Accounting & Finance

Business Owner's Guide to Profit Planning

Owner's Guide to Profit Planning

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Steven Strauss Column: Maximum returns from microfinance

Q: Steve, I would like to expand but the recession was tough on me and my business. As a result, my business’ credit stinks, as does my own personal credit. I don’t have a fancy idea that can be crowdfunded or some such thing, so where does someone like me turn? Gabriel
A: Gabriel, I have some good news for you. Have you ever heard of microfinance? You might have, especially insofar as the developing world goes. Traditionally, microfinance has occurred in third-world countries where, say, a farmer gets a $100 loan to buy some cows so as to become self sufficient. That’s microfinance.
Microfinance has now come to the west, but with a twist.
There are few good things to be said about the no so Great Recession, but one is that a whole slew of new and creative methods for funding a business came out of it, including western-style microfinance. It turns out that we need microloans too, but the twist is, we tack on a zero or two.
Because microlending in the United States is a fairly new phenomenon, the number of loans has been fairly low to date, but that too is changing. Recent changes in law have made more money available for microloans as well as for technical assistance to microlenders and as a result the number of microloans has doubled in recent years. 
One reason you should be excited about microfinance is that lending decisions are made based on reasons beyond your FICO score, bank balance, and collateralization ability. Fortunately, microlenders look at a bigger picture, including:
• Your experience
• Your passion
• The opportunity
It should not be surprising that microfinance is emerging as a viable option right now. Credit has been tight, unemployment has been high, and people’s credit ratings have taken a hit. And many unemployed people have become accidental entrepreneurs, starting their own self-employment enterprise. The upshot is that there is a need for capital. Enter microfinance. No, microloan interest rates are not usually great, but that is the price you might have to pay. 
That microfinance is finally here is the important thing.
Microloans are typically available on the local level through groups called CDFIs, for Community Development Financial Institutions. To find a microlender in your area then, begin with a Google search of the name of your city or region and “microloan” or “CDFI.”
Beyond that, here are some other good options to check out:
ACCION USA: ACCION is a great group and a significant microlender. Their own website puts it best: “ACCION USA is different from a bank or credit union.  ACCION USA is a microfinance organization that lends with the mission of empowering business owners with access to working capital and financial education. ACCION USA offers business loans up to $50,000 and financial education throughout the United States. Since 1991, we have specialized in working with small business owners who cannot borrow from the bank due to business type, a short length of time in business, or an insufficient credit history.”
The SBA: The SBA has been guaranteeing microloans for years. The SBA does not make the actual loan, but it does make the money available to third-party nonprofit lenders. These lenders then make loans to qualified borrowers. Although the maximum loan amount was recently raised to $50,000, the average SBA microloan is around $13,000.
Grameen Bank: The original microlender, the Grameen Bank of Bangladesh opened up shop here in the U.S. a year or two ago. Operating under the name Grameen America, the granddaddy microlender has or will open branches in New York, Omaha, San Francisco, Boston, D.C., and Charlotte. Loans are adjusted appropriately, but still are pretty micro, $1,500 or so.
Kiva: Kiva made its name by offering people the chance to loan money to poor third-world entrepreneurs through Kiva.org. Seeing a need here, Kiva came to the United States in 2010, and Kiva loans in th

IRS releases income tax withholding tables reflecting 2013 changes

Article courtesy of SBAM Approved Partner ASE

As employers begin issuing 2013 paychecks, here is a summary of new withholding rates and changes affecting Social Security and Medicare rates, directly from the IRS.

Updated tables, which were issued by the IRS after President Obama signed the American Taxpayer Relief Act of 2012, show the new rates in effect for 2013. They supersede tables issued on December 31, 2012. The newly revised version of IRS Notice 1036 contains the percentage method income-tax withholding tables and related information that employers need to implement changes for 2013.

Employers should also begin withholding Social Security tax at the rate of 6.2 percent of wages paid following the expiration of the temporary two-percentage-point payroll tax cut that was in effect for 2011 and 2012. And the tables incorporate the new 0.9 percent Medicare tax (in addition to the 1.45 percent withheld by employers).

Employers should start using the revised withholding tables and correct the amount of Social Security tax withheld as soon as possible in 2013, but not later than February 15, 2013. For any Social Security tax under-withheld before that date, employers should make the appropriate adjustment in workers' pay as soon as possible, but not later than March 31, 2013.

Employers and payroll companies will handle the withholding changes, so workers typically don't need to take any additional action, such as filling out a new W-4 withholding form.

As always, however, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms.

Benefits Law Update

Michigan Enacts Health Care Claims Tax
Article provided by Clark Hill PLC

On September 20, 2011, Michigan Governor Rick Snyder signed into law the Health Insurance Claims Assessment (HICA) Act, which establishes a 1% tax on certain paid health care claims beginning January 1, 2012.  The HICA Act replaces the current 6% Use Tax on Medicaid managed care organizations.  The Michigan Legislature enacted the HICA Act based on anticipated action by the federal Centers for Medicare and Medicaid offices prohibiting the Use Tax as a means of generating State revenue to be used as a match for federal Medicaid funds.

Who Pays the Tax?

Insurers and third-party claims administrators for self-funded plans will be directly responsible for payment of the tax.  Employers/plan sponsors, however, should be aware that the HICA Act will likely cause an increase in the cost of coverage as it is anticipated that insurers and third party administrators will pass the cost onto the plan sponsor.

What "Paid Claims" Does the Tax Cover?

The HICA Act defines "paid claims" as actual payments made to a health and medical services provider or reimbursed to an individual by a carrier (including an insurer, HMO or group health plan sponsor), third party administrator, or excess loss or stop loss carrier.  Paid claims include the following:

  • Payments under a service contract for administrative services;
  • Cost-plus or noninsured benefit plan arrangements;
  • Payments for health and medical services provided under a group health plan;
  • Claims for services in Michigan by a pharmacy benefits manager;
  • Individual, nongroup, and group insurance coverage for Michigan residents in Michigan that affect the rights of an insured in Michigan and bear a reasonable relation to Michigan, regardless of whether the coverage is delivered, renewed, or issued for delivery in Michigan.

Certain categories of payme

Are You a Small Business C-Corp? Be Cautious About Reorganizing Just to Take Advantage of the New Six Percent Corporate Tax Rate

From SBAM’s member-only Focus on Small Business magazine

Business tax reform, which goes into effect on Jan. 1, eliminates the job-killing Michigan Business Tax (MBT) and the MBT Surcharge, replacing it with a 6 percent corporate income tax on C-corps only.

If you are a C-Corp and a small business, you really need to talk to your CPA about the several strategies available to you, advises Angela McGarry, a Lansing-based CPA who testified in favor of business tax reform this spring before the State Senate.

“If your profit is going to be consistently over $50,000 a year then, you might want to consider an S-election or some other entity, but that also has its complications,” says McGarry. “You’re going to want to consult with a CPA to do the conversion from a C-Corp to an S-election. It’s important to get an appraisal, because if in the future your business becomes very successful and you want to sell you have to be careful of the built in federal gains tax. You’ll wish you had an appraisal if that ever happens. Again, it’s a complicated issue and you need to talk to your CPA.”

McGarry says she believes that overall, the new tax law changes are going to be very beneficial to small businesses. It will give them extra dollars to spend on labor or that extra piece of equipment they need in their business,” she says.

Friend Raising -- Getting the People Right Before Raising the Money

Money is the focus of many business meetings and strategic planning sessions. How do we get more sales? How do we fund our growth plans? How do we cover our cash flow? These are just a few of the multitude of money issues that small business owners deal with on a daily basis. As important as the answers to these questions are; there is something more important than FUND raising and that is FRIEND RAISING.

Friend raising can take many forms. For a start-up it is getting those closest to us to buy into our crazy ideas. And for established businesses, networking is a popular and effective technique to open new sales opportunities. But there is so much more to be gained by making new business friends inside and outside your business. The best part is many of these ideas can be done for free.

 Build your board. Every company should have a board. It doesn’t have to be a board of directors that have authority over your organization, but an advisory board can be a very invaluable tool, especially when facing tough decisions. An advisory board will provide an outside perspective to your business and can both encourage and challenge you. When selecting board members, look for people who believe in you and your business. Be selective, not every personal friend should be on your board. Choose people who will bring a different perspective to your business. Often retired professionals in your industry can impart a wealth of information from their years of experience.

 Make friends in your industry. Even competitors can be friends and you never know when you may need to partner with someone on a project or vice versa. Attending trade shows and industry events is a great place to meet new friends and become aware of even more opportunities. Keith Ferrazzi talks about the many techniques for making friends in his book, “Never Eat Alone.” This includes, as the title says, building friends over coffee, lunch and dinner. Spending time together and sharing reality with each other builds friendships. Be honest and expect honesty from others and true friends will emerge.

There are many other friends you can make including mentors and political allies that you will find to be valuable contacts when the need arises.

"If you go out looking for a friend, you’re going to find they’re very scarce. If you go out to be a friend, you’ll find them everywhere.”
— Zig Ziglar

Nothing is ever free. Making friends is hard work. If you look for friends that can help you but are not willing to reciprocate your friendship may be short lived. You must be the friend that you seek in others. See everyone not as a sales target but a potential friend and you will find many friends and sales opportunities will follow.

Todd A. Luhtanen is a serial entrepreneur, business consultant and founder of Talan SBS a Michigan-based provider of Small Business Services, www.talansbs.com.
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