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Should I Apply For A Small Business Credit Card?

By Marco Carbajo, Guest Blogger
Published: September 20, 2012

A small business credit card should always be the credit card you use when making business purchases. Transactions such as paying for gas in a company car, buying office supplies or taking clients out for lunch are all acceptable ways to use a small business credit card.

When it comes to personal credit cards, you should not use them for business expenses. This can potentially jeopardize the protection of the corporate veil because you are co-mingling funds. Did you know corporate veil piercing is the top litigated issue in corporate law today?

That’s a scary thought because statistics show that of the 65% of small businesses using credit cards, only 50% of those cards are actually in the company’s name.

In addition, each type of small business credit card serves a unique purpose and offers its own array of features, perks and benefits.

A common mistake is applying for a card without first identifying the needs of the business. Will the card be used primarily for air travel, automotive or daily purchases? Do you prefer the option to pay off purchases each month or carry a balance? Will the company be issuing cards to employees or will there be a single cardholder?

These are important questions that give you an indication of the importance in defining purpose. Without purpose you can end up obtaining a small business credit card that costs more and benefits you less.

Some of the benefits of a small business credit card include:

  • Easy financing: Rather than waiting for an approval for a loan, lease, or line of credit, a business credit card lets you purchase items immediately. No explanations are required and there are no limitations on what you can purchase with your card. As long as you make the minimum payment each month and don’t exceed your limits, it’s a great option for quick cash.
  • Fast Access to Cash: If your company needs cash fast, then a small business credit card can be a life saver. Typically, the cash advance limit on a business credit card is lower than the spending limit, but the ability to access cash immediately is extremely convenient.
  • Track Expenses: Managing your company’s expenses becomes much easier when you completely separate your personal and business expenses. With a small business credit card, all your purchases are recorded, making it much easier for your bookkeeper during tax time. Also, most business credit cards will issue year-end statements that categorize your annual expenses into specific categories.
  • Control and Manage Employee Spending: Issuing small business credit cards to employees can offer many tax advantages. However, it is important to select a card that offers you the ability to control spending and set limits.
  • Business Perks: Business credit cards offer a variety of benefits for companies such as travel assistance, purchase protection, cash back rewards and insurance protection.

Many business owners have multiple cards with each one designated for certain purposes. For example, one card for employee expenses, another for business necessities, etc. Either way, it is helpful to have two or three small business credit cards available. Take the time to research, compare cards and reap all the benefits a business credit card has to offer.

About the author

Marco Carbajo is CEO of the Business Credit Insiders Circle (http://www.businesscreditblogger.com), a step-by-step business credit building system providing credit recovery, lines of credit, business credit cards, trade credit, and funding sources.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

How to Succeed as a Young Entrepreneur – Essential Resources

By Caron_Beesley, Contributor
Published: September 13, 2012 Updated: September 21, 2016

Move MastersAccording to Kauffman Foundation, young entrepreneurship in the U.S. is on the rise, with the 20-34 age group comprising 29 percent of the total new entrepreneurship activity in 2011.

Entrepreneurship can be an exciting adventure, and for the young it can be easier than you might think. The barriers – including cost of entry –are low, (working at home, online, etc.), and younger people are often unconstrained by the commitments of family and marriage.

And of course, there are inspiring role models from big names like Facebook’s Mark Zuckerberg and SBA’s very own 2012 young entrepreneur of the year, Mark Masters.

You don’t need a business degree or the backing of an investor to go into business, you just need an idea. Of course, starting a business has its challenges. This is especially true for young entrepreneurs without business experience. Common questions include:

  • How can I be taken seriously?
  • Is there a market for my business?
  • How much will it cost me to get started?
  • How do I get in front of the right people?
  • Do I need to incorporate?
  • When do I start paying taxes?

If you are interested in starting your own business, take a look at SBA’s Young Entrepreneur Guide, a one-stop resource for any young entrepreneur looking for resources and financial support to start a business. The site includes free online courses, links to in-community training and support, and other initiatives from across the U.S. government intended to make it easy for our youth to succeed in business. The site is constantly changing to reflect the latest initiatives, but current resources include:

  • Free Online Course – Young Entrepreneurs: An Essential Guide to Starting your Own Business – This self-paced online training course walks you through the steps of turning a business idea into a reality and answers many of the questions listed above. It includes tips on doing your research, deciding on a business model, understanding your financing options, as well as six “must-do’s” for getting started and, finally, making the leap.
  • Student Loan Deferment – If your student loan repayments are preventing you from starting your own business, the Student Startup Plan (through the White House-led Startup America initiative) enables college graduates, including those looking to start a business, to lower student loan repayments.

Useful Blogs

The SBA Community also features regular blogs with tips and resources for young entrepreneurs. Here are just a few:

 

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Is your Business Idea Patentable? A Guide to What Entrepreneurs Can Patent

By Caron_Beesley, Contributor
Published: September 5, 2012 Updated: September 28, 2016

Got a great idea for a business? Wondering if you can patent it before someone else comes up with something similar?

Technically, you can’t patent an idea for a business – for example, if you have a unique idea for an online store or a new chain of themed restaurants.  However, you may be able to protect and patent a method of doing business – if it meets very specific criteria and requirements.

Here’s what you need to know about what patent protection can do for your business, and about other intellectual property issues that should also come into play.

What You Can Patent

There are three types of patents you can apply for based on the nature of your invention: utility patents, design patents, or plant (of the green variety) patents. 

If you have a business idea that is somewhat abstract, then you may be eligible to apply for a utility patent. A utility patent may be granted to anyone who invents or discovers any new and useful:

  • Process
  • Machine
  • Article of manufacture
  • Composition of matter
  • Any new and useful improvement of these.

That’s a pretty broad bucket of innovation. But the U.S Patent and Trademark Office (USPTO) is also very specific about the requirements for these patents. Your idea or invention must be:

  • Novel
  • Non-obvious – meaning anyone else with the same skills in this area could not have come up with the same idea
  • Clearly explained and documented so that someone equally skilled could make and use the invention

The Patenting Process

If you are confident your idea falls within the definitions and requirements above, check out the next steps, which will include checking for previously filed patents, and are described here by the USPTO. If you’re not clear whether your idea falls within these boundaries, read USPTO’s “How do I Know whether my Invention is Patentable?”.

Either way, it’s worth taking time to consult with a patent lawyer. If you choose to proceed, be prepared. This can take time and using the services of a patent attorney to help you meet the precise documentation and filing requirements is going to cost you. If you are seeking outside investment and have established that your business idea or invention is patentable, it may be worth rolling the cost of getting legal help into your business plan and seeing if your investors will cover the costs.

Other Ways of Protecting Your Business Idea

Even if your idea isn’t patentable, there are still important assets of your business you can protect. For example, web content can be copyrighted. You can also trademark, and should do so if you want to claim and protect your product or business name. Here’s a quick overview of these two forms of protection and how to register for them:

Copyright – If your business involves creating original written works, music, or videos, these can be covered by copyright laws. Copyright can be claimed through the U.S. Copyright Office for a small fee. Note that copyright does not protect ideas, concepts, systems, or methods of doing something. While you can express your ideas in writing or drawings and claim copyright in your description, copyright will not protect the idea itself. 

Trademark – A trademark is different from a patent because it only protects words, names, symbols, sounds, or colors that distinguish goods and services. Trademarks, unlike patents, can be renewed forever as long as they are being used in commerce. Trademark infringement can carry a high cost for your business. Before you pick a name, use the U.S. Patent and Trademark Office’s trademark search tool to see if a similar name, or variations of it, is trademarked. If your chosen name is unclaimed you can then register for the trademark online (for a fee).

Related Resources

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

5 Smart Things To Do Before You Search For A Franchise

By FranchiseKing, Guest Blogger
Published: September 4, 2012 Updated: January 3, 2013

If you’re thinking about becoming your own boss, and the business model of franchising sounds attractive, there are several things you need to do before you even look at a franchise business opportunity.

Even though you probably can’t wait to jump in that nice, warm franchise opportunity pool, I want you to force yourself to hold back. Read my tips below first; they’ll help you prepare for your jump.

1.      Talk To Your Family

If you think for one minute that becoming the owner of a business will only affect you (because of the long hours you’ll be putting in, etc.) you’re going to be in for a big surprise. Do you have family support? Starting any business is a family decision, even if it doesn’t involve any family members actually working in the business.*

Not only do family members need to understand that there will be huge demands on your time, they need to understand the big picture. A lot of things are going to change if you end up becoming an owner.

2.      Talk To Yourself

This could be a good time for you to take up some form of meditation.*

Before you embark on what could end up being a life-changing event, you need to have a day or two to yourself. Please turn off all electronic devices. Take some walks. Go through the plusses and minuses of starting a business in your head. No outside interference allowed. See how you feel when you’re done. Are you really ready to take on a major commitment like small business ownership?   

3.      Find Yourself

While you’re still in self-discovery mode, I want you to think about a couple of things.

The first thing has to do with skills. Grab a sheet of paper and write down what you feel your top skills are as they relate to business. Are you good with numbers? Are you a great team leader? Are your sales skills top-notch?

Grab another sheet of paper and write down the traits that define you. Are you deliberate? Laid-back? Driven? Detail-oriented? Outgoing? Make sure you write down your most dominate traits.

Now, you have two lists that can help figure out what types of franchises to search for. Hint: franchise concepts that allow you to use your top skills, combined with your personal makeup in the operation of the business, are the opportunities to start investigating.

4.      Grab A Calculator

Don’t even think about exploring any franchises without knowing where you stand financially. Gather all of your financial information and plan on spending a few hours figuring out where you stand. Your goal is to come up with your net worth. You’ll need to know your net worth before you go on to the next step.

Wouldn’t it be upsetting to get really excited about a specific franchise only to learn that you’re not financially qualified to own it?

5.      Visit Your Bank

The best time to meet with a loan representative is when you don’t need a loan. Think about how relaxed you’ll be. There’s no pressure. You’re just gathering some information that you’ll be able to use later.

It’s also a great time to find out what the lending environment is like, and find out if your lender handles SBA loans. In addition, you can probably get a list of things you’ll need to get the small business loan process started.

Just in case you end up buying a franchise. And, if you do, you’ll have all of your ducks in a row.

 

Related Articles

How To Prepare Your Loan Application

Small Business Education From SBDC’s

 

*Non-US Government links 

About the Author:

FranchiseKing
Joel Libava

Guest Blogger

The Franchise King®, Joel Libava, is the author of Become a Franchise Owner! and recently launched Franchise Business University.

Ready to Grow? 5 Ways to Assess Your Readiness and Plan for Expansion

By Caron_Beesley, Contributor
Published: August 30, 2012 Updated: September 19, 2016

Do you know where your company is headed? How do you know when it’s time to grow? How can you manage that growth so it doesn’t run away with you?

In this five-minute video – Strategies for Growth – SBA, in partnership with Dell, talked to Carey Wilson of the Maryland Small Business and Technology Development Center. He offers the following five valuable tips for preparing your small business for growth.

1. When is it time to grow your business?

You can only grow when business indicators show that you are ready for growth – and these vary by industry.

As Wilson observes: “If a retailer or restaurant is finding great acceptance of their product or service offering, that owner may say I'm successful here. Let me find another market with the same demographics; I've got the financial stability to grow this business.”

Other industries, of course, would look at different indicators to mandate growth and re-capitalization. For example, in the R&D sector, product development success or gaining approval from a government regulator would be indicators. For many small businesses, clinching a big sales deal can also be a signal for quick growth.

And how do you plan for that growth? As Wilson continues, planning for growth involves “a constant reassessment of all operational aspects of the business,” from day-to-day operations, to an expansion of marketing, market penetration, hiring and the staff skills needed to grow the business.

2. How can you guide your growth?

As with starting and managing your business, a business plan is essential for planning the steps needed to achieve your vision and exploit your business potential.

It starts with a foundational business plan that the entrepreneur used to get the business off the ground...” explains Wilson. However, since things never go quite as planned, so it’s important to reassess things in a different light than you did in start-up mode. Wilson suggests revisiting your foundational business plan “with an eye to growing capitalization, staff and market size.

  • Ask yourself the following:
  • How is the capitalization working?
  • Where did the initial capital come from?
  • What did it cost?
  • How current are you in paying it back?
  • Do you have the capacity to take on more capital?
  • What skill sets do you lack or need in order to run a larger business?

As you fine-tune your business plan, you should consider the audience for the plan. Any business plan needs to address all the stakeholders in a business – from those who are providing the capital to outsourced agencies to your management team. As Wilson explains: “Any entity or person that has a stake in that business is an audience for the business plan.” So your plan needs to be “broad-ranging and complete, with every single aspect of the operation fully documented and strategized.”

Last but not least, revisit your plan on a quarterly basis to compare where you are versus where you want to be.

3. Think big picture

Strategic planning is essential to business growth. But what's the difference between a strategic business plan and an operational plan?

Strategy is really about answering the fundamental questions of why you're in business: What's our business? Who's our customer? Why are we special? Why are we better than our competition?” explains Wilson. “A strategic plan really places you in the marketplace.” A day-to-day operational plan, on the other hand, is all about laying out the tactics for using your business resources to accomplish your strategy.

4. Get help with your growth plan  

As Wilson points out in the video, there are many online and in-person resources available to help business owners keep tabs on and update their business plan. For example, check out SBA’s business planning guide as well as these useful business planning video tutorials. SBA guest blogger and business planning expert Tim Berry, also contributes many blogs on this topic.

You can also get help in your community from various resources. For example, Small Business Development Centers, SCORE and Women’s Business Centers nationwide all provide advice and mentoring to help you with your business plan.

5. Finance your business expansion

We write about financing frequently at SBA.gov and there are many options to help small business owners fund growth – from commercial bank loans to SBA-guaranteed loan programs. Another increasingly popular option are private sources of capital, typically from outside investors, crowdfunding ventures and even borrowing from friends and family.

Related Blog

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Buying a Franchise – How to Determine What it’s Going to Cost You

By Caron_Beesley, Contributor
Published: August 27, 2012 Updated: September 3, 2015

Thinking of buying a franchise? Do you understand the franchise business model and have you determined it’s a good fit for you?

Perhaps you’ve also explored potential franchises and think you’ve found a match. But how are you going to finance your venture? What can you afford? How much financing should you seek? Should you even be doing this?

To help you answer these questions, here are tips of the trade from franchising pro and fellow SBA.gov guest blogger, Joel Libava, a.k.a. The Franchise King®.

Should you Be Doing This?

Determining exactly how much money you should invest in your franchise purchase is an important question deserving of an entire chapter in Joel’s book –“Become a Franchise Owner”.

According to Joel, you may be asking yourself if you can afford to invest in a franchise, when you should be asking: “should I be doing this?” The answer to this question lies in your unique financial situation. To help you get a clear picture of your own finances, Joel recommends the following:

  1. Develop a Net-Worth Statement – Make a simple two-column list of your assets and liabilities. Add them up and subtract the latter from the former – this will give you a picture of your net worth.
  2. Talk to an Expert – Joel stresses the importance of consulting a financial advisor. A franchise is a major investment and an advisor can help you build a picture of what you truly can afford – not only in terms of the purchase price, but also how much your down-payment should be. 

So How Much Money should you Personally Invest?

Your time with a financial advisor should give you the answer to this question.  As a guideline, Joel suggests (but steers clear of an all-out recommendation) that franchise buyers should invest no more than 15 percent of their own money in a start-up franchise. Say, for example, your net worth is $400,000, of which $80,000 is liquid. The most you would want to invest in a franchise is 15 percent of your net worth, or $60,000.

Investing 15 percent isn’t a hard and fast rule. As Joel’s admits, this number is based on his own risk tolerance and vast experience.  So it’s important to talk to a financial advisor to work out exactly what this percentage should be for you.

What Can you Afford to Buy and What do You need to Borrow?

Once you’ve determined what you can afford to contribute towards a franchise purchase, what kind of dollar range should you be looking at in terms of total franchise investment? In other words, what can you afford to buy and how much do you need to borrow?

Most lenders, Joel explains, want to see franchise buyers come up with 20-25 percent of the total investment in the franchise they’re trying to buy.  Based on Joel’s math from above, $60,000 is 25 percent of $240,000. This means you shouldn’t look at franchises requiring a total investment greater than $240,000.  

OK, so you’re investing $60,000 of your $80,000 in liquid cash in the franchise venture.  Where do the remaining funds come from? This is where borrowing comes into play, either a small business loan or borrowing money from family or friends. Whichever route you choose, you still have $20,000 in your pocket you can save for a rainy day.

Stick to Your Budget

Now that you have a clear picture of what you can afford and your target investment range, be sure to stick to your budget. And, of course, have enough funds set aside to pay your own personal monthly bills. As Joel points out in his book, you’re not going to make money at first – so be prepared. Breaking even comes first, then profits, and only then can you pay yourself a salary (read more about in this blog: 5 Tips for Setting Your Salary as Business Owner).

Financing Options for Purchasing a Franchise

Many banks and credit unions offer financing for franchise purchases.  In fact, SBA data (PDF) shows start-up franchis­es are more likely than other businesses to use a commercial bank loan as their source of funding. 

When you approach a bank, be prepared to disclose all your financial information. While your credit rating is important, you’ll also need to provide a personal financial statement, copies of tax returns, and information about the source of your down payment funds.

You should also be aware that your choice of franchise will have an influence on a bank’s decision to fund you. Franchises with strong brand names, a track record of consistent profits and cash flow, plus an ability to perform well across a variety of diverse locations are going to stand you in good stead when you meet with your bank manager.

If your bank is hesitant about a particular franchise system’s performance, or your finances aren’t as strong as they could be, you might want to consider an SBA loan.  SBA doesn’t lend to business owners directly; it provides a repayment guaranty to banks and lenders for money they lend to small businesses, making it less risky for the banks. Use this search tool to find the right SBA loan for you.

Related Resources

 

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Online Payment Services – Are They a Good Fit for Your Small Business?

By Caron_Beesley, Contributor
Published: August 20, 2012 Updated: September 20, 2016

Credit cards are a common online payment option for small businesses, but what about other services like PayPal, Bill Me Later and Google Wallet?

These now ubiquitous tools make it easier than ever for anyone – not just e-tailers – to buy and sell goods online and via mobile devices. However, as with all business tools, they have their pros and cons. Here’s what you need to know.

What Are Online Payment Services?

Online payment services allow businesses to receive payment from any customer with an existing PayPal, Bill Me Later or Google Wallet account. As a seller, you set up a business or merchant account, follow a few steps to add code to your website – and off you go. Once you’re set up, customers’ payments can be directly deposited into your account. You can also issue invoices, swipe credit cards on mobile devices (with a special widget) and accept payments on the go.

Here’s a quick breakdown of how each service works:

PayPal – Still the world’s largest online payment option, PayPal offers numerous multi-channel options for business owners to accept payments. With a PayPal account, businesses can accept payments online without a merchant account, process major credit cards, scan checks via smart phones, and process payments via mobile devices by using a card swiper.

PayPal fees  are 2.9 percent plus 30 cents per transaction (2.7 percent for PayPal Here mobile services), and a basic PayPal account is free to set up, with no monthly fee. You can lower the cost per transaction with volume discounts - the more you transact the less you pay. Funds are credited to your PayPal account as soon as payments are processed.

Additional value-add services are available for a fee (such as payment processing without the customer leaving your website). 

Bill Me Later – Owned by PayPal, Bill Me Later offers instant credit to consumers for online purchases without using a credit card. Unlike PayPal, consumers aren’t required to set up an account in advance. Instead, a company called WebBank makes a real-time credit decision each time at the point of purchase. Here’s the crux for small businesses: Bill Me Later targets larger retailers with annual sales well into the millions. Read more in this article from MutliChannel Merchant: Alternative Payment Methods Gain Acceptance.

Google Wallet – Formerly Google Checkout, Google Wallet (like PayPal) serves both online and mobile payments. Registered Google Wallet users can pay for goods with their phone anywhere MasterCard PayPass is accepted. Customers can also make one-click online purchases on an enabled merchant website using credit card information stored in a secure cloud platform. Google hasn’t yet embarked on a targeted campaign for a share of the small business market and most merchants tend to be larger retailers and known brands.

Rates vary depending on your sales volume but can be as low as 1.9 percent plus 30 cents per transaction. Google is competitive too – there are no monthly, set-up or gateway fees. Google’s website doesn’t publicly state the cost of the in-store Mastercard PayPass reader, so it’s not clear what upfront investment business owners can expect.

Read more about whether Google Wallet is the right fit for small businesses in this article from SmallBizTrends.

The Pros and Cons

You might well ask, “Why would I opt for an online payment service?” One of the biggest reasons is, quite simply, your customers are using these services. There are more than 100 million active PayPal accounts in the U.S. and the proliferation of secure online technology and mobile apps means wallet-less transactions are here to stay.

Other pros to these services are ease of use and low cost. Opening an online payment services account is often faster, easier and less expensive than setting up a merchant account for credit and debit card transactions.

Cons?

For customers, one of the biggest drawbacks of online payment processing sites like PayPal and Bill Me Later is that they often have to leave your website to complete a transaction (although you can pay an additional fee to avoid this). Many customers might be familiar with this experience, while others may find it confusing and abandon the purchase.

Customer service is also cited on the web as a frequent issue. If transactions are questioned, service providers can contractually lock your account and even withdraw funds from your account – leaving merchants waiting for days for their accounts to be reinstated. Not something any small business owner can afford to risk.

The Bottom Line: Offering online payment options can help increase online sales. However, don’t put all your eggs in one basket. Online payment services should be an option for you and your customers, but not the only option. Find the right balance of options – something that differs for every business. Do your research, understand your customer needs and demographics and test the market with low-cost, low-risk entry-level solutions like the Standard offering from PayPal or Google Wallet’s online payment processing service.

Related Blog

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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