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5 Things to Know about Year-End Bonuses

By BarbaraWeltman, Guest Blogger
Published: December 7, 2017 Updated: December 7, 2017

According to Bank of America’s Fall 2017 Small Business Owner Report, 35%of small businesses plan to offer year-end bonuses. These bonuses are an important way to retain good employees, especially during this increasingly tight job market. The size of these bonuses varies by industry and company, as well as the way they are figured (tied to performance or a flat amount) and when they are paid to employees (this year or next). Here are 5 things to know about year-end bonuses.

 

1. Be fair, be clear

Unless an employee has an employment agreement spelling out any required bonus, it’s within the company’s discretion to give a year-end bonus. These holiday-time rewards are an expression of gratitude by the employer for a job well done. Companies want employees to be happy about receiving bonuses and not grumble that payments to some workers are unfair. Consider:

  • Giving all employees the same type of bonus (e.g., a week’s wages).
  • Fixing bonuses to performance. Be sure that employees understand how this works.
  • Paying bonuses based on longevity with the company (e.g., a dollar amount per year of employment).

 

2. Pay what you can afford

Not every small business is giving bonuses this year. But with profits up for many companies, it may be easier this year than in recent years to give bonuses. Because bonuses are discretionary, companies don’t have to put themselves in the red just to be generous at holiday time. But with that said, don’t overlook the real cost of giving. In addition to the gross amount of the bonus, don’t ignore:

  • Employer’s payroll taxes. Depending on what the total payments to the employee for the year have been, the employer share of FICA can be 7.65% of the bonus amount (e.g., $765 on a $10,000 bonus).
  • Employee benefits keyed to compensation (e.g., employer contributions to a company’s qualified retirement plan)

 

3. Factor in payroll taxes

Bonuses are taxable compensation subject to income tax withholding and FICA. They’re treated as supplemental wages. This means employers can:

  • Lump the bonuses in with regular pay and figure withholding in the usual way
  • Withhold at a flat 25% (no other rate is allowed). However, for bonuses over $1 million (not likely in a small business), the flat withholding rate is 39.6%.

The rules for payroll taxes on bonuses are in IRS Publication 15.

 

4. Withholding for the additional Medicare tax

If a year-end bonus puts taxable compensation to an employee over $200,000, the employer must withhold for the 0.9% additional Medicare tax on earned income. This is so regardless of the employee’s marital status or whether he or she will ultimately owe this tax when the income tax return for 2017 is filed.

 

5. Declare now, pay later?

Calendar-year companies that are on the accrual method of accounting can declare year-end bonuses by December 31 and pay them later. As long as bonuses to rank-and-file employees are paid by March 15, 2018, they’re deductible on the 2017 return. But bonuses to owner-employees have different rules. For S corporations, bonuses aren’t deductible in most cases until actually paid (i.e., when owners have to include the bonuses in their income).

 

6. Conclusion

Are you a Santa or a Grinch? At this time of the year, small business owners can show appreciation and generosity to their staff in ways other than bonuses. Consider giving employees time off, closing the office, increasing compensation for the coming year, or any other tangible or intangible benefit you can offer at holiday time. A big, genuine thank you is always welcome.

About the Author:

BarbaraWeltman
Barbara Weltman

Guest Blogger

Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser's Small Business Taxes, J.K. Lasser's Guide to Self-Employment, and Smooth Failing as well as a trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and host of Build Your Business Radio. She has been included in the List of 100 Small Business Influencers for three years in a row. Follow her on Twitter: @BarbaraWeltman.

Small Business Owners Share Challenges of Hiring Employees and Gig Workers

By bridgetwpollack, Guest Blogger
Published: December 5, 2017

Small businesses employ almost half of all workers in the United States and have been responsible for much of the post-2008 economic recovery through their hiring efforts.

Over the past year, hiring activity has been on an upward trend for small businesses, with plans to add workers hitting the highest level since 1999.

SCORE’s latest Megaphone of Main Street Small Business Jobs Report surveyed more than 1,700 small business owners to rate their hiring experiences of employees and contractors.

 

Difficulty filling positions

More than 50 percent of small businesses said it was very or somewhat difficult to fill open positions, with about 55 percent of micro businesses, or those with 0 to 4 employees, in agreement.

Twenty-seven percent of openings went unfilled in the past six months, which was consistent across different small business sizes and locations. Business owners cited problems finding skilled, qualified applicants as a primary reason for not filling positions.

Offering competitive wages and salaries is another common challenge, along with a lack of healthcare and other employee benefits. Hiring takes time, too — about 18 percent of all small businesses said it was too time-consuming to hire qualified workers - they’ll just do the job themselves.

Small businesses use job-posting sites, recommendations from other business owners, networking groups and online platforms drive hiring efforts, but by far, recommendations from other workers proved most fruitful in finding new employees.

Our infographic, “The Megaphone of Main Street: Small Business and Employment,” identifies more hiring challenges faced by small businesses.

 

The gig economy and small business

The area of largest hiring growth among those surveyed was in one-time project or gig workers at 37 percent.

Eighteen percent of businesses reported replacing employees of any type with contractors over the past six months.

Of those business owners, 50.8 percent reported choosing a contractor or temporary worker for the benefit of their specialized expertise. Forty-one percent reported only having seasonal or temporary needs; 35.1 percent said they preferred hiring a contractor over needing ongoing cash reserves for payroll. The costs and complexities of offering employee benefits like healthcare and retirement plans also drove the decision to hire a contractor.

Forty-seven percent of solopreneurs reported hiring other people for part-time help running their businesses. Their firms had an average of 3.2 workers, including the owner.

Contractors are most likely to be called in to complete technical, accounting, bookkeeping and marketing tasks. Other important roles for contractors include manufacturing, sales, business planning and logistics.

When respondents noted their reasons for hiring an employee over a contractor, consistency of work and commitment to the company were primary. Having the same person in a position rather than a rotating contractor was another major factor, as was the ability to direct work tasks and schedule work hours.

Some business owners commented that their concerns about correctly following IRS regulations— and dealing with related paperwork — guided their decisions whether to hire a contractor or an employee.

For more insight on the growth of the gig economy, see our infographic “The Megaphone of Main Street: The Gig Economy.”

How does your experience hiring qualified employees and contractors fit in with our findings? Meet with a SCORE mentor about how to ensure you find the best talent for your growing small business. 

About the Author:

bridgetwpollack
Bridget Weston Pollack

Guest Blogger

Bridget Weston Pollack is the Vice President of Marketing and Communications at the SCORE Association. She is responsible for all branding, marketing, PR, and communication efforts. She focuses on implementing marketing plans and strategies to facilitate the growth of SCORE’s mentoring and trainings services. She collaborates with SCORE volunteers and develops SCORE’s online marketing strategy.

What Makes a New Business Forecast Realistic?

By Tim Berry, Guest Blogger
Published: November 21, 2017 Updated: November 21, 2017

This is the second of two parts. The first was What Makes an Ongoing Business Forecast Realistic. I’ve written before about about why to forecast basic business numbers and how to forecast better. I write about the value of realistic forecasting in those posts and others. So for these two posts I want to address what makes a forecast realistic. How can we tell? What do we look for?

I separated this into two parts because they are so different. For established businesses, realism is boosted by past results. For new businesses, however, there are no past results. Realism is a matter of transparent assumptions and comparisons to similar situations.

What we all want to avoid, for new business forecasts, is the complaint that comes up way too often: “How can I forecast a new product if I don’t have past data?” That’s not a reason to not forecast. A new business needs a forecast even more than an established business, because the uncertainty level is higher, and the risks are higher. So just because it’s hard doesn’t mean you can’t do it. Millions of others have done it before you.

Focus on sales drivers

Most businesses have some key factors that drive sales. It might be traffic, channels, stores, leads, pipeline, or something else. A realistic sales forecast breaks down into drivers. Here are two examples.

  • A sales forecast for a subscription-based web business that shows estimated web traffic and conversion rates looks more realistic than one that just shows subscriptions as if they came from nowhere. And another increase in realism is to breaks traffic into sources of traffic, such as organic search placement, pay-per-click advertising, and email marketing.
  • A sales forecast for a product business selling through traditional retail channels might include estimates of stores carrying the item, and monthly unit sales per store. It might be even more realistic if it breaks the monthly sales assumptions into categories of stores.

These examples are illustrated below.

visual representation of a chart with a web Business sales forecast

Realistic assumptions make realistic forecasts

Even new products and new businesses follow established patterns. Modern technology gives us enormous resources for educating our guesses, even on new things, by what’s normal for existing things.

For example, that web business doing the sales forecast above can find out, with some web searches, what might be normal expectations for traffic for new sites, as a function of factors like type of site, type of business, and marketing budget. And that product business ought to be able to find data on sales per store for some existing products.

A new business forecast can anchor its assumptions with data from existing businesses. When a key assumption for something new is based on actual results for something similar, that adds credibility.

With expenses, too, new businesses can find a lot of data. Average salaries by job type, for your market, are available. Average marketing spending, for your type of business, as a percent of sales, is available for most businesses. Average square feet of office space per person, for your type of business or one similar to yours, is something you can research and estimate. Average rents for office space, or retail location, by type of location and square footage, are available.

Review and revise often

Remember, forecasts aren’t supposed to hold up to time. Forecasts are meant to be reviewed often, and revised. The point isn’t accurately guessing the future; it’s getting information you can use to manage.

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

Why Hire Veterans?

By BarbaraWeltman, Guest Blogger
Published: November 8, 2017 Updated: November 9, 2017

The month of November is a time to celebrate Veterans Day. This year Veterans Day falls on Saturday, November 11 (Friday, November 10 is the federal holiday to celebrate it). There are more than 19 million veterans, and one or more of them may be a good fit for your company. Here’s what veterans offer to employers:

 

Continuing pool of workers
Approximately 230,000 to 245,000 service men and women leave the military* each year. Given the increased tightening of the job market, these individuals are available for work in the private sector and offer much to employees (as explained below).

 

Skills
Veterans may have the skills and education you’re seeking for your company. There are “hard skills,” such as technology skills they’ve learned that can translate in the private sector. And there are “soft skills,” such as leadership and decision-making, that are also valuable to a company.

 

Reliability
As a rule, you can count on veterans to display a good work ethic by showing up for work on time to do their jobs. What’s more, you probably don’t need a background check once you verify their service; the government has essentially vetted them for you.

 

Tax credit
You may be eligible for a work opportunity tax credit for hiring certain veterans. A qualified veteran is a veteran certified as being any of the following:
  • A member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) (food stamps) for at least 3 months during the first year of employment.
  • Unemployed for a period totaling at least 4 weeks (whether or not consecutive) but less than 6 months in the 1-year period prior to the date of hire.
  • Unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the one-year period ending on the date of hire.
  • Entitled to compensation for a service-connected disability and hired not more than one year after being discharged or released from active duty in the U.S. Armed Forces.
  • Entitled to compensation for a service-connected disability and unemployed for a period totaling at least 6 months (whether or not consecutive) in the 1-year period that ended on the date of hire.

The credit is 40% of eligible wages, which for a qualified veteran is limited to the following amounts:

  • $6,000 for a qualified veteran certified as being either (a) a member of a family receiving SNAP assistance (food stamps) for at least a 3-month period during the 15-month period ending on the hiring date, or (b) unemployed for a period or periods totaling at least 4 weeks (whether or not consecutive) but less than 6 months in the 1-year period ending on the hiring date.
  • $12,000 for a qualified veteran certified as being entitled to compensation for a service-connected disability and hired not more than 1 year after being discharged or released from active duty in the U.S. Armed Forces.
  • $14,000 for a qualified veteran certified as being unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date.
  • $24,000 for a qualified veteran certified as being entitled to compensation for a service-connected disability, and unemployed for a period or periods totaling at least 6 months (whether or not consecutive), in the 1-year period ending on the hiring date.

There’s no limit to the number of veterans with respect to which you can claim a credit. But when hiring a veteran, be sure that he/she completes Form 8850 so you can submit it to your state employment security agency (SESA) within 28 days of starting work. If you don’t, you can’t claim the work opportunity credit even if you are otherwise entitled to it.

 

Conclusion
There are many other good reasons to hire veterans. You can find them in the Veterans Employment Toolkit from the U.S. Department of Veterans Affairs.

About the Author:

BarbaraWeltman
Barbara Weltman

Guest Blogger

Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser's Small Business Taxes, J.K. Lasser's Guide to Self-Employment, and Smooth Failing as well as a trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and host of Build Your Business Radio. She has been included in the List of 100 Small Business Influencers for three years in a row. Follow her on Twitter: @BarbaraWeltman.

What Makes an Ongoing Business Forecast Realistic?

By Tim Berry, Guest Blogger
Published: November 2, 2017 Updated: November 21, 2017

I’ve posted here before about about why to forecast basic business numbers and how to forecast better. I write about the value of realistic forecasting in those posts and others. So for this post I want to address what makes a forecast realistic. How can we tell? What do we look for?

As I do, I’ll look at two important variations. First, business forecasts for an existing ongoing company. Second, business forecasts for a new company, not started yet, in the planning stages. Both cases are different. In this post we look at realistic forecasts for ongoing. Next month we’ll look at realism for startups.

Align your types and categories and units

Start with the obvious: coordinate your forecast with your past results. Make sure that the types, categories, and items you put into your forecast match the types, categories, and items you get reports on from your bookkeeping. Specifically, if you think of a forecast in a spreadsheet view with labels in the leftmost column and months across the top in the top row. Way too often people set up forecasts using different categories than what they get in accounting reports. Keep past and future aligned.

Example of financial forecasting chart

As you develop forecasts, think about metrics. For example, you could forecast sales as broken into units, average price, and sales; or just as sales, in dollars. What you want is metrics you can act on, to make decisions. Tracking by units and price helps you manage your business by understanding whether your results varied in unit sales or average price.

Align your projections with the recent past

How well do projections match the recent past? Real life is full of gradual changes. Real life is full of things for which the recent past is the best predictor of the near future. Weather, for example. Kids grades in school. Business success. And your business’s sales, costs, and expenses.

So, concretely, project reasonable logical change as you move forward into the future. For a quick test, draw or think of a line chart that takes any specific business number – sales, sales of a specific product, expenses, some specific category of expenses – and projects it as a line in a line chart that has money on the vertical axis and time on the horizontal. Have it draw a continuous line including results of the last year, and forecast for the next year. Suspect abrupt changes as lack of realism.

A gradually sloping line with some curve is a more realistic representation of ongoing changes in businesses

Understand what drives changes

Please don’t think I’m suggesting that forecasts always extrapolate the past into the future. No, of course; it’s not that simple. Changes happen. Your business launches new products or services, or new marketing or sales promotions. You expand to new markets. You want your business to grow and separate itself from the past, with sharp changes in curves. I’m a business owner too, I understand. We all want that.

What I am saying is that realistic forecasts understand and incorporate the drivers of change. You don’t just project better results next year for doing the same thing you’ve always done. Your improvements are linked conceptually to causes. You take the past, project it into the future, and then adjust it for changes you can predict.

The more you understand the causes of change, the more realistic the forecast.

Review and revise often

Remember, forecasts aren’t supposed to hold up to time. Forecasts are meant to be reviewed often, and revised. The point isn’t accurately guessing the future; it’s getting information you can use to manage.

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

Small Business Development Center Helps Washington Companies STEP Up to the Global Marketplace

By Peter J. Cazamias, SBA Official
Published: October 13, 2017

The Washington State Small Business Development Center (WSBDC) has perfected the art of building productive partnerships to help Washington companies, notably rural ones, achieve export success. 

WSBDC International Trade Specialist Vern Jenkins and Grant County Economic Development Council Certified Business Advisor Allan Peterson leveraged contacts at the Korea International Trade Association (KITA), and Grant County’s Sister City relationship with Gunpo City, South Korea to arrange for Eastern Washington businesses to visit South Korea and meet with interested importers of U.S. products and services.

That trade mission to Seoul took place in April, 2016.  Jenkins and Peterson effectively leveraged another important partner, the U.S. Small Business Administration (SBA), to recruit companies to join the mission.  SBA’s State Trade Expansion Program (STEP) helped finance a portion of the travel for Washington small businesses.

Five Washington small businesses participated in the 2016 mission, four supported by STEP funds.  The success and positive feedback from participants led to a second mission in June, 2017, this time making stops in Seoul and Tokyo, Japan.  The WSBDC engaged the Japanese External Trade Organization (JETRO) as a partner for matchmaking in the Tokyo market. Nine Washington small businesses participated in 2017, including three that participated in the 2016 mission.  Eight of the nine participants were STEP funded.

Here are some small business exporting success stories resulting from those two missions:

Cascade Organic Flour of Royal City, WA was one of the companies that participated in both missions.   Thanks in large part to their global market expansion, Cascade has tripled grinding capacity for its Organic flour products and hired six new employees.  This is significant job growth in a small rural town of about 2,200. 

Eckenberg Farms of Mattawa, WA, a company that grows and bales hay, participated in the 2017 mission where they sold the entire inventory of their 2017 harvest, nearly $25 million. They also picked up two new potential customers in Japan, which contributed to their opening of an extension office in Richland, WA and hiring an additional six employees. 

Fresh Nature Foods, home of the Fresh Picked Chickpea in Spokane, was a 2016 participant.   Fresh Nature Foods began as a small family farm dating back four generations.  The 2016 mission, their first overseas trade endeavor, helped lay the foundation for active global market participation.  They have since gone to Hong Kong on their own, with support from STEP funds, and are growing sales into China and the Netherlands.

Glacia Nova, an  Auburn company that bottles natural water from Mt. Rainier Glacier participated in the 2017 and is currently exploring options for SBA financing to support export working capital to support sales in the Asian markets of Japan, Korea, Hong Kong, Singapore and China. 

Excellent market intelligence from the WSBDC and Washington Department of Agriculture, and STEP funding from SBA, delivered locally by the Washington State Department of Commerce, have provided great stepping stones for area  small businesses to find success in the global marketplace. 

The WSBDC continues to work with these clients and to explore additional opportunities for STEP funding and SBA export financing as they make plans for another Trade Mission in 2018.

Effective leveraging of partnerships and dedicated commitment to their clients has made the Washington SBDC a stellar example of the role SBDCs can play in helping U.S. small businesses achieve global market success!

Visit the SBDC’s site to learn more about their resources for small businesses. 

Learn more about the State Trade Expansion Program at the website. 

SBA has a great site where you can find out more about export financing options. Click on the links for more information about the WSBDC trade missions, and enjoy the trade mission video.

About the Author:

Peter J. Cazamias
Peter J. Cazamias

SBA Official

Peter J. Cazamias serves as the Associate Administrator for SBA's Office of International Trade.

St. Louis Company Grows Over 200 Percent by Looking to Export Markets

By Peter J. Cazamias, SBA Official
Published: October 11, 2017

David and Linda Shogren are the duo behind U.S. International Foods LLC, a Missouri-based small business that specializes in exporting high quality food and grocery products abroad. Focusing primarily on Asia, they match American-made goods with local cultural preferences.

The rise of middle class markets in these developing countries has sparked an increased demand for quality Made-In-America products.  Mr. Shogren’s two decades of food marketing and sales experience positioned him well to start a business to fulfill these demands.  

Since 2011, the Shogrens have taken advantage of some key local resources, including the University of Missouri Small Business Development Center’s Office of International Trade, which helped them to draft their first international business plan.

In addition, the company has secured both an Export Express loan and an Export Working Capital loan, both guaranteed by the U.S. Small Business Administration, to offer open account terms on a wider basis and facilitate working capital to support increased sales.

The sustained access to capital has allowed U.S. International Foods to continue along a strong growth trajectory over the years, leading to an increase in both sales and employees. Recently, the SBA’s Office of International Trade had an opportunity to speak with the Shogrens to dive deeper into their rapid expansion into the global marketplace.  

SBA: Tell us about your company.

David & Linda Shogren: Our mission is to export food and grocery products made here in the United States to customers overseas – primarily Asia. Our products include a variety of things like cereals, dried fruit, nuts, soups, snacks, confectionary products, and more. Our customers are supermarkets, and distributors that supply supermarkets, as well as some e-commerce. China was the original focus and our first market; now, we are expanding into contiguous markets from there including Hong Kong, Taiwan, the Philippines, and Korea.

What inspired you to begin your own company?

D: In short: I love food and I love to travel! I was working for a domestic food broker at the time that represented manufacturers here in the U.S. Around 2011, a new supervisor came aboard who wanted to begin to focus on selling internationally. I became the international project manager and started developing a plan to go global. US International Foods started off as a subsidiary of that company in 2011, and we were able to buy and operate it on our own in 2014.

How did you first hear about the resources you eventually utilized - like the Small Business Development Center and the U.S. Small Business Administration?

D: First, we went to the World Trade Center in St. Louis to hear their suggestions. Starting a conversation there got us into the flow of international support organizations around town. Within the first year or so, we took the State Trade Expansion Program (STEP) training, where we were introduced to a local Small Business Development Center counselor who helped us to write our first export business plan. From there, we were introduced to the SBA as well.

How did you utilize the State Trade Expansion Program (STEP) to expand your company?

D: After connecting with the World Trade Center, we signed up for their weekly newsletter which is where we first learned about the STEP program. We jumped on the opportunity to apply for funding. We’ve used the STEP grant every year since then to get funding to attend trade shows and trade missions abroad. We leverage these funds so we can travel more, particularly to shows in China like the SIAL Show. We also utilized the STEP program to test the feasibility of expanding our operations to the Middle East. In February of 2017, we traveled to Dubai to attend a different food show.

How have your company’s annual revenues or number of employees changed since securing SBA financing?

D: It has helped us grow a lot.  We have grown in both revenue and employees. In 2013, our total sales were about $800 thousand. This year, in 2017, we are on track to hit $3 million in sales. A lot of our sales are through large customers on long payment terms. We would not have the cash flow to make those big sales without the SBA. In fact, three of the retailers we sell to in Asia are in the top 15 global retailers. The bigger the retailer the longer the payment terms are, so we need that financing to do business with them. With the SBA Export Working Capital Loan, we have been able to sell on open account terms: the guarantee let us get the loan and the loan lets us sell to those customers.

L:  Adding to David’s point, selling to bigger retailers because we used SBA’s financing gives us a lot of credibility in the market. In turn, that makes it easier to other large customers.  

L: We started with just two and currently, we have 5 employees. However, we indirectly support a lot more employees than that given our focus on Made-in-America goods. I don’t think we’d have employees right now if we hadn’t gotten the financing through the SBA. 

What advice do you have for other companies that are considering selling abroad?

D: Step number one, go to the SBA.  The other more general idea is when I travel overseas; I meet a lot of people from different countries. I focus on what we have in common with these people. The issues that exist in the grocery industry abroad are the same for me here, regardless of the country. I think of commonalities to overcome the language and culture barriers and I focus on how to solve a problem for a customer. You also have to keep at it and you do not expect to have that big sale at first. Exporting is a slow process.  One expression I use in talking with suppliers about exports is selling for export is like making good barbeque: it’s low and slow. 

To learn more about the counseling, training, and financial tools available to help your small business sell abroad and to find the offices located closest to you, please visit: www.SBA.gov/local-assistance

About the Author:

Peter J. Cazamias
Peter J. Cazamias

SBA Official

Peter J. Cazamias serves as the Associate Administrator for SBA's Office of International Trade.

Business Equipment Financing & Leasing: 7 Key Tips to Know

By Marco Carbajo, Guest Blogger
Published: October 11, 2017

Should you finance or lease business equipment?

Although both options help break down the overall cost of business equipment into smaller amounts, they are very different in how they’re set up.

If you decide to finance your equipment, you own it outright because you are purchasing the equipment and spreading out the purchase price over several years. You maintain ownership during and after all the payments have been made.

When you lease equipment, the lender owns the equipment and you’re paying for the use of it. Now there are different types of leases so it’s important to understand when you should use a capital lease versus when to use an operating lease.

A capital lease is more commonly used than an operating lease. If you plan to take ownership of the equipment at the end of the lease, then a capital lease is the right option. For example, if you are leasing a piece of machinery that you will use for a long time, you most likely will need a capital lease. Now keep in mind, there are many benefits that come along with owning equipment such as claiming the depreciation of it.

An operating lease is used if you are acquiring business equipment and you plan on replacing it at the end of your lease term. The rental cost of an operating lease is considered an operating expense for the business. Most likely operating leases are used for high-tech equipment, copiers, and computers.

When you decide what type of equipment your company needs there is much more to consider than overall costs of buying or leasing, you also should consider maintenance, tax deductions, flexibility, etc. Here are seven key tips to consider when it comes to business equipment financing & leasing.

Tip #1 – Be ready to clearly describe how the business equipment will benefit your business. An equipment financing provider may want to know a projection of increased revenues and cost savings gained from the use of the equipment.

Tip #2Review your credit report/scores and organize your financial information before contacting an equipment financing provider. Expect the equipment financing provider to request this information and be prepared to explain any issues.

Tip #3 – Don’t assume you’ll get the best terms from your bank or equipment manufacturer’s captive finance company. Take the time to compare rates, lease terms, fees and options that are available to you.

Tip #4 – Review your business credit report and update any information that is outdated or incorrect prior to contacting an equipment financing provider. If you have any negative information reporting, be prepared to explain it to a potential finance provider.

Tip #5 – Do not submit multiple lease applications to various companies. When a lessor sees inquiries from other leasing companies it raises questions as to why other lessors rejected your application. Choose an equipment finance provider that caters to your kind of business for a greater chance of approval.

Tip #6 – Know the difference between a fair market value lease and a $1 purchase option lease. A FMV lease provides low monthly payments, great flexibility at the end of the lease term and tax advantages. If you choose the $1 purchase option lease you’ll get to purchase the equipment at the end of the lease for $1. Compared to the fair market value lease, the monthly payments will be higher, but you’ll also have depreciation and other tax incentives as well.

Tip #7 – Combine multiple business equipment purchases under one lease. To keep things simple and cost effective it’s best to identify what types of equipment your company needs and bundle the leasing into one single payment. Doing this can possibly enable you to get a better deal compared to the latter.

Business equipment financing and leasing provides business owners the ability to increase revenues and keep up with new technology or machinery. With equipment financing, a credit savvy business owner can save money and avoid spending large sums of money on business equipment 

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’.

Take Your Small Business Global

By Peter J. Cazamias, SBA Official
Published: September 27, 2017

Is your business struggling to thrive?

If you’re finding it hard to stay afloat—be it by maintaining a profit or maximizing your outputs, the U.S. Small Business Administration’s (SBA) Office of International Trade has a solution that can help your business succeed.

SBA runs the State Trade Expansion Program (STEP), a grant program that helps small businesses grow.   So far, with a combined investment of over $103.1 million in funding from Congress, the SBA has supported thousands of small businesses increase export opportunities to over 126 international markets. 

Now, it’s your chance.  You can apply for STEP financial assistance in your state, territory, or commonwealth to help your business enter and succeed in the international marketplace.  Here are some examples:

  • Participate in a foreign market sales trip:  You can join a team of export specialists to make your products and/or services available in one or more international markets. 
  • Get your website translated in different languages:  If you have a website, STEP funding will allow you to reach more customers through multiple translations. You’ll be able to increase the number of visitors to your website and before you know it, right at your fingertips, you can get orders from other countries.
  • Attend an international trade show:  By attending an international trade show, you will be in the company of buyers from all over the world interested in purchasing U.S. goods and services. It’s an opportunity to schedule meetings with potential customers and potential distributors.  STEP clients have signed new sales deals on the spot, and others have gained numerous prospects for purchase orders in a short period of time.

These are just a few of the many ways you can expand your business globally and increase sales.  Now more than ever, it’s easier to generate new international business opportunities and increase your sales potential.  Let us help you STEP into your destiny!  Getting started is as easy as 1, 2, 3:

  1. Visit our website     
  2. Click on the map to learn about available STEP opportunities, and
  3. Make a connection so you can to take your small business global

 

About the Author:

Peter J. Cazamias
Peter J. Cazamias

SBA Official

Peter J. Cazamias serves as the Associate Administrator for SBA's Office of International Trade.

Dress the Part: How to Use Employee Dress to Market Your Business

By Rieva Lesonsky, Guest Blogger
Published: September 8, 2017

Last week, I went to a restaurant where the servers didn’t wear uniforms. In addition, there was no consistency in the street clothes they wore. One waitress was in jeans and a pink T-shirt, another was clad in all black, and the hostess sported a glamorous floor-length dress. It was a bustling place, and I got confused about which of the people hustling through the restaurant were actually employees and which were customers. It drove home the importance of employee uniforms and dress codes in marketing a business.

Your employees’ appearance plays a big role in your business brand. Employees are the “face” of your business for your customers, so it’s important their attire reflects and enhances your brand.

Benefits of Employee Dress Codes
Creating a dress code or uniform guidelines for your employees has many benefits for your business.
  • Reduces confusion: As my restaurant experience exemplifies, when customers can easily spot employees to provide help or answer questions, they’re more likely to be satisfied with their experience at your business. That makes them happier customers more likely to come back—and recommend your business to others.
  • Builds brand awareness: Uniforms serve as a silent marketing tool, promoting your business to anyone who sees them. For example, if your employees visit customers’ homes to provide services, such as lawn care, uniforms serve as an advertisement to neighbors who happen to see them.
  • Morale/team building: Following a uniform policy or dress code reminds employees they’re all on the same team. It also puts them in the frame of mind to represent your business, reminding them when they’re on the job, they need to embody your business’s values.
  • Creates uniformity: Dress codes and uniforms convey to customers they will receive the same level of quality and service no matter who they interact with at your business, and no matter which location of your business they visit.
Developing a Dress Code or Uniform Policy
To create a business uniform or dress code, keep these factors in mind:
  • What roles do employees play? Uniforms or dress codes must be appropriate for different roles within your business. A salesperson who calls on B2B clients in their offices must dress differently than a technician who visits those offices to service copier equipment. Your uniform or dress code should allow employees to perform their duties comfortably and safely.
  • What style of dress best conveys your business brand? Is your brand efficient? Chic? “Alternative”? Conservative? Natural? Your brand and your target customers’ expectations will dictate what your uniforms should look like. For example, if you own an accounting firm that serves Fortune 1000 clients, T-shirts and jeans would never be appropriate attire. On the other hand, that might be the perfect uniform for wait staff at a trendy gastropub.
  • What type of dress code will improve employee morale? Consider giving employees some input into uniforms and dress codes, especially in creative industries. You don’t want employees to feel forced into a cookie-cutter mold. Look for a middle ground that gives employees a consistent look while still allowing them to display personality.
How to Convey and Enforce Dress Codes
  • Include employee dress code or uniform information in your employee handbook. The more detail and examples you can provide, the better. Be concrete and specific. Terms like “professional” or “stylish” may not mean the same thing to you as they do to your employees. (For example, distressed jeans are currently very stylish, but rarely look professional.) Also include rules for hairstyles, facial hair and general grooming. It’s a good idea to include visual illustrations of “do’s and don'ts.” Some styles of dress commonly prohibited even in casual workplaces include hats or baseball caps, ripped or dirty clothing, revealing or athletic clothing, T-shirts with slogans or pictures on them, and sandals.
  • Consider creating different dress codes or uniforms for different times of year, such as hot weather. You can also have different dress codes or uniforms for different job functions, such as customer-facing employees or back-office staff.
  • Be sure your dress codes don’t discriminate against employees on the basis of gender, sexual orientation, race, religion, age, appearance, size or other factors. Learn more about discrimination and dress codes at the EEOC website.

To get employees to support and comply with your uniform or dress code policy, emphasize that the goal is not to quash individuality, but to enhance your business brand and image while promoting teamwork. Once your employees understand the value of the dress code as a marketing tool, they’re more likely to embrace it.

About the Author:

Rieva Lesonsky
Rieva Lesonsky

Guest Blogger

Rieva Lesonsky is CEO and President of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Follow Rieva at Twitter.com/Rieva and visit SmallBizDaily.com to sign up for her free TrendCast reports. She's been covering small business and entrepreneurial issues for more than 30 years, is the author of several books about entrepreneurship and was the editorial director of Entrepreneur magazine for over two decades

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