consulting
Banks Ease Small Business Lending Standards
Thursday, August 19th, 2010 | consulting | No Comments
Banks have begun to loosen their credit standards for the first time since 2006, according to the latest survey by the Federal Reserve. The quarterly survey of senior loan officers indicated a slight easing of credit standards and most terms on commercial and industrial loans to firms of all sizes. This is the first survey since late 2006 to show an easing of standards on loans to small firms.
The survey respondents pointed to increased competition in various loan categories as a reason for the easing. Demand for such loans among firms of all sizes changed little last quarter after having dropped in the April reporting period. In contrast, credit card loan standards tightened slightly.
Locally, we are hearing that banks are increasingly flexible and more aggressive in working with their clients to create lending packages that are good fits. This is a welcome change from the last two to three years, when lenders were dealing with their own recession-related problems. While some banks are still wrestling with their loan portfolios, others appear to have worked through their issues. They now are devoting more resources to serving existing clients and attracting new ones.
This is good news for companies that need credit to keep their operations moving forward. For businesses that are in a position to take advantage of opportunities amid the carnage of the recession, many banks are more willing now to lend their support.
How do you think of yourself as the CEO?
Thursday, August 5th, 2010 | consulting | No Comments
How do you think of yourself as the CEO? A shift in perspective from functional to visionary can transform your company. Here is some food for thought about your identity as the CEO of your company. This post by Dr. Linne Bourget on the Startup Growth Expert website suggests a shift in your perspective from dealing with individual issues to focusing on the company as a whole. This can change not only your approach to running your company, but the entire culture of the company from top to bottom. Dr. Bourget says, “Your entire business derives from your identity as a CEO—or lack thereof.”
Sometimes it’s difficult to gain that perspective on your own. That’s where a trusted advisor can help. Fresh eyes on the company with what Van calls a “10,000 foot view” can help you develop a big-picture focus on the company that will pull you out of the micro-management mentality and aid strategic planning. This approach will then enable you to focus your resources and your team better to make your company more profitable.
DOE hosts Veterans Business Conference
Monday, August 2nd, 2010 | consulting | No Comments
The Department of Energy’s Y-12 complex is hosting a free Veterans Business Conference on August 3, 2010 to support veteran-owned businesses seeking to work with government agencies. As we are a veteran-owned business, we will be attending the conference. We will be listening to small business owners and seeking ways to help them do business better, whether their revenue comes from government agencies and contractors or from the private sector. Here is the link to learn more and register.
Understanding client expectations and establishing service standards
Tuesday, July 27th, 2010 | consulting | No Comments
No matter what kind of business you are running, effective communication with your customer or client is vital. You will have happy clients if you exceed their expectations, but how do you make sure that happens every time? You start by finding out what they expect. Then you can continue the relationship so that those expecxtations are met or exceeded. During the transaction process from the initial encounter to the final phase, effective communication is the key to managing client expectations and establishing service standards.
This blog post talks about the importance of listening to your client first to learn what is expected of you. Only then can you tailor your offering to your client’s specific needs. By communicating how you will meet those needs from the beginning, and then telling your client what you are doing throughout the process, your client will understand the process better and see the value in what you do.
We have built our firm on the principles of understanding our clients first, then determining how best to help them achieve the goals they set. By communicating openly along the way, we can work together to build on success. By going beyond the traditional approach of delivering the expected end result, our long-term relationships can enhance the success of our clients.
How can we exceed your expectations? We’ll be happy to listen to you.
Tax code as cash flow tool
Thursday, July 1st, 2010 | consulting, tax | No Comments
Has your business suffered a net loss during the recession? A tax refund may give you a needed cash infusion. The federal tax code provides a means to smooth out the business cycle. If your company reports a net operating loss on this year’s tax return, you can recover tax paid in prior (or future) years when the company reported a net profit.
The technique is called a net operating loss carryback. You must elect to carry a loss back on a timely filed return, otherwise the loss may be carried forward to as many as twenty future tax years to reduce taxable income. Normally, the loss may be carried back two years. For either 2008 or 2009 (not both), a loss may be carried back up to five years. If the loss is not used up in the prior years, it may be carried forward.
The IRS provides a method to quickly recover taxes to be refunded because of the loss carryback. By properly filing an Application for Tentative Refund (Form 1139 for corporations, Form 1045 for individuals, estates, and trusts), you can recieve a refund within ninety days of filing. This can provide a relatively quick cash infusion to help pull your company through the rough patch.
If a coroporation expects a loss this year and has not yet filed its return for last year, it can apply on Form 1138 for an extension to pay last year’s tax. When the net loss for this year is calculated, the company will pay last year’s tax (plus interest) after applying the net operating loss.
A corporation that has paid more estimated tax than necessary in light of adjusted income or loss projactions may apply for a quick refund of those payments on Form 4466.
These techniques can return cash to the company for daily operations rather than tying it up until after the year’s tax return is filed. Other types of carrybacks are also available, such as casualty and theft loss, farming loss, foreign tax credit, and loss attributable to a federally declared disaster.
As usual, there are technical details and caveats to the use of these techniques. Some of these details are discussed in this article. You should consult your tax advisor to determine the most appropriate action for your situation. We will be happy to help you with these tools, and to find other ways to improve your cash flow.
Renting to relatives
Monday, June 28th, 2010 | consulting, tax | No Comments
Renting property to your relatives can be a good thing. You know them, and you probably have a good idea of how they will take care of the property. You may consider renting to your retired parents or to your children attending college. You must play by IRS rules to retain the tax advantages of renting out property. If you don’t, the deductions will be disallowed while the income is taxed - a double tax hit. You may also suffer unfavorable tax consequences when you sell the property.
Special rules apply to rental of a residence (rental house or apartment) and to vacation home rental.
You must charge a fair rent to your relative on a residence to avoid having that property reclassified as a second home (and losing rental deductions).
- Prove fair rent by collecting third-party documentation about rents for similar properties in the area from the want ads and craigslist. Letters from property managers and independent appraisals are good evidence to support fair rent.
- Do not make gifts to help your tenant pay the rent. The gift will be deemed to reduce the rent, putting it below fair value and jeopardizing the rental claim.
- One alternative for your relative who needs rent money is gifting business assets and having your company lease them back so that your tenant receives rental income. Another option is to hire your relative, although that generates payroll taxes.
- You may consider a good-tenant discount of no more than 10%. One justification for this discount is that there is no need for a rental management company, passing the savings to the tenant.
- If you wish to set up a rent-to-own situation, you must follow the rules for a shared-equity financing agreement for the rental to stand.
- Your relative must use the rental property as a principal residence.
If you have a vacation home that you rent for part of the year and also use personally, the tax code provides a break on rental income. Your personal use of the vacation home must not exceed the greater of 14 days or 10% of rental days per year. If your relatives use the vacation home, their use counts toward these limits even if you charge fair rent. If your combined use exceeds these limits, the property becomes a second home, which makes the rent income taxable while eliminating the usual rent expense deductions.
If you are considering renting to relatives, a call to us will help ensure that everything is done in a way that secures the greatest tax advantages and best financial outcome for your family.
Small business lending changes
Thursday, June 24th, 2010 | consulting | No Comments
The financial reform bills currently in Congress are being reconciled in conference in hopes of passage by July 4. Also in the works is an appropriation of $30 billion for banks to lend to small businesses. But will small businesses see that money? Is that what they need to survive the recession? The metrics to answer these questions, and thereby allow Congress to craft legislation that does what it intends, range from hazy to nonexistent, according to this report from Bloomberg BusinessWeek. Bank data indicate that while overall lending fell over the past two years, lending to small businesses fell more than twice as much. Because banks are not required to report small business lending in detail, no one can tell whether the reason is the banks’ unwillingness to lend, the companies’ poor creditworthiness, or a lack of demand for small business loans.
We are hearing now from some banks (not all) that they have money to lend to creditworthy companies with good histories and solid plans for using the money (such as commercial real estate with leases already in place). Their credit analysts are beginning to listen again to the stories behind the numbers rather than focusing solely on whather the loans will pass muster with the regulators. We are also hearing from business owners who would much rather have more revenue than more borrowed money that they are not sure they can pay back in the current economy.
Those business owners who are applying for commercial credit are finding a higher level of scrutiny into their personal financial hstory, as this article explains. Because small business loans are often granted subject to the personal guarantee of the owner, lenders are placing greater emphasis on subjective measures relating to the owner’s character. They are going back to the old days when the banker’s mantra was, get to know your client as a person before you decide whether to extend the loan. These days, they have plenty of ways to quantify creditworthiness, but that one-to-one relationship is becoming important again.
If you are considering applying for credit, here are some things to remember:
- Deal with a banker who knows you (let’s hope you’ve already been working on this one).
- Work up a detailed plan for how you will use the money and how this use will increase your capacity to pay back the loan.
- Have your business and personal financial ducks in a row. Check your credit reports and make sure they are accurate.
- Organize your tax returns and other financial information so your lender has a complete, easy-to-follow set of data.
- Try to anticipate the lender’s questions and concerns so you can respond without being caught off guard and convey the sense that you are aware and in control.
Fraud protection resource
Monday, June 21st, 2010 | consulting | 1 Comment
When times get tough, more people try imaginative (and illegal) ways to outsmart the system or take advantage of others. We’ve seen it during this recession in Ponzi schemes (e.g., Madoff and Bolze), unemployment insurance fraud, bank fraud, mortgage fraud, and more. Recently, the Federal government set up the interagency Financial Fraud Enforcement Tax Force to improve enforcement actions and to help us protect ourselves from fraud. They launched the website StopFraud.gov as a central point for news and information on financial fraud.
As consumers and as business owners, we need protective measures to reduce our risk of becoming fraud victims. You may find some useful information on this website. For more specific help in boosting your fraud protection, please feel free to contact us.
Seminar presentations
Tuesday, June 8th, 2010 | consulting, tax | No Comments
Van and Karen presented at a seminar for business owners and managers in Morristown, TN today. Van talked about the increase in IRS audits and how companies can prepare for that possibility. Karen talked about detecting and preventing fraud in the workplace, which the latest study from the ACFE estimates costs the typical company 5% of annual revenue. Both shared many real-life stories from their experiences dealing with these issues. We also gave the participants practical ways to improve their recordkeeping and internal controls that they can implement in their businesses.
Six Cloud Computing Benefits For SMBs
Monday, June 7th, 2010 | consulting | No Comments
We are always watching for ways to improve your profitability. We are not an IT company , but the buzz about cloud computing has gotten us thinking about whether it makes good business sense to tap into the promise. Information Week has posted a series of articles about the cloud that can help us begin analyzing its its uses and pitfalls. You might begin with this article.
As you explore your options, call on us to help you analyze the cost-effectiveness of various scenarios. We’ll do our best to clear the clouds about this or any other business decisions you are considering.