Successful Entrepreneurs Share Secrets for Running a Lean & Mean Businesses

Let these entrepreneurial whiz kids make your life a little easier.

Running your own business is an unpredictable adventure with highs, lows, twists and turns. And while you’ll weather much of what comes along, you will also make mistakes. Why not minimize missteps by listening to the advice of those who have come before you? Here are 15 tips from successful entrepreneurs on being efficient, keeping overhead low and more.

Your Team

“Always be ready to adapt your needs to match your employees to their strengths, so that they will shine, instead of fitting them to the job description. In other words, the ’round peg versus square hole’ concept at its best.”

Christi Lopez, President, Bergerons Flowers, a floral design studio in Springfield, Virginia

“Invest wisely by hiring skilled experts — rather than less expensive novices — who can focus on their areas of expertise (for example, sales, marketing, public relations, graphic design) and can dive into the details so you are able to focus on the big picture and set the overall direction for the company.”

 Kelly Carroll Burgin, Owner/Founder of K. Carroll Accessories , a luxury vegan handbag line

“Outsource repetitive and time consuming tasks to a virtual assistant, like Peach Tree Virtual Assistants. If you are organized and have systems in place, they can often accomplish more in 10 hours a month than you could with the same amount of time.”

Kaysha van der Heyden, a modern wedding and lifestyle photographer based in Orange County, California

Virtual assistants are a great way to get help without a huge cost.  They can relieve you of low value tasks and because they’re virtual, you don’t have any additional costs. I’ve found my people through Elance (now Upwork).”

– Jamie Chang, Founder, Passport to Joy, an online program that guides couples through planning their own wedding

[Editor’s note: If you’re starting your own business or thinking about it, your good credit can make it easier. Here are some tips for not letting your business ruin your credit. You can check two of your credit scores for free on Credit.com.]

Coaching

“Business/marketing coaching is everything because I’m not amazing at that stuff, and my business grows so much faster when I invest in a coach.”

Meg Hodge, Owner, Centered: Richmond Acupuncture & Wellness, a well-being facility in Richmond, Virginia

“Amplifying the RestoPresto brand is essential so with a tight PR and marketing budget, I deeply value the affordable (and free) strategies, tips and guidance by PR coach Sabina Hitchen of Sabina Knows. Combining that ‘how to’ knowledge with free HARO (Help a Reporter Out) media leads has gained amazing press for the RestoPresto wearable blanket including a feature on the TODAY Show!”

Candi Obrentz, creator of RestoPresto, the lightweight compact pouch that unfolds to a soft, water-repellent, thin layer to sit on or wear

Efficiencies

“I use a few filters to determine how to prioritize my time and my business spending. First, I look for things that will help me increase sales, because without sales, your business will fail. Second, I look for things that I spend too much time on that I can automate or outsource. This frees up my time to spend on higher value activities that directly impact revenue and client satisfaction. If more business owners focused on these things first instead of the superficial things that don’t immediately drive revenue, we would have fewer business failures. Sales fund everything in your business. Not the other way around.”

Maria Bayer, a consultant who helps experts in creative fields book clients they love and get paid what they’re worth

“Schedule, schedule, schedule. Make sure you schedule out your days and times for efficiency while leaving time for emergencies or tasks running over.”

Kim Sayatovic, Belladeux Event Design, an event design and planning firm in New Orleans

“Use technology to your advantage. Take some time and research some apps that will help streamline your day. A few we like are Evernote, Todoist and Acuity. Also, manage your time wisely. Block off time throughout your day to work on projects, but don’t forget to schedule some time for yourself!”

Kevin Dennis, editor of WeddingIQ and owner of Fantasy Sound Event Services, a full-service event company based in Livermore, California

Reduce Costs

“Reduce premises costs. Move to smaller premises or allow staff to work from home to save rent, business rates and utilities. Also, rent rather than buy equipment. Renting reduces capital investment and lets you speedily upgrade equipment, while saving on maintenance and repair.”

Vernic Popat, Co-Founder of PlantOGram.com, which produces sustainable, eco-friendly fruit tree gifts an alternative to traditional gifts.

Travel cost-effectively. Also, hold teleconferences whenever possible, rather than traveling to meetings,” said Popat.

“When it comes to tools and software, keep only what you need, use and like, and dump the rest. This will help reduce your monthly costs,” said Jamie Chang.

Communicate

“Schedule 30 minute ‘coffee talks’ with your staff in the morning to go over current projects and then monthly brainstorm meetings outside the office — ‘wine and brain dump’ for future ideas and strategic planning.”

Lynette Lovelace, Creator and CEO of Lifetherapy, a retail site focusing on well-being.

“When launching a new initiative, always test markets first, especially if you’re planning to reach a national audience. The cost to launch on a larger scale can be considerable, so best to make sure you have benefited from consumer feedback while also reducing any uncertainties.”

Joanne Jiang, founder, LadyMarry, an app that guides engaged couples through the wedding planning process through an easy-to-use interface.

“For service-based businesses, it can be tempting to say yes to every project and client that comes along, even if you are too busy to handle everything.  But one bad client can make you miserable or even hurt your business. Say no to the projects that are not a good fit for you so that you have more space to say yes to your ideal clients and projects.”

Ann Oleinik, Ann & Kam Photography & Cinema, a husband-and-wife wedding photography and cinematography team based in Chicago.

Image: svetikd

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Self-Employed? Here’s How to Plan for Retirement

Don't forget to include retirement savings in your plan to build a successful business.

When you’re hard at work as a self-employed entrepreneur or freelancer, retirement can seem like something that’s miles away. It can not only feel less important than getting your business or trade off the ground, but also seem like you won’t have spare money to set aside for a good, long time. You can save for your future, however. Here are some steps self-employed individuals can take to plan for their retirement.

1. Enroll in a Retirement Plan

Yes, there are retirement plan options out there for self-employed people like you. These include:

One-Participant 401K Plan: The one-participant or “solo” 401K is essentially the same as a traditional 401K designed to cover a business owner with no employees. (Note: You can hire your spouse and include them in this plan as well.) According to the IRS, you can contribute elective deferrals up to 100% of your earned income and employer non-elective contributions (determined by a special computation). Contributions are made pre-tax (you’ll be taxed when you withdraw the money, which you typically can’t do without a penalty until age 59½) and give you great flexibility in how much (or how little) you contribute. The contribution limits for 2017 are $18,000 and 25% of compensation up to the amount that’s defined in your plan, respectively, according to the IRS.

Traditional Individual Retirement Account (IRA): Many self-employed people can see immediate rewards from contributing to a traditional IRA, as these are tax-deductible in certain situations, giving you an immediate break on your taxable income. For example, if your income is $60,000, and you contribute $4,000 to a traditional IRA, you’ll only be taxed on $56,000 for that year. Keep in mind, however, that you’ll have to pay taxes when withdrawing the money and tax penalties can arise if you withdraw your retirement dollars early.

Simplified Employee Pension (SEP) IRA: To set this plan up, you simply fill out a form — no annual reporting to the IRS is required. The IRS notes that you can open a SEP IRA through your bank or other financial institution and can contribute up to 25% of your net earnings from self-employment. This type of plan is generally best if your business has no employees, or very few, because you have to include all employees in the plan — and everyone has to receive the same amount, which can get pricey if you have a lot of people working for you.

Savings Incentive Match Plan for Employees (SIMPLE) IRA: Per the IRS, a SIMPLE IRA plan is best suited as a start-up retirement savings plan for small employers. Under this plan, both employees and employers can contribute to traditional IRAs.

You can read more about the retirement plan options available to self-employed individuals on the IRS’s website and check out our glossary of common retirement terms you’ll want to know.

2. Budget By Percentages, Not Dollars

As a self-employed person, your income likely fluctuates from month to month, meaning you can’t budget the same way that a non-self-employed person would. It can help to think about budgeting for non-fixed expenses in percentages, instead of dollars, personal finance expert AJ Smith suggested in a blog post on Credit.com.

“If, for example, you want to save for retirement, try putting aside a certain percentage of your income rather than a certain dollar amount,” Smith wrote. “A dollar amount can lead you to save too little in high-income months and more than you can realistically afford in low-income ones.”

3. Be Vigilant About Your Taxes

Paying taxes can be a lot more complicated when you’re self-employed. For instance, throughout the year, you’ll have to estimate how much you owe for Medicare, Social Security and income tax and pay it in quarterly installments — and face penalties if you do so incorrectly. Plus, you’ll have to a pay a self-employment (SE) tax, which is essentially a combination of the Social Security and Medicare tax.

It’s important to properly work your tax payments into your budget, so you don’t wind up spending dollars you don’t really have. You may also want to consult with a tax accountant or other financial expert about your taxes, so you don’t miss out on important deductions or credits that could drive more money to your bottom line — and subsequently your retirement plans.

4. Stay on Top of Your Credit

Similarly, you’ll want to monitor your credit scores to make sure they’re in good shape and that you don’t wind up paying extra in interest on personal and business financing. Those dollars can severely hamper your ability to save for your eventual happy golden years. (You can see how your credit is doing by getting two free credit scores every 14 days on Credit.com.)

Remember, too, many business lines of credit require a personal guarantee, meaning you’ll be personally liable for any debts your business has that go unpaid. As such, you’ll want to carefully consider all loans you’re thinking of taking on to finance your business. Overextending yourself can make it harder to save not just for retirement, but also for future bills and/or emergencies that may come your way.

Image: julief514 

The post Self-Employed? Here’s How to Plan for Retirement appeared first on Credit.com.

The Wackiest Things Small Business Owners Try to Deduct

tax_deductions

As a small business owner, you want to take every legal tax deduction you can to lower your tax bill. But lingerie? A petting zoo? Daily breakfast eaten at your desk? As it turns out, one of those three items passed IRS scrutiny, proving that what’s crazy for one business to try to deduct could turn out to be fine for another.

Firearms was a popular response mentioned by several experts asked to share some of the unique items for which they’ve seen business owners try to get a tax break.

“A client tried to deduct the cost of a shotgun,” says Steven J. Weil, Ph.D., EA, president and partner of Fort Lauderdale firm RMS Accounting. “The reason given was, ‘I am a pharmacist and I need to protect myself in case someone wants to break into my house looking for drugs’.”

Another small business owner tried to deduct the cost of a concealed weapons permit class because they claimed it would allow them to “protect their office,” says Jeffrey Beebe, a CPA in Boise, Idaho. The problem? “They didn’t do anything that represented any kind of special risk,” he says.

And Thomas J. Williams, a tax accountant who operates Your Small Biz Accountant, LLC, said a client thought their “concealed weapon and permit would be deductible since it would be used for security purposes at the office.” He had to point out to the client that for an item to be deductible, it “must meet the necessary and ordinary test for the industry type. The client did not keep cash on site, nor were they located in an overly crime-ridden area; a general sense of feeling safer by owning a gun would not qualify as reasonable business expense.”

Off the Wall … But Deductible?

“A purchase from SexyHighHeels.com,” says Donna Merrill, business coach, tax expert and founder of Business Untangled, describing surprising items her clients have tried to write off. That purchase turned out to be a personal gift, purchased on a business credit card (another no-no). It didn’t fly. But two other unusual ones did:

  • A petting zoo for a direct sales home-based business. “Positioned strategically on the tax return with very visible notes to be seen upfront, this deduction continued to be accepted by the IRS for numerous years,” she says.
  • A Playboy subscription. “This expense was actually put through the scrutiny of an audit,” says Merrill. “It was a legitimate expense for the taxpayer, who was a photographer who did boudoir photography.”

“Clothing and shoes” are the ones that top the list of creative deductions Andrew G. Poulos, principal of Atlanta-based Poulos Accounting & Consulting, Inc., sees clients try to take. “Other crazy deductions I have seen include expensive gifts to their spouse, which include jewelry, lavish trips and even lingerie as a ‘gift.’ ”

Meals and entertainment deductions can trigger an audit if the business owner isn’t careful. “In my experience, the most abused expense is meals and entertainment,” according to Williams. “Clients are under the wrong impression that it’s a free for all. I once had a client try to deduct their daily breakfast because he happened to be speaking on the phone with a customer or sitting at his desk completing paperwork.”

Folasade Ayegbusi, founder of Accountingwithfolasade.com, says she’s seen a business owner try to deduct the occasional “alcohol run” under meals and entertainment. “Now, if the doctor prescribed you alcohol, then yes, we can deduct it,” she says.

Is Fido Deductible?

Pets can be expensive, and no doubt a tax deduction to lessen the burden would be nice. Some entrepreneurs do try. One of Weil’s clients, for example, tried to deduct the cost of their dog saying, “He is the company mascot, and we provide medical coverage for our employees.”

Joshua Zimmelman, owner of Westwood Tax & Consulting, says he’s had clients try to deduct vet bills and the cost of pet food by claiming their dogs were doing double duty as “guard dogs.” Beebe also had a client who tried to deduct the cost of their pet German Shepherd by claiming it was a guard dog.

Hobby or Business?

“People try to wrap their hobbies — from a kid’s soccer team to auto racing — into their business,” says Crystal Stranger, EA and president of 1st Tax. “It’s a thin line often between what does and does not fly when it comes to making something personal be business-related by calling it advertising or marketing,” she warns.

One test: Is it highly related to your business? She gives this example: “If you have a steer-roping team and run a business that builds saddles for steer roping, then the activities of competing your team and traveling to events are likely to be fully deductible. Whereas if your business is insurance, you will have a harder time connecting that to being a profit center.”

Vacations & Beach Homes

Personal vacations disguised as a business trip are another potential tax trap, warns Avo Asdourian, EA and founder of VirtualTaxAccountant.com. “If the deduction is for a convention and you are audited, the IRS will require the conference name and supporting registration documents, and proof that you attended the conference at least eight hours a day,” he explains. He adds, “If you call your vacation a business meeting, then you need to provide the people you met with and a synopsis of the business meeting and the outcome of the business meeting.”

One of Beebe’s clients tried to deduct a $600,000 catamaran used to entertain clients once or twice a year. Another hoped to get a tax break by claiming a deduction for a cabin deep in the woods, as well as the snowmobiles used to get there in the winter, because it was used occasionally to entertain clients.

Clients have tried to come up with “elaborate schemes” involving ”foreign companies owning nice houses on even nicer beaches,” says Austin Carlson, a CPA and associate at Gray Reed & McGraw. His answer is “not deductible,” he says.

Protect Yourself

For an expense to be deductible, the IRS says “it must be be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.” But in many cases, business owners attempt to deduct a purely personal expense, says Williams.

As seen from the example of the Playboy subscription, some unconventional purchases may be deductible in the right circumstances. Make sure you keep good records and consider working with a qualified tax professional with experience helping small business owners.

But beware tax preparers who promise big deductions before reviewing your situation. “Don’t use anyone who suggests that you hide income or take write-offs you know you aren’t entitled to — this is a tip-off that the preparer is shady,” warns Asdourian. “If the IRS catches the preparer, all the preparer’s clients may come under audit.” Conversely, the wrong preparer could mean you miss out on deductions you are entitled to take.

Just remember the consequences if you come under the microscope of the IRS. The agency could put a lien on your business, which can have a major negative impact on your personal credit (if you’re a sole proprietor) and your business credit scores.

“There are always opportunities to plan legally within the law,” says Carlson, “but if it sounds too good to be true, it’s probably a one-way ticket to a massive IRS headache.”

Image: filadendron

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4 Tips for Entrepreneurs Worried About Trump Immigration Policies

The Obama administration took steps to help foreign entrepreneurs stay in the United States but will the Trump immigration policy changes alter that?

When Mike Galarza first heard what then-candidate Donald Trump had to say about building a wall between the United States and Mexico, deporting illegal immigrants and possibly limiting legal immigration, he was stunned. As an immigrant from Mexico, the issue was personal, but as an entrepreneur and business owner, he worried it could also impact his bottom line.

“It’s a bad representation of American culture and it’s totally the opposite of what I’ve seen and my reality here in the U.S.,” Galarza, the founder and CEO of of billing automation startup Entryless, and one of Business Insider’s “Badass Immigrants in Technology,” said. “I think it’s a very divisive rhetoric that goes beyond the Mexican people … so my first reaction was ‘he is not what America is, not what America stands for.’”

Galarza has beefed up his visa and is actively pursuing a green card. And in light of Trump’s executive order Wednesday that directs funds to build a border wall and curtail some immigration, Galarza is waiting to see whether it could signal that documented immigrants may have a harder time doing business in the United States over the next several years.

The White House declined to comment on how new immigration policies might impact current visa holders or future visa applicants.

What to Watch for 

What will be most telling, according to Susan J. Cohen, founder and chair of the immigration practice at law firm Mintz Levin in Boston, is what the administration does with a ruling by the Department of Homeland Security in the waning days of the Obama Administration. The International Entrepreneur Rule has been frozen pro forma along with most pending rulings and edicts across most federal government departments as the new administration reviews them.

Galarza

Mike Galarza beefed up his visa ahead of potential immigration policy changes. Photo courtesy of Mike Galarza.

“I think what happens with that rule will at least provide some insight into how some of the other aspects of immigration may go in this administration,” Cohen said.

The rule, set to take effect July 17 if it isn’t altered by the new administration, provides for a “parole” period for foreign entrepreneurs, granting them 2.5 years in the United States to establish and grow a startup. They would, of course, need to qualify for that time, including having $250,000 in funding and being able to demonstrate the potential for “significant public benefit.” After the parole period, the applicant would be able to apply for a 2.5 year extension as long as the startup meets additional benchmarks.

“Right now, I think we’re just in wait-and-see mode with respect to the skilled worker population who have extraordinary talents that they would like to bring to the United States,” Cohen said.

Waiting and seeing is exactly what Galarza, who grew up in San Luis Potosi, Mexico, is doing. Last October, he wrote about his concerns for the future of his company and himself in the United States in a blog post on inDinero.com.

When I founded Entryless, I faced—and continue to face—unique challenges because of my immigrant status. I came to the U.S. from Mexico in 2009 on a travel Visa, which allowed me to work for an employer but not for myself. This required me to build Entryless from the ground up in my spare time—and by spare time, I mean at night when I should’ve been sleeping … It was worth every sleepless night. I now have an E2 Visa, and even though I have to return to the U.S. Embassy in Mexico each year to renew it, Entryless is established and growing. However, my next renewal is not a slam dunk — especially if the next administration adopts isolationist policies.

Since then, Galarza decided it was as good a time as any to beef up his visa. He recently upgraded to an EB1 visa, also known as an Outstanding Researcher or Professor visa. It renews every 10 years, which he says gives him some comfort now that Trump is in office. He also is actively working on getting his green card.

Reviewing visa options and starting the green card process are both good steps for immigrant entrepreneurs regardless of whether they are just setting up a business or, like Galarza, have been established for some time, according to Cohen.

Here are four things immigrant entrepreneurs can do right now to help ensure their business succeeds in the United States going forward.

1. Talk to an Immigration Attorney

“It’s important to meet with a competent professional who can help each person explore all possible options and leave no stone unturned to try to figure out a solution that will allow the individual to hopefully remain in a secure immigration status in the U.S. if that’s what they want to do,“ Cohen said.

Depending on your immigration status, that process could mean looking at which visa fits your situation best, looking at a different kind of visa that provides a little more security like Galarza did; it could mean seeking green card status or even applying for citizenship, Cohen said.

2. Breathe

Nothing is going to change right away, Cohen said. There are few unilateral changes that the new president can make (The North American Free Trade Agreement’s (NAFTA’s) TN-1 visas excluded. They would disappear if the United States withdraws from NAFTA). Most immigration reform, including changes to visa requirements, and even changes to how visas are vetted will take time.

“Things are going to take a considerable period of time before they get changed,” Cohen said. “There are a lot of things that can’t be changed without Congress.”

3. Focus on Your Business

“Get customers,” Galarza said. “That’s the first thing, because if you have that really nothing can stop you, because there’s a need for your product and people that rely on it and it becomes critical to them and their existence and there’s this chain that gets created. Based on that … you can prove to the American immigration system that you’ve earned your right to stay in this country and to get funding to grow your business faster.”

4. Create Your Own Funding

If you’re just starting your business or are at a point where you are ready to expand but can’t secure venture capital or small business loans, credit cards can help you get through short-term cash flow issues, even if your credit isn’t stellar or you don’t have a credit history.

In fact, using a credit card for your business expenses can even help you establish and improve your credit standing. Keep in mind, however, that you can go overboard. It’s possible to have too many credit cards, which can lead to too much debt, missed payments because you can’t keep up with the due dates and other issues.

Image: BasSlabbers

The post 4 Tips for Entrepreneurs Worried About Trump Immigration Policies appeared first on Credit.com.

5 Annoying Fees Lurking in the Fine Print of a Business Loan

business_loan_fees

Taking out a loan is often a necessary action for owners looking to grow a successful business. However, many business owners engaging in the loan hunt don’t realize there are a variety of underlying fees and charges rolled into the final loan, which is why it’s important to get out that magnifying glass and read the business loan small print.

Loans advertised with an annual percentage rate (APR) should give you the total cost of the loan, including the interest rate and other standard fees. However, if the loan is only advertised with an interest rate, or other rate specified by a lender, you’ll likely encounter additional costs. Understanding these extras can help you compare offers from lender to lender; it may also help you vie for a lower loan rate.

Some of these fees are non-negotiable and simply part of the loan agreement. Some of these won’t be included in an APR but will still affect your costs. In any case, it’s important to watch out for these business loan fees before you sign on the dotted line.

1. Origination Fee

This fee is pretty common and is meant to recoup the labor that goes into things like paperwork, verifications, underwriting and any other processes required for the lender to approve your loan and get the money in your hands.

Origination fees are typically charged upfront, with the amount subtracted from your loan before it’s disbursed. These fees are commonly between 1% to 4% of your total loan amount, which might not sound like much but can eat into your capital, big time.

The good news is that in some cases this fee is negotiable. If you have good credit or multiple lenders competing for your business, you’ll likely have more leverage to reduce the fee.

2. Third-Party Fees

Depending on your loan purpose (commercial real estate, for example), you may find fees from third parties — such as appraisers and notaries, as well as for documentation requirements — added to your business loan fees.

Talk to your lender and ask which, if any, of these fees may be included. Due to the nature of these fees, there is no set rate amount, but it’s likely at least some of them can be negotiated or reduced.

Ultimately, these may not seem significant at the time of signing. However, they’re either deducted from your loan or added to your total loan amount, and therefore can increase your costs.

3. Prepayment Penalties

Paying off your loan early might seem appealing, but for lenders, that leads to a potential loss in the interest they anticipated receiving when they disbursed your loan. For that reason, some lenders protect themselves against this loss by charging the borrower a percentage or flat fee if the borrower attempts to pay the loan off early.

The fee varies from lender to lender, but it’s something you should determine early in the application process. It’s likely that once you sign, you’re locked in to whatever repayment or redemption charge was listed in the business loan small print, so your best bet at catching this fee is to inquire upfront and read any and all documentation. Note that because you only incur this fee if you prepay a loan that carries this penalty, an advertised APR typically wouldn’t reflect this cost.

4. Check Processing Fee

Some businesses and lenders may incentivize you to have your loan payments automatically deducted from your account, but others take a different path and will penalize you for not doing so.

Much like the prepayment fee, this will vary in structure and cost, and will not be reflected in an advertised APR. If you prefer to pay by check, ask your lender what, if any, payment-processing fees exist.

5. Guarantee Fee

Loans backed by the Small Business Administration (SBA) will be subject to a guarantee fee, meaning a fee that is charged to the lending bank to guarantee that they’ll recoup some of the cost if the borrower defaults. It’s likely that the bank will pass a portion of the cost along to you, but the amount passed on from the lender to the borrower may vary, according to the SBA website. SBA loans under $150,000 are not subject to this particular fee.

The rate is based on the maturity and the guaranteed loan amount: For loans greater than $150,000 with a maturity of one year or shorter, the fee is 0.25% of the guaranteed amount. Loans between $150,000 and $700,000 with a maturity of over one year are subject to a 3% guarantee fee, and loans exceeding $700,000 have a 3.5% guarantee fee. The good news is that even though interest and fees are determined by the lender, SBA backed loan rates may not exceed the maximums set by the SBA. All of this can be a little difficult to figure out on your own, so be sure to ask your lender for an explanation of how your fee is calculated.

Ultimately, the burden is on the borrower to find out what fees they’ll have to pay, and as such, be sure to read all business loan small print, ask questions, and demand explanations for any fee. If you aren’t sure whether a fee is normal or if you can negotiate it, do your research. In the worst-case scenario, they simply can’t adjust the fees. However, empowering yourself with this information can help you negotiate lower rates and make the best decision if choosing between multiple lenders.

[Editor’s note: Lenders may review your personal credit standing when reviewing your application for a business loan. To get an idea of what they’re looking at and if your credit needs improvement, you can get a free snapshot of your credit report every 14 days on Credit.com.]

Image: mavoimages

The post 5 Annoying Fees Lurking in the Fine Print of a Business Loan appeared first on Credit.com.

5 Annoying Fees Lurking in the Fine Print of a Business Loan

business_loan_fees

Taking out a loan is often a necessary action for owners looking to grow a successful business. However, many business owners engaging in the loan hunt don’t realize there are a variety of underlying fees and charges rolled into the final loan, which is why it’s important to get out that magnifying glass and read the business loan small print.

Loans advertised with an annual percentage rate (APR) should give you the total cost of the loan, including the interest rate and other standard fees. However, if the loan is only advertised with an interest rate, or other rate specified by a lender, you’ll likely encounter additional costs. Understanding these extras can help you compare offers from lender to lender; it may also help you vie for a lower loan rate.

Some of these fees are non-negotiable and simply part of the loan agreement. Some of these won’t be included in an APR but will still affect your costs. In any case, it’s important to watch out for these business loan fees before you sign on the dotted line.

1. Origination Fee

This fee is pretty common and is meant to recoup the labor that goes into things like paperwork, verifications, underwriting and any other processes required for the lender to approve your loan and get the money in your hands.

Origination fees are typically charged upfront, with the amount subtracted from your loan before it’s disbursed. These fees are commonly between 1% to 4% of your total loan amount, which might not sound like much but can eat into your capital, big time.

The good news is that in some cases this fee is negotiable. If you have good credit or multiple lenders competing for your business, you’ll likely have more leverage to reduce the fee.

2. Third-Party Fees

Depending on your loan purpose (commercial real estate, for example), you may find fees from third parties — such as appraisers and notaries, as well as for documentation requirements — added to your business loan fees.

Talk to your lender and ask which, if any, of these fees may be included. Due to the nature of these fees, there is no set rate amount, but it’s likely at least some of them can be negotiated or reduced.

Ultimately, these may not seem significant at the time of signing. However, they’re either deducted from your loan or added to your total loan amount, and therefore can increase your costs.

3. Prepayment Penalties

Paying off your loan early might seem appealing, but for lenders, that leads to a potential loss in the interest they anticipated receiving when they disbursed your loan. For that reason, some lenders protect themselves against this loss by charging the borrower a percentage or flat fee if the borrower attempts to pay the loan off early.

The fee varies from lender to lender, but it’s something you should determine early in the application process. It’s likely that once you sign, you’re locked in to whatever repayment or redemption charge was listed in the business loan small print, so your best bet at catching this fee is to inquire upfront and read any and all documentation. Note that because you only incur this fee if you prepay a loan that carries this penalty, an advertised APR typically wouldn’t reflect this cost.

4. Check Processing Fee

Some businesses and lenders may incentivize you to have your loan payments automatically deducted from your account, but others take a different path and will penalize you for not doing so.

Much like the prepayment fee, this will vary in structure and cost, and will not be reflected in an advertised APR. If you prefer to pay by check, ask your lender what, if any, payment-processing fees exist.

5. Guarantee Fee

Loans backed by the Small Business Administration (SBA) will be subject to a guarantee fee, meaning a fee that is charged to the lending bank to guarantee that they’ll recoup some of the cost if the borrower defaults. It’s likely that the bank will pass a portion of the cost along to you, but the amount passed on from the lender to the borrower may vary, according to the SBA website. SBA loans under $150,000 are not subject to this particular fee.

The rate is based on the maturity and the guaranteed loan amount: For loans greater than $150,000 with a maturity of one year or shorter, the fee is 0.25% of the guaranteed amount. Loans between $150,000 and $700,000 with a maturity of over one year are subject to a 3% guarantee fee, and loans exceeding $700,000 have a 3.5% guarantee fee. The good news is that even though interest and fees are determined by the lender, SBA backed loan rates may not exceed the maximums set by the SBA. All of this can be a little difficult to figure out on your own, so be sure to ask your lender for an explanation of how your fee is calculated.

Ultimately, the burden is on the borrower to find out what fees they’ll have to pay, and as such, be sure to read all business loan small print, ask questions, and demand explanations for any fee. If you aren’t sure whether a fee is normal or if you can negotiate it, do your research. In the worst-case scenario, they simply can’t adjust the fees. However, empowering yourself with this information can help you negotiate lower rates and make the best decision if choosing between multiple lenders.

[Editor’s note: Lenders may review your personal credit standing when reviewing your application for a business loan. To get an idea of what they’re looking at and if your credit needs improvement, you can get a free snapshot of your credit report every 14 days on Credit.com.]

Image: mavoimages

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5 Annoying Fees Lurking in the Fine Print of a Business Loan

business_loan_fees

Taking out a loan is often a necessary action for owners looking to grow a successful business. However, many business owners engaging in the loan hunt don’t realize there are a variety of underlying fees and charges rolled into the final loan, which is why it’s important to get out that magnifying glass and read the business loan small print.

Loans advertised with an annual percentage rate (APR) should give you the total cost of the loan, including the interest rate and other standard fees. However, if the loan is only advertised with an interest rate, or other rate specified by a lender, you’ll likely encounter additional costs. Understanding these extras can help you compare offers from lender to lender; it may also help you vie for a lower loan rate.

Some of these fees are non-negotiable and simply part of the loan agreement. Some of these won’t be included in an APR but will still affect your costs. In any case, it’s important to watch out for these business loan fees before you sign on the dotted line.

1. Origination Fee

This fee is pretty common and is meant to recoup the labor that goes into things like paperwork, verifications, underwriting and any other processes required for the lender to approve your loan and get the money in your hands.

Origination fees are typically charged upfront, with the amount subtracted from your loan before it’s disbursed. These fees are commonly between 1% to 4% of your total loan amount, which might not sound like much but can eat into your capital, big time.

The good news is that in some cases this fee is negotiable. If you have good credit or multiple lenders competing for your business, you’ll likely have more leverage to reduce the fee.

2. Third-Party Fees

Depending on your loan purpose (commercial real estate, for example), you may find fees from third parties — such as appraisers and notaries, as well as for documentation requirements — added to your business loan fees.

Talk to your lender and ask which, if any, of these fees may be included. Due to the nature of these fees, there is no set rate amount, but it’s likely at least some of them can be negotiated or reduced.

Ultimately, these may not seem significant at the time of signing. However, they’re either deducted from your loan or added to your total loan amount, and therefore can increase your costs.

3. Prepayment Penalties

Paying off your loan early might seem appealing, but for lenders, that leads to a potential loss in the interest they anticipated receiving when they disbursed your loan. For that reason, some lenders protect themselves against this loss by charging the borrower a percentage or flat fee if the borrower attempts to pay the loan off early.

The fee varies from lender to lender, but it’s something you should determine early in the application process. It’s likely that once you sign, you’re locked in to whatever repayment or redemption charge was listed in the business loan small print, so your best bet at catching this fee is to inquire upfront and read any and all documentation. Note that because you only incur this fee if you prepay a loan that carries this penalty, an advertised APR typically wouldn’t reflect this cost.

4. Check Processing Fee

Some businesses and lenders may incentivize you to have your loan payments automatically deducted from your account, but others take a different path and will penalize you for not doing so.

Much like the prepayment fee, this will vary in structure and cost, and will not be reflected in an advertised APR. If you prefer to pay by check, ask your lender what, if any, payment-processing fees exist.

5. Guarantee Fee

Loans backed by the Small Business Administration (SBA) will be subject to a guarantee fee, meaning a fee that is charged to the lending bank to guarantee that they’ll recoup some of the cost if the borrower defaults. It’s likely that the bank will pass a portion of the cost along to you, but the amount passed on from the lender to the borrower may vary, according to the SBA website. SBA loans under $150,000 are not subject to this particular fee.

The rate is based on the maturity and the guaranteed loan amount: For loans greater than $150,000 with a maturity of one year or shorter, the fee is 0.25% of the guaranteed amount. Loans between $150,000 and $700,000 with a maturity of over one year are subject to a 3% guarantee fee, and loans exceeding $700,000 have a 3.5% guarantee fee. The good news is that even though interest and fees are determined by the lender, SBA backed loan rates may not exceed the maximums set by the SBA. All of this can be a little difficult to figure out on your own, so be sure to ask your lender for an explanation of how your fee is calculated.

Ultimately, the burden is on the borrower to find out what fees they’ll have to pay, and as such, be sure to read all business loan small print, ask questions, and demand explanations for any fee. If you aren’t sure whether a fee is normal or if you can negotiate it, do your research. In the worst-case scenario, they simply can’t adjust the fees. However, empowering yourself with this information can help you negotiate lower rates and make the best decision if choosing between multiple lenders.

[Editor’s note: Lenders may review your personal credit standing when reviewing your application for a business loan. To get an idea of what they’re looking at and if your credit needs improvement, you can get a free snapshot of your credit report every 14 days on Credit.com.]

Image: mavoimages

The post 5 Annoying Fees Lurking in the Fine Print of a Business Loan appeared first on Credit.com.

5 Easy Ways to Start Making More Money

how-to-make-more-money

If you’re self-employed or your pay depends on your productivity, it’s important to consider how you’re currently planning your day and what you should do differently.

Having freedom in your schedule is a beautiful thing, but it can also be a double-edged sword. On the one hand, you have superior flexibility. On the other, you have a lot of planning to do — and that can be simply overwhelming. Many financial advisers like myself have to juggle marketing, administrative work, portfolio management, client meetings and more.

I reached out to a few to get their tips on how they plan their day to make the money – and I included a few of my own. Financial adviser or not, you’re sure to benefit from their advice.

1. Choose Your Top Three Most Important Tasks

Grant Bledsoe, CFA, CFP(R), a Portland financial planner and blogger at AbovetheCanopy.us, says, “I try to list out my top three most important to-dos the night before. That way, when I get to the office in the morning, I can refer to my list and get right to work. If I don’t, I’ll waste time on emails, ESPN and surfing the web.”

He adds, “I also try to limit the list to no more than three tasks. I’m far less likely to finish longer to-do lists, and the sense of accomplishment I get when it’s done helps keep me motivated.”

There seem to be two main takeaways from Bledsoe’s advice: Focus on a few of the most important tasks and do so early in the day.

2. Categorize Your Tasks to Achieve Balance

Peter Huminski, AWMA, a wealth adviser in North Carolina and blogger at ThoriumWealth.com/blog, says, “I try to block out at least 90 minutes everyday to work on prospecting for new clients. Sometimes it’s in the morning, and other times it’s in the afternoon, but I try to move a relationship closer to becoming a client during that block of time.”

Here, Huminski points out that prospecting is an important part of earning more money. It’s true that one can get caught up in the administrative tasks so much that they forget to think about the future of their business.

He adds, “I also break my daily tasks list into business development or administrative. For every administrative task I do, I will do one off the business development list. This gives me balance between the two most important parts of my business or any business.”

Labelling your tasks and making sure to work on each category equally, assuming they are both important, will help you focus on the present and the future of your business.

While you’re at it, make sure to look for some ways to save money. This is an important part of the future of your business. If you can cut some expenses, you’ll save a lot over the long-term and have more money to put to better use.

3. Don’t Forget Creativity & Good Customer Service

Joe Carbone, Jr., CFP(R), a wealth adviser and blogger at WealthManagementfortheRealWorld.com, says, “I use my morning as my creative time. I use this time to work on new marketing ideas, different investment strategies, reach out to prospects, etc.”

If your creativity peaks in the morning, you may want to use that time for your most creative activities. While you may or may not define these activities as your most important, creativity is a critical ingredient in making more money.

Carbone goes on to say “I also make sure my current clients are being treated with the utmost care and customer service throughout the day. They are the lifeline of my practice. What good is attracting new prospects and clients if my retention is 70%? Not to mention I would be failing them on my promise to take care of their financial world.”

Improving your customer service is a great way to increase your chances of making more money. People want to be taken care of, and if you don’t take care of them, they’ll probably look for service elsewhere.

4. Focus on Things That Allow You to Make Money Quickly

Yes, there is such a thing as a quick buck. It’s not always the best route to take, especially over the long-term, but it will help you get out of a bind. Look at some ways to make money fast and do try them in your spare time or try one early in the day. Whether you’re looking to raise some money to put toward advertising or buying new equipment you need to run a better business, there’s always an idea or two that will work.

5. Delegate Tasks

There are probably a few key tasks you do to make your money, and you’re good at them. There might also be several other tasks you do that have to get done but don’t really result in more money. Consider the second type of tasks. Are any of these the kind you can delegate to others? Perhaps you need some content edited. Instead of doing that yourself, find an editor to help you out. Maybe you need some web design. Again, delegate that to someone who can get the job done.

It can be a little scary to delegate tasks to others, especially if you’re new to it. You don’t have to dive in head first. Instead, pick one or two tasks that don’t require a lot of responsibility, and offload those to other people.

Final Thoughts

If you’re not used to planning your day before you begin, it may take some time to get the hang of it. Going from putting out fires to organized, efficient money-making isn’t something you learn overnight. Consider taking the tips from this article and try them out. (You can monitor your financial goals, like building a good credit score, each month on Credit.com.)

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