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Summer vacation is almost over. The summer that was supposed to be “The Summer of Recovery” didn’t prove itself to be one. In today’s economic climate, business owners are apprehensive about hiring help. The cycles of hope and despair that have been plaguing us for at least a year have left people disillusioned and less adventurous.
If you need help in your small business, and don’t want to hire people because you are afraid you’ll have to let them go a few months later, maybe an internship program is the way to go.
Internship is defined by the Department of Labor by certain criteria: It has to be in the same academic or vocational field, the intern should not replace any paid worker and the internship should primarily benefit the intern, not the employer. The employer, on the other hand, “derives no immediate advantage” from the internship.
Read on, not all internships are born alike.
If you establish contact with a higher education institute that has courses in your field, you have a way into the talent pool of the future. The young generation is most likely up to date with new technology which can make your life easier, or move your business forward.
Those students want to learn. They think of your business as their profession of choice and they are willing not to get paid to learn how it works in the real world.
What a wonderful way to screen your future employees, and keep the ones you like by turning them into student employees. If you want to get young talent into your business, you might have just hired the new whiz-kid.
An article in ReadWrite Start has 5 tips on creating an internship program. How to create a work plan, how to assign a good supervisor (it can be you…), how to give and take feedback and provide compensation when the work that’s done doesn’t fall into the categories mentioned above.
New rules which will go into effect in January 2012 require all businesses and nonprofit organizations to issue a 1099 form for all goods and services which were paid over $600 a year. The buzz that this new regulation causes can be heard from those who will impacted the most – small business owners.
How this legislation happened is another story. It was slipped into the Health Care bill which was passed in March as an attempt at closing a gap of income tax revenue reporting. The additional paperwork puts business owners at a disadvantage because of minimal or non-existent support staff.
Pennsylvania’s SMC business networking organization surveyed its members and found that they currently average 10 filings a year. The new rules might push that average to over 200 fillings per year for typical small business.
What will be the effect of this regulation?
It will undoubtedly cause small businesses to consolidate their purchases, going from many vendors they do business with, to only a few to ease on the reporting. That might hurt small businesses in general.
It will also cause a larger paper trail. ”Small businesses that lack the capacity to track customer purchases may lose customers, leaving the economy with more large national vendors and less local competition.” Says SMC Business Councils Tom Henschke.
Because of product returns and other complications, the payment documented by the 1099 won’t match up cleanly against the revenue business report, putting small business owners to have increased communication with the IRS.
How to avoid the new reporting?
The buzz this new requirement created was heard all the way to the IRS. In May, in a speech before two payroll trade groups, IRS Commissioner, Douglas Shulman, announced a major exemption to the new rule. The IRS plans to exempt transactions made through credit cards and debit cards. “Whenever a business uses a credit or debit card, there will be no new burden under the new law,” Shulman said.
The main beneficiaries of that exemption are likely to be credit card companies, which will get an added hook to get small businesses to pay their fees.
Image thanks to http://www.flickr.com/photos/joshuacraig/2415343592/lightbox/
Getting an SBA loan is not an easy task, we all know. It is a little like winning the biggest stuffed animal at the carnival. Odds are against you, but sometimes it does happen, writes Geoff Williams in his article in AOL small business. He spoke with Christine Reilly, the president of Small Business Lending for CIT, who said about a year ago the federal government tinkered with the formula for getting an SBA loan and for a brief moment the loans were semi easy to get. The SBA guaranteed 90 cents on the dollar instead of 75 cents and waived the borrower’s fees (about 3% of the loan). SBA lending jumped until the 90 cents guarantee ended in May. In June lending has dropped a whopping 74%.
Here are some things you need to know before you apply for a loan:
- Learn about the loans – There are a few SBA loans, applying for the correct one will give you a better chance of getting the loan.
The 7(a) loans are the most popular. Within it there are four types of loans:
The Express loan – Aimed at getting your loan as fast as possible
Export Loan Program – for businesses that export their products.
Rural Lender Advantage Program – designed for businesses in small communities, away from big city areas.
Special Purpose Loan Programs – designed for businesses that were affected by NAFTA.
There are also loans called 8(a) which are aimed at ‘Socially Disadvantaged Individuals’.
SBA 504 loans are another type of loans for real estate or infrastructure such as buying land or expending your building.
- Prepare The Documents – It’s not enough to ask for a loan and bring some papers to back up a request. John Martinka, Vice-President of Partners, a Kirkland, Washington company, suggests his clients prepare a “book” about the company and the individuals involved. It can be a 10 tab divider with business and personal financial statements, tax returns, accounts receivable, accounts payable, a business plan, reference letters and whatever else is related to the business or the loan. Bankers see many applications, the well-organized ones gives them an idea of how you run your business and how in tune you are to details. Tell a good story about you and your business.
- Collateral – SBA requires that the lender put up all available collateral, including home equity, against the loan. Your business might have some assets that can guarantee the loan.
- Risk factors – Even if you think you have the uncanny ability to turn tin into gold, don’t brag about it to the bank. Traditional lenders hate risk and it’s not the best environment to go way outside your core business.
Image thanks to http://www.flickr.com/photos/42179515@N06/3908285404/
New bank overdraft regulations that went into effect August 15, 2010 may cost banks billions in lost revenue according to guess who: major banks. Research firm Moebs Services estimates overdraft brought banks $37.1 billion last year, as reported in The Washington Post.
The new rules may help small businesses that are dealing with tight cash flow and were slapped with huge fines. Here are how the rules were before the new regulation:
Let’s assume your bank account shows you have a few hundred dollars in your account. You buy a cup of coffee, you buy stamps, you maybe have lunch. You paid for all of those with your debit card.
A few days later you discover you are overdrawn by hundreds of dollars. How could that possibly happen when you had a few hundred dollars in your account? Quite simply, banks decide which withdrawals they post first. Let’s assume a check you gave a month ago was just now posted into your account, or a recurring automatic payment you forgot about went through.
Regardless of the dates, the bank posted your big check first. That brought your balance to zero. All the other withdrawals, small as they may be, now appear after it. Instead of paying overdraft on one big withdrawal, you now pay for all the small ones – with a fine. The cup of latte for which you paid $3, has now a fine of $37. A few of those and now you owe the bank hundreds of dollars.
This was one of the ways the banks made a lot of money with an unfair but legal practice, and that is one of the problems the Dodd-Frank Wall Street Reform and Consumer Protection Act addresses.
According to the new rules, the banks have to give their customer the option to enroll in overdraft protection or opt out. But many economists fear the new rules are not spelled clear enough, so here they are:
The customer can decide if he enrolls in the program and has the bank honor all of his debit card withdrawals regardless of whether there’s money in the account. Overdraft charges will be accompanied with a fine. If the customer opts out, banks will not honor debit card payments when there’s not enough money in the account to cover them.
The FDIC admits the complaints about overdraft abuse doubled from 2008 to 2009, prompting the agency to write guidelines that include small banks as well. They say the banks have to limit the number of times an overdraft accrues by limiting the dollar amount or the number of times the fee can be slapped, a provision that is not included in the bill, and they call to review the order in which bank post the withdrawals.
What worried bank critics is the idea that the bank will now look for other inventive ways to make up for their lost revenues. Legislation takes years and until the public catches up with the bank shenanigans, the customers lose.
Image thanks to http://www.flickr.com/photos/7578081@N07/2585039824/
Unfortunately most credit card processing rate quotes cannot be trusted, which is why we created TransFS, where all the offers are full-disclosure and fully accurate.
Here is an example of how a merchant account provider has advertised false rates.
Business owners all over the country say it is almost impossible to be approved for a bank loan. The banks are very careful, demanding documentation and projections that are very hard to satisfy. The banks demand good credit scores and collateral, but with real estate prices still down, business owners often find they don’t have enough collateral to guarantee their loans.
The big banks throw the blame on the customers. They say people are applying less for loans, afraid to expand because they do not know what the next day will bring.
As reported in the New York Times, Mr. Bernanke said: “It seems clear that some creditworthy businesses – including some whose collateral has lost value but whose cash flows remain strong – have had difficulty obtaining the credit that they need to expand, and in some cases, even to continue operating.”
Some small business owners found it helpful to try microlending.
If this concept sounds foreign, it’s because it is. Microlending has been operating in developing countries for over two decades now. Muhammad Yunus, the founder of Grameen Bank, a nonprofit organization based in Bangladesh, has received the Noble Peace Prize for his work in microlending, granting small loans mainly to poor people. Now Grameen Bank has arrived to the United States. Together with another organization called Kiva, which has lent more than $150 million in 53 countries, they are widening their loans to Americans.
The trend is growing. Cities like New York and San Francisco have introduces their own microloans programs. “Everyone is knocking on our doors, even those with good credit,” said Galen Gondolfi from “Justine Peterson,” another microlending company based in St. Louis.
There are more than 360 outfits for microlending in the United States, some have been operating since the 80’s and experts expect the numbers to rise as long as the bank remains tight.
According to another article in the New York Times, microlending programs in the United States typically lend up to $35,000 to small businesses with less than 5 employees. The interest rate is a bit higher than the bank rate, between 5%-18%, but the documentation required is reasonable.
While banks rely mainly on credit scores, the microlenders consider passion and commitment as well. They require participation in marketing and business-plan workshops and money management courses that can help the small business owner even more in the long run.
The article tells the story of a small business owner (a wine shop in St. Louis) who tried to get a $50,000 loan from his longtime bank. He was rejected because the bank claimed he had too much debt. Another bank turned him down as well. He applied for a microloan and he got $15,000, for 10 years with a 12% interest rate. He had to scale back his plans, he says, but “It’s the only way to go.”
Grameen bank has opened 4 new branches in NY and one in Omaha and has plans to open branches in San Francisco, Washington, Boston and North Carolina.
Kiva works in a different way. It uploads the business profile onto their site. People browse the site and decide, based on the business owner’s profile, who they would like to loan money to. Kiva distributes the money. Borrowers can ask for as much as $10,000, and Kiva made almost one million dollars in loans up till now.
So if your bank has turned you down for a loan, don’t despair. There’s another way to go.
An interesting report from the Kauffman Foundation sheds light on employment practices and duration at startups. The results are somewhat surprising. By looking at hiring practices over 23 years, the report concludes that there is an interesting relationship between job growth and well, the opposite, at startups: Firms that grow and hire many people balance out the other firms who fail and fire workers. Here are some other interesting tidbits:
1) Startups retain an average of 80% of initial employment up to five years from inception. That may be the most shocking and somewhat counterintuitive result since people tend to think of startup employment as more temporary than permanent.
2) Launching during a recessions does not affect a startup’s employment levels after five years.
3) Prolonged exposure to recession does, however, affect employment–startups exposed to recession for long periods of time (3 years) had approximately 10% lower employment after five years than startups not exposed to recession.
Read more about the methodology and results of the report here.
SBA Site Gets a Makeover
The Small Business Administration is revamping its site in order to be a better resource for small business owners.
We’re redesigning SBA.gov from top to bottom with small business owners in mind. Our goal is to build a site that helps small businesses do what they do best: grow businesses and create jobs.
Check the site frequently for updated resources, articles, and information on programs that can help your small business.



