’re excellent at running your small business doesn’t mean you know how to build your business credit—that’s where SD Associates comes in! Our accountants will guide you through best practices to build credit for your business, so you can get the funding you want when you need it. These practices may include:

  • Establishing a business entity separate from your personal finances.
  • Financing certain business purchases.
  • Registering with the credit bureau that is appropriate for your small business.

Assists with Borrowing Money Against Unpaid Invoices

As a small business owner, there may be times where you need cash fast or you are waiting for your clients to pay their outstanding invoices. SD Associates accountants have the financial and business acumen needed to identify these gaps for cash flow purposes. They can assist you to determine why your cash flow is negative.  If you have several clients who are not paying their invoices within the terms set forth in your policies, we can will assist you through the process of factoring these invoices. This practice enables you to borrow money against unpaid invoices so that you can quickly get the capital infusion you need to help you run your business efficiently.

Whether you are looking for an accountant to help you in the process of raising capital, or you need a bookkeeper to manage your monthly expenses and invoices, SD Associates in Elkins Park, PA can help! Contact us today to schedule an appointment with one of our financial experts.

Could captive insurance reduce health care costs and save your business taxes?

If your business offers health insurance benefits to employees, there’s a good chance you’ve seen a climb in premium costs in recent years — perhaps a dramatic one. To meet the challenge of rising costs, some employers are opting for a creative alternative to traditional health insurance known as “captive insurance.” A captive insurance company generally is wholly owned and controlled by the employer. So it’s essentially like forming your own insurance company. And it provides tax advantages, too.

Benefits abound

Potential benefits of forming a captive insurance company include:

  • Stabilized or lower premiums,
  • More control over claims,
  • Lower administrative costs, and
  • Access to certain types of coverage that are unavailable or too expensive on the commercial health insurance market.

You can customize your coverage package and charge premiums that more accurately reflect your business’s true loss exposure.

Another big benefit is that you can participate in the captive’s underwriting profits and investment income. When you pay commercial health insurance premiums, a big chunk of your payment goes toward the insurer’s underwriting profit. But when you form a captive, you retain this profit through the captive.

Also, your business can enjoy investment and cash flow benefits by investing premiums yourself instead of paying them to a commercial insurer.

Tax impact

A captive insurance company may also save you tax dollars. For example, premiums paid to a captive are tax-deductible and the captive can deduct most of its loss reserves. To qualify for federal income tax purposes, a captive must meet several criteria. These include properly priced premiums based on actuarial and underwriting considerations and a sufficient level of risk distribution as determined by the IRS.

Recent U.S. Tax Court rulings have determined that risk distribution exists if there’s a large enough pool of unrelated risks — or, in other words, if risk is spread over a sufficient number of employees. This is true regardless of how many entities are involved.

Additional tax benefits may be available if your captive qualifies as a “microcaptive” (a captive with $2.2 million or less in premiums that meets certain additional tests): You may elect to exclude premiums from income and pay taxes only on net investment income. Be aware, however, that you’ll lose certain deductions with this election.

Also keep in mind that there are some potential drawbacks to forming a captive insurance company. Contact us to learn more about the tax treatment and other pros and cons of captive insurance. We can help you determine whether this alternative may be right for your business.

Helping Our “Young Adult” Children Focus on the Future

Helping Our “Young Adult” Children Focus on the Future

If you are like most parents, you want your children to complete college, get a job and be successful. In fact, you’ve guided them all their life so they could one day become independent and financially stable. As they close the college books and begin down their career path, there is one more lesson you can impact – and that is the value of investing for a secure financial future early. Yes, you can help them develop good saving habits. To quote Aristotle, “We are what we repeatedly do. Excellence, then, is not an act but a habit.”

This may seem like a no brainer, yet young adults do not live their life thinking about the distant future. They are more focused on finally getting a job, living on their own, and frankly – having fun. How can you help? By sharing with them some of the basics they should know about savings and investments.

The Cost of Waiting

Financial publications often focus on where to invest but seldom on the need to save. You’ve seen the covers:

“Best 10 stocks for 2017!”

 “Where to Invest Your Money NOW!”

“Which Industries Will Benefit Under the New Administration?!”

 I understand the benefit of selecting an appropriate investment. But it’s not the biggest dilemma facing most Americans. What is? Not saving enough. It’s a habit that needs to be addressed at an early age. The sooner the better. Consider this example of two savers:

Anne:       

Starts contributing $30 per week at age 21

Stops contributing 14 years later at age 35

Total contribution – $21,840

 

Tracy:          

Starts contributing $30 per week at age 35

Stops contributing 30 years later at age 60

Total contribution – $46,800

 

At first glance it appears that Tracy is in a better position. However, assuming a 6.3 % annualized rate of return, who do you think will have more money at age 65?

Anne: $209,319 versus Tracy: $130,042

Tracy contributed more than Anne, but delaying her start date by 14 years she significantly hurt her accumulated balance at retirement.

Obviously, the more they contribute and the longer they contribute the impact is even greater. Clearly there is a cost of waiting.

Millennials Get It!

There is good news. According to a study conducted in 2016 by Bankrate.com[1], millennials have increased their savings rates in recent years. Millennials, defined in the study as those between the ages of 18 and 29, are saving at these levels:

  • 14% are saving more than 15%
  • 15% are saving between 11% and 15%
  • 33% are saving between 6% and 10%
  • 19% are saving 5% or less
  • 14% are saving nothing

This is impressive, but we can help our children do better. When they land that first job, you can ask them two easy questions:

  • Does your company offer a 401k plan?
  • When are you eligible to participate?

They may or may not know the answers to these questions; if they don’t, they should. Let them know the importance of taking ownership of their financial future. Here are some suggestions you can make that will help them realize the impact of their decisions today on their tomorrows. Suggest:

  1. If they have a 401k, they should enter the plan as soon as they are eligible. Some plans impose a one year wait, but many plans today allow employees to enter sooner (i.e., immediately, 3 months).
  2. Starting contribution rate of 10%. For those companies that provide a match, many advisors will suggest starting with an employee contribution % needed to maximize the match (i.e., if an employer matches 50% of an employee’s contribution to a maximum of 6%, a participant should consider contributing no less than 6%). Whether a company offers a match or not, however, I still recommend a young worker contribute a minimum 10%. This may sound high, but if paying down student debt is not an issue, many twenty-somethings generally have few commitments and/or liabilities and can probably afford this contribution level. If they are responsible for paying down student loans, though, perhaps a starting contribution level of 5% is more appropriate. And consider this. If this is a first job, they are starting from scratch. One week earlier, there were no paychecks and no deposits into their account. It’s better that they become comfortable with a lower net deposit from the start.
  3. Selecting a target date investment option. You’ll recognize these investment options. They all include the year that corresponds to their approximate retirement date, in five year increments (i.e., investment fund 2045, 2050, 2055, etc.). Today, most plans include these options. Unless your college grad wants to pick from among the other options in the plan and monitor their choices from year-to-year, the target date models are a smart choice. They will automatically diversify their contributions and, equally important, re-balance the account more conservatively as they approach retirement.
  4. Contributing to a Roth 401k. If their plan allows for Roth 401k contributions, it can make sense if you believe their tax bracket will be the same or higher in retirement. This may be difficult to project, but there is a high likelihood of this for young workers currently in the 15% tax bracket (which is the case for single taxpayers whose annual income is below $37,950 in 2017). What is a Roth 401k contribution? Unlike a traditional 401k, which allow for pre-tax contributions, deferrals to a Roth 401k are made with after-tax contributions. The good news, however, is that distributions in retirement are made tax free. Ask your CPA whether the Roth 401k is right for your college grad. If it does make sense, but they are still conflicted, consider suggesting they contribute half to the Roth 401k and the other half to the Traditional 401k.
  5. If the plan permits, select an annual “auto-increase” on contributions. This feature allows participants to automatically increase their contribution % each year by a pre-determined amount on a pre-determined date. For example, if they decide they want to automatically increase their contribution each year by 1%, on their birthdate, an initial 10% deferral level will increase to 15% in only 5 years. This is significant and the benefit should not be underestimated. They should avoid any temptation to adjust their contribution level manually from year to year. It will never happen.

If you want your college graduate to get a good start you can help them make thoughtful decisions.  As Henry H. Buckley once said, “Save a part of your income and begin now, for the man with a surplus controls circumstances and the man without a surplus is controlled by circumstances.”

Alan J. Fishman, CLU, CFP ®

Yorktown Financial Group, Inc.

Alan J. Fishman, CLU, CFP ® is a Registered Representative and Investment Advisor Representative of Equity Services, Inc.  Securities and investment advisory services are offered solely by Equity Services, Inc. Member FINRA/SIPC, Rose Tree Corporate Center I, 1400 North Providence Road, Suite 117, Media PA 19063 610-891-9700.  Yorktown Financial Group, Inc. is independent of Equity Services, Inc.  This information is not intended as tax or legal advice.  For advice concerning their own situation, customers should consult with their appropriate professional advisor.  TC94233(0317)1

[1] http://www.bankrate.com/finance/consumer-index/millennials-boost-savings-but-financial-security-slips.aspx

Tips for Success in Your Business

“Losers stop when they fail. Winners fail, fail, fail until they succeed.”

I heard this phrase recently at a Tax Preparer’s Conference, and it struck a responsive chord.

If you’ve started a small business, and have suffered some wins as well as losses you didn’t anticipate, you may be wondering whether you made a good decision to start the business.

Most people question this decision at some point in their business. I know that I have. Several times.

Let’s just cut to the chase. What’s the biggest thing holding you back?

More often than not, the answer is not your skill or ability. Nor is it the skills and abilities of your employees. You and they are probably good at whatever it is that you do.

And the thing holding you back is probably not expenses, though there are always things we’d like to buy for our business.

Not even your competitors are the thing holding you back. Not really. Competition is a fact of life. Accept it.

What holds so many small businesses back is the lack of a continuing, effective sales effort.

And that sales effort is Job Number One for the owner. Doesn’t matter how good the product or service, and doesn’t matter how good the expense control. Doesn’t even matter how much better you are than the competition.

If your existing and prospective customers don’t know who you are, and that you actively want an opportunity to earn their business, they won’t buy.

And everything stops.

Many Small Business Owners dislike one-on-one selling. Fair enough. It’s a learned skill and one that doesn’t come naturally to most of us.

When I started my own business, I was often in the company of people who did small business accounting and tax preparation. These folks are highly intelligent and honorable and have so many good and admirable qualities.

Natural sales ability is usually missing. To be successful, they must either rapidly acquire that skill, or they must rapidly hire that skill – hire a salesperson.

The meetings I used to attend invariably had common themes – it’s so hard to find good salespeople, it’s so hard to keep good salespeople, and the prospects those salespeople find are usually not very good quality anyhow.

The tax and accounting practices that reported the most success with salespeople were usually large, successful practices. Success brings success.

What’s going on? The owner of the beginning practice – the very definition of a small business owner – did not personally buy into the concept that successful sales were Job Number One.

You can delegate some of the sales work, but you must make sales your personal priority.

Business owners who don’t make a personal and daily commitment to sales usually meet early and sometimes tragic ends.

Of the 5 practices that I started with, 4 were out of business within 6 months. Of the four, two had filed lawsuits alleging deceptive trade practices. One owner had been admitted to a psychiatric unit for severe depression.

The message for small business owners – both those early in the business, or those preparing to start a business is that you must make a personal, daily, and continuing commitment to sales.

If you don’t, nobody else will. And you will never generate the sales volume you need. You can make excuses – competition is too tough, expenses are too high, can’t get the right employees, etc.

And while all of those issues may be valid, the most common cause of the business failure is a lack of the owner’s personal sales commitment.

Small business sales don’t have to be daily cold-calling. Cold calling works, folks. But it’s expensive, time-consuming, hot in the summer, and not very much fun for most of us.

Here are a couple of tactics that work for me

Join A Networking Group. Committing to such a group should be a Number One priority for most full-time small businesses. It’s a great way to extend your sales force, it’s a great way to make some good friends, and it’s a great way to reinforce your personal commitment to selling.

Invite prospects to a networking breakfast or lunch with some of your clients. Invite 3 prospects and 2 existing clients – 6 people total. All are honored to be included, and hopefully, will enjoy networking with the others. It’s an efficient and pleasant way to develop new business. This method also allows you to say thank you to your existing good client, who by their very presence will sell you to the prospect.

Bill Belchee
Beacon Small Business Solutions
www.beaconsmallbiz.com

New Years Resolutions for Your Business

I used this article in my Small Business classes for years. It remains the single best statement on how to live and work most of us will ever read.

As you move into 2010, here are ten New Years Resolutions that will transform your enterprise:

  1. Focus on vision and accelerate your progress. Establish a powerful picture of your preferred future, as you want it to be in three years. Use this vision as a guideline for all 2010 decisions, plans, communications and actions.Progress is a result of a creative relationship between the present-day you and the future you. To achieve an extraordinary preferred future, something has to change. You can’t just keep doing what you’ve been doing and expect anything other than what you’ve been getting. Performance guided by a crystal-clear vision leads to extraordinary breakthroughs.
  2. Focus on free time and turbo charge your productivity. Free time isn’t a reward for working hard; it’s a necessary prerequisite for optimum productivity. We need free time away from the business to rejuvenate ourselves.Proactively allowing for rest, relaxation and rejuvenation, regularly and frequently, leads to increased creativity and productivity. The more free time we take, the more creativity and productivity we will experience. In order to make breakthroughs in income, productivity and creativity, it is necessary to significantly increase the amount of free time away from the business.
  3. Focus on cleanups feel your energy soar. We all have messes in our lives. Messes are situations of disorder, conflict and non-completion that cause you to be distracted, lose energy, break concentration and reduce confidence.Messes can include finances, relationships, physical well being, agreements and legal contracts. Each time you clean up a mess, you increase concentration, confidence and energy. For 2010, target a mess a month.
  4. Focus on delegation and increase your income. Business owners and professionals won’t delegate because they “can’t find anyone who can do the job as well as they can.” With today’s vast electronic networks, we now have the ability to link up with the best people in the world. Some may be contractors for you, some could be employees, and some might be strategic alliances. Stop trying to do everything.Superb results come not from a single individual, but rather from teams of individuals, all working within their own distinct areas of expertise toward a shared goal or vision. You’ve heard of the 80-20 rule — 80% of your meaningful results come from only 20% of your activities. Each time you delegate some of your less productive activities, you multiply your effectiveness…and your income.
  5. Focus on value and deepen relationships. Your economic opportunities lie in other people’s future. You will succeed in your enterprise to the extent that you help other people to exceed in their lives. Ask people you encounter what they want to have accomplished three years from now. Focus your entrepreneurial efforts on assisting others in achieving their goals. By adding value to their preferred future, you not only deepen your relationship, you also create huge opportunities for yourself.
  6. Focus on your strengths and delegate weaknesses. Highly successful entrepreneurs, as well as top scientists, artists, athletes and entertainers throughout history have achieved greatness by focusing on their areas of strength. Everybody has a natural aptitude in certain areas. No matter how hard you try it is unlikely you will ever be more than average in areas where you do not have an aptitude.Continuously working on your weaknesses undermines your self-esteem since you will focus mostly on your deficiencies. On the other hand, developing your natural talents is self rewarding and motivating, allowing you to continually realize higher and higher levels of ability, achievement and success. This year, experience the immense satisfaction that comes with being superb at something.
  7. Focus on habits and forget about discipline. Everyone is already completely disciplined to their existing set of habits. We have work habits, relationship habits, health habits, and so on. Each of us has a full set of habits that regulate most of our behavior. Progress in life is not a result of more discipline, but rather of developing goal-directed habits.
  8. Are your habits working for you, or against you? As you know, it takes about 21 days of daily repetition to establish a new habit. Generally, you can develop only one habit at a time. In 2010, you can establish seventeen new habits, thereby producing extraordinary results.
  9. Focus on your attitude and improve your altitude. Our behavior, our decisions, our actions and our results are based on our beliefs and attitudes. When we feel strong, confident, knowledgeable and competent, we will act that way. If we feel tired, depressed, incapable or weak, our behavior mirrors our feelings.
    How do we change the way we feel? By changing the way we talk to ourselves, we can manage our feelings and therefore our behavior. Lets remember that mistakes are the fuel of creativity. If were not making mistakes, were not doing anything worthwhile. Just say to yourself OK, it happened. Now, how do we deal with it and avoid this next time?
  10. Focus on quality of life, and enjoy a life worth living. Researchers have said that only 4% of people enjoy both their work and their personal life. Make 2010 the year that you create balance in your life. Use your skills in goal setting and your persistence in achievement to develop a higher quality of life. Set and pursue goals in each of the value centers of your life: family life, physical well-being, your spiritual journey, intellectual growth, social involvement, and, of course, your financial health.By developing balance in your life, you will increase your energy, motivation, and your sense of satisfaction. In other words, increasing your happiness. People are as happy as they choose to be.

May you choose to be Very Happy in 2010!

Author: Bill Belchee
www.beaconsmallbiz.com
Copyright 2010 Bill Belchee All rights reserved
Printed here by permission of Bill Belchee