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Finances

The Truth About Free Credit Card Processing

July 17, 2019


Plastic makes the world go round, but for small business owners, accepting credit cards can mean additional charges from processing companies and confusingly tiered pricing structures. Setting up free credit card processing is an appealing option on the surface – after all, who doesn’t like free? But you may be wondering why and how some companies claim to offer small businesses free processing while others charge fees.

Here’s the unvarnished truth about free credit card processing, how those freebie companies operate, and what you can expect if you choose the no-cost route. We also offer a comprehensive guide to the best credit card processors for small businesses, which we review independently on an annual basis for our readers.

What is free credit card processing?

Traditional credit card processing methods allow businesses to accept credit card payments in exchange for a processing fee. No matter what credit card processing company you use, there is a processing fee involved in accepting credit. However, with free credit card processing companies, that fee is offloaded onto your customers rather than coming out of your own pocket. So, it’s not free in the sense that it has no cost – you’re just not the one paying it. Additionally, companies that claim to offer free credit card processing still charge their clients a fee for their software and services, so no matter how you look at it, it’s not free.

Why is there a cost associated with processing credit card payments?

The interchange fee (sometimes referred to as a swipe fee by retailers) is what credit card companies charge merchants or customers in exchange for offering them purchases on credit. When people use credit cards to buy things, a financial institution has to offer the money upfront before it is paid back. Credit card companies …

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How to Keep Your Business Out of Bankruptcy

July 9, 2019


Research from the Supreme Court on federal court filings show that bankruptcy filings are at their lowest levels in more than a decade. However, at the same time that bankruptcies — legal processes involving actors that can’t repay their debts to creditors — are declining, business debt is rapidly rising. In fact, the Federal Reserve’s recent financial stability report shows that leveraged lending is 20% higher than last year and flags a decline in protections for lenders against default.

This is important to be aware of because debt and cash flow — more precisely, the inability to effectively manage debt and cash flow — are the principal drivers of bankruptcy. If you want to understand the risk of selling your goods or services to someone on credit terms, understand the credit report first. Pay close attention to the credit score and credit limit, both of which will tell you a lot about a company’s payment behavior and the likelihood of it becoming bankrupt in the near future.

Signs of trouble

 In my years helping companies manage credit, I’ve identified some red flags when it comes to debt management issues:

  • Changes in payment behavior: It’s a major red flag if a business has suddenly slowed payments to its primary vendors — or worse, to the utility companies in charge of keeping the lights on. While some businesses simply have a style of paying bills past due, it’s almost always a bad sign if they aren’t paying for water, lights or gas. This is by far the more predictive factor in business failures, as it indicates a real-time, looming cash flow problem.
  • Tax liens: If companies don’t pay government taxes, these liens can stack up quickly with local, state, and federal entities. Government agencies will always be first in the queue to
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Do You Understand the Fine Print of Your Loan Agreement?

June 25, 2019


For thousands of New York taxi drivers, however, both ended up being the case. According to a New York Times expose published this spring, much of the profession’s financial ruin – and, tragically, rampant suicide rates – can be traced to the deliberate overpricing of taxi medallions (the city’s taxi license) and the predatory loans cabbies took out to afford them. 

There’s little argument that the taxi drivers weren’t taken advantage of, with many lacking the English language skills to do their due diligence. The problem is that not all predatory loans are unlawful loans. While usury laws can cap interest rates and payday loans are outright banned in some states, many unethical lenders are still able to operate within the realm of legality.

Editor’s note: Looking for a small business loan? Fill out the questionnaire below to have our vendor partners contact you about your needs.

Check yourself before you wreck yourself

Failing to read the fine print of a loan agreement can have life-altering consequences. If you’re a small business owner who has been approved for a business loan, the hard part may be over, but don’t let your jubilance get the best of you. Read the fine print.

You’ll know you’ve been thorough if you can answer these seven questions:

1. Is the interest rate fixed or variable?

In a variable interest rate loan, the borrower pays the market’s interest rate plus or minus a fixed percentage. A variable rate commonly seen in business loans is the Wall Street Journal Prime Rate plus 2.5%. As the prime rate changes, so does the interest a borrower pays.

A fixed interest rate, however, is not affected by the market – the percentage remains the same. Variable rates tend to accrue less interest than fixed rates, however, this comes …

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Why Small Business Owners Should Think About Taxes Year-Round

June 18, 2019


For many small businesses, tax season is a grueling time of year. It’s often associated with stress, record-combing and exhaustion. This is one of the key reasons why small businesses should be thinking about their taxes year-round and prepare long before it comes time to file. By folding tax planning into your overall business strategy, small business owners can tackle their taxes far more effectively (and may even end up with bigger deductions than they anticipated!). Here are some of the best tips for keeping taxes a priority for your small business 365 days a year.

1. Use the right software.

One of the best ways to ensure your taxes are always a priority for your small business is by getting hold of business accounting software. There are many resources and valuable apps you can use to keep your small business in check and ensure an efficient tax filing process months before it’s time to begin filing. For example, Intuit is the parent company behind software such as TurboTax and QuickBooks. These tools can help you keep track of everything related to your business and taxes. By taking proactive measures to be more organized, you can make taxes a smoother process. [Are you interested in finding the right online tax software for your business? Check out our best picks and reviews.]

2. Track all of your spending and have regular budget check-ins.

Aim to track all of your spending throughout the year so that none of your expenses are hard to pin down once tax season rolls around. It’s incredible how much you forget when it comes time to file. Noting expenses the day or week they happen ensures you don’t miss them at the end of the year.

For some, it helps to have monthly expense check-ins. For others, …

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How States Have Leveled the Playing Field for Small Businesses Since South Dakota v. Wayfair

June 6, 2019


Last year, the U.S. Supreme Court handed down a big decision for small businesses: In South Dakota v. Wayfair, the Court said that states could require out-of-state, online retailers to collect and remit sales tax on purchases made within the state. Early on, the decision was hailed as an indisputable win for local brick-and-mortar retailers struggling to compete against the Wayfairs and Amazons of the Internet, but did the new ruling actually inspire states to level the sales-tax playing field for small businesses? One year later, the South Dakota v. Wayfair decision has done all that and more.

What was the South Dakota vs. Wayfair decision?

Specifically, the case concerned a South Dakota law that required large, online retailers — those with at least $100,000 in sales or 200 transactions in the state — to collect and remit sales tax on those purchases. The law rebuffed the longstanding legal tradition in which states could only collect sales tax from retailers with a physical presence in the state. In upholding the law, the Supreme Court called the physical presence requirement “flawed” and “arbitrary.”

“Modern e-commerce does not align analytically with a test that relies on [physical presence],” wrote Justice Anthony Kennedy. “This Court should not maintain a rule that ignores … substantial virtual connections to the state.”

What are the effects of South Dakota vs. Wayfair?

With this language, the Supreme Court did at least three important things for local economies and the small businesses that support them: First, the South Dakota v. Wayfair decision officially put a stamp of approval on South Dakota’s law and similar laws already on the books in several states.

According to the Sales Tax Institute, laws imposing sales-tax burdens on online retailers based on some alternative “nexus” to the state have been on …

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5 Money-Saving Strategies for Small Businesses

May 31, 2019


Reducing your expenses does not take much time or require much effort. Here are five simple ways to make your small business financially more flexible.

1. Make more environmentally friendly decisions.

Going green is a great way to reduce costs, and it’s helpful for the environment. Consider making these small changes to your office:

  • Switch halogen or regular lights to LEDs. LED bulbs reduce your consumption of electricity and give off better lighting. Where possible, use motion sensor lights to reduce your use of electricity.
  • At first glance, it may not seem like you spend a lot of money on paper, but if you have stationery, the costs of it, along with ink, toner, etc., can add up to be a lot. Ask employees to use e-mail whenever possible. Some people still believe that documents, such as contracts, need to be printed, signed and exchanged. However, most contracts can be digitally signed and shared via e-mail, which can reduce your long-term paper and printing costs.
  • Shutting down computers at the end of the day will save on your electrical bill. Ask employees to shut their computers down and to use a timer, or standby mode, on their computers. 

2. Be flexible in hiring employees.

With changes in technology and in the workforce, hiring independent freelancers brings many benefits to small businesses.  This can help you in several ways:

  • You can adjust your staff up or down as needed depending on your business’s current workload. Further, you can quickly outsource – and find – the specific skills you need without needing to hire a long-term, full-time employee.
  • You can provide flexible working conditions that help you locate the talent you need and that also accommodates the freelancer’s schedule. This flexibility can help you retain these experts for a lengthy period of
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5 Ways to Take the Pain out of Your Bookkeeping

May 23, 2019


A few years back, SCORE conducted a poll asking entrepreneurs what was the worst part of owning a small business. A whopping 40% answered bookkeeping and taxes.

That survey wasn’t an anomaly. In that same year, TD Bank asked over 500 business owners that same question, with 46% listing bookkeeping as their least favorite task. A 2012 survey by Mavenlink had 41% of respondents giving that same answer.

So, it’s no wonder that so many small businesses put it off for as long as possible. If a person despises doing something, it’s not exactly going to jump to the top of their to-do list. Unfortunately, this can have a severely negative effect on a business’s performance.

So, what can be done to fix it? Short of miraculously developing a passion for accounting, what are some simple tricks to reduce the pain around bookkeeping?

1. Understand the purpose.

One thing that has helped a lot of our clients is understanding why they’re doing their books in the first place. To be able to file their taxes? To provide records to a bank for a loan? To give something to their annoying CPA to get them off their backs?

Sure, all of those things are real reasons. But they are far from the primary purpose that bookkeeping serves.

Accounting is called “the language of business.” A business’s books are the truest reflection of its operations. They show the successes, the failures and the opportunities. They provide data on cash flow, receivables turnover, seasonality, and the profitability of different products and services. They give a snapshot of the business’s performance – all backed up by cold hard data. As a friend of mine bluntly put it, “If you don’t know your books, you don’t know your business.” They can and should be …

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Ask These 4 Questions Before Hopping on the Blockchain Bandwagon

May 23, 2019


Now, we live in a time when there is an app for any productivity issue. We can choose from thousands of solutions, each boasting impressive features that help people accomplish more in less time. One such solution that’s making waves is blockchain.

Aided by the meteoric rise of bitcoin, blockchain has technological applications that make it a viable resource for any number of industries in which transparency matters. As the food services and healthcare fields show, though, blockchain and technology in general is not a silver bullet. While it has potential to effect change, blockchain can’t be the cure-all you might expect if you don’t apply the necessary context.

Seeing through the supply chain

Supply chain transparency is a must, especially as it relates to food and health. Take, for example, E. coli. A 2015 outbreak of the bacteria contaminated Chipotle restaurants across 11 states, and E. coli concerns led to three recalls of romaine lettuce in 2018 alone. Recalls, besides being a major health concern, pose the single biggest threat to food vendor profitability, according to Food Safety Magazine.

In healthcare, opaque supply chains lead to other issues. Stolen prescription drugs are contributing to a well-documented opioid crisis in the U.S. In addition, fraudulent billing costs around $455 billion worldwide.

While blockchain can help each industry prosper, there are still questions that both healthcare and the food industry must address as to how blockchain aligns with their goals. For leaders in other industries considering blockchain adoption, ask yourself these four questions to determine if it’ll yield the results you envision.

1. How important are product quality audits?

Blockchain has the potential to serve as a global supply chain operating system. If your business sells high-quality goods and it’s vital to know where they are every step of …

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Debt or Equity? Determine the Right Capital Mix for Your Business

May 22, 2019


In such scenarios, raising loans through banks for small business or relying on individual investors becomes unavoidable. However, raising small business loans poses a challenge for startups, and business owners struggle to find the right capital structure or funding mix for their company. Differentiating between the two funding options, debt and equity, raises issues. In this regard, a clear demarcation between the two and the cost of capital to be incurred will help entrepreneurs make the right financial decisions, ensuring business growth and higher valuation.

What’s the difference between debt and equity funding?

Debt financing is a process of arranging funds for your business through borrowings. These borrowings can be in the form of secured or unsecured loans that will eventually have to be paid back to the lender at a certain interest rate. On the other hand, equity financing is a process of raising funds by selling off part of stocks of your business, or shares. Under this type of funding, ownership of the business is traded off in return of funds.

Is debt or equity better?

While the key underlying difference between the two types of funding structure is clear, further distinctions are vital for an entrepreneur to make the right decision.

In the case of debt funding, the downside is the payment of interest, which results in a greater sum than the amount repayable to the lender, making it a costly proposition. Moreover, the loan has to be repaid regardless of whether your business generates revenue. On the other hand, equity funding dilutes ownership and reduces the controlling stake in the business. The main obligation under equity financing is the need to generate consistent profits to distribute dividends.

Further, debt financing offers the benefit of tax deduction, as interest paid on debt can be deducted from a …

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3 Tips for Building an Investor-Ready Franchise Business

May 22, 2019


Franchisees usually benefit from a ready-made, tried-and-tested business model from the franchisor, which often includes a known brand, marketing strategy, and benefits associated with economies of scale when buying supplies and other relevant business inputs. 

That package of goodies, however, doesn’t come without a price tag – sometimes a hefty one, depending on the franchise brand you want to associate with. In addition to a franchise fee, which typically ranges from $20,000 to $50,000, franchisees often have to meet contractor and professional fees, as well as costs associated with signage and inventory. As with any other business, they also have to raise sufficient working capital to launch the business and keep it running until it breaks even.

Franchisees must always be on the lookout for funding opportunities to help with some of these costs. Because of the highly competitive nature of business funding, it pays to build a business that will not only get loan approvals from banks and other traditional lenders but also attract independent investors, including private equity firms that might have more favorable lending terms.

 

Editor’s note: Looking for financing for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.

 

 

Here are a few tips to help you build an investor-friendly franchise business.

1. Cover all your legal bases.

When you’re looking to bring investors into your franchise business, remember that you’ll be adding another independent party, the investor, into an already complex web of interactions. To ensure things run smoothly, it’s crucial to take up the services of a franchise attorney from the get-go who will help with things like the franchise agreement, the franchise disclosure document, and issues of liability that often carry serious implications for franchise businesses.

Liability issues can weigh heavily on any business, …

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