A Helping Hand: 3 Key Things to Remember About the Government’s Coronavirus Aid Package

StrategyDriven Managing Your Finances Article |Coronavirus Aid Package|A Helping Hand: 3 Key Things to Remember About the Government’s Coronavirus Aid PackageThe Coronavirus aid package, known formally as the CARES act, was passed by the American government in an effort to help alleviate the economic impacts of the COVID-19 pandemic on small business owners and families. With all of the economic uncertainty caused by the pandemic, families and individuals should seriously consider taking advantage of all available resources to avoid long-term personal and professional consequences. Get started by reading on to find out about three of the most important things about the coronavirus aid package.

Small Businesses Can Get Low-Interest Loans

The CARES act makes provisions for the Small Business Administration (SBA) to provide cash-flow assistance to businesses with fewer than 500 employees in the form of low-interest loans. These loans are provided by banks, but they’re guaranteed by the SBA. To get a loan, businesses must meet eligibility criteria, find an approved SBA 7(a) lender, and apply for the program before funding runs out. The best way to get started is to find information online at about CARES act loan consulting for small business owners.

The loans provided through the CARES act Paycheck Protection Program are specifically designed to help small businesses weather the storm of COVID-19. They can be used to cover things like payroll costs, paid sick leave, health insurance premiums, mortgage payments, and more. Eligible borrowers include not just small businesses, but also 501(c)(3) tax-exempt non-profits, registered veterans organizations, sole proprietors, tribal businesses, independent contractors, and the self-employed.

Coronavirus Relief Loans Are Partially Forgivable

When the loans are used to pay employee wages after businesses are partially or fully suspended or gross income declines by more than 50% in comparison to last year, the loans are partially forgivable. Eligible businesses with less than 100 full-time employees can get partial loan forgiveness regardless of whether they have been subject to shut-down orders.

If borrowers follow all the regulations laid out in the CARES act for how the loans can be used, they will be eligible for forgiveness of the money spent not just on payroll costs, but also rent, utilities, interest payments, and mortgages taken out before February 15, 2020. Since the SBA is guaranteeing the loans through private lenders, it is up to the discretion of the lender to determine forgiveness. The timeframe for forgiveness by lenders is currently 60 days from the borrower’s request.

Borrowers must provide documentation of how the money was spent to prove that the loan was used for approved purposes. This documentation must verify how many full-time equivalent employees are on the company’s payroll, how much they were paid, and how much the business spent on mortgage or lease obligations, utility payments, or other debt obligations. Lenders can request additional documentation if they deem it necessary to verify that the borrower’s expenses qualify for loan forgiveness.

Businesses that lay off employees or reduce their wages during the covered period of eight weeks from the time of taking out the loan will have the amount of forgiveness reduced. Employers who reduced payroll or employee headcounts between February 15 and April 26 can reinstate their former employee payrolls by June 30 to restore their ability to request loan forgiveness.

The CARES act also makes provisions for a refundable payroll tax credit. Employers who keep their workers on the payroll even if they can’t work full-time, or at all, can expect the program to cover 50% of their wages during the COVID-19 crisis. The credit will cover wages paid from March 13 to December 31 of this year up to $10,000 per eligible employee.

Student Loan Borrowers Get a Reprieve

Business owners aren’t the only ones who have benefited from the CARES act. In addition to the paycheck protection program, it also stipulates that student loan borrowers will not have to make payments on the federal loans until September 30. During this relief period, student loan payments will be fully deferred, and no interest will be accrued on the accounts.

There’s even more good news for borrowers whose loans are in rehabilitation. For every month that the loans are suspended due to the COVID-19 pandemic, the suspended payment will count as if the borrower had made the payment. This avoids disruptions to former students’ loan forgiveness obligations and reduces the burden on borrowers who are rehabilitating their federal student loans.

Borrowers with eligible student loans don’t have to do anything to take advantage of this program. They can simply stop paying their loans without incurring any fees or additional interest. Those who choose to continue paying their loans will also benefit since 100% of the payments will go to paying down their principal balances during this time.

Borrowers who have defaulted on their student loans will not have their wages garnished during the relief period. If they have experienced wage garnishments since March 13, borrowers can contact their employers to request that any funds sent to the Department of Education during this time be returned. Borrowers whose 2019 tax refunds or Social Security payments were withheld to pay off defaulted student loans can also have their refunds returned provided the process for withholding it was completed after March 13.

The CARES act also makes a provision for employers who pay down student loans as part of their employee benefits packages. These employers can now contribute up to $5,250 through the rest of 2020 tax-free, which benefits both employers and employees.

The Bottom Line

It can be difficult for business owners and consumers to sort out all the provisions of the CARES act by themselves. The best thing for those with questions about eligibility or the application process to do is to contact an accountant who can help them better understand what assistance is available during these trying times. The pandemic has changed everything about life in America and across the world, but it shouldn’t mean that business owners and families wind up suffering needlessly. Don’t be afraid to take advantage of the CARES act provisions for protecting America’s workers, but make sure to consult an expert before taking out an SBA-guaranteed loan to ensure eligibility and clarify requirements.

How To Use Money Wisely For Your Business

StrategyDriven Managing Your Finances Article |Using Money Wisely|How To Use Money Wisely For Your BusinessMoney goes hand in hand when it comes to running a business. For the most part, you need money in order for your company to continue to thrive and to tick along as it may have been doing up until now. However, mistakes can be made when it comes to money, and that’s really not something you want when it comes to your business. So here are some tips for using money wisely and to give you the best opportunities to have a thriving and successful business for years to come.

Be Wary Of Risk Taking

Risks are good to take for your business, but only if you can afford to do so. There are many risks that will come by throughout the course of the company’s existence. Some will be beneficial and work the risk, regardless of whether it pays off or not and some, not so much. It’s good to have a keen eye on which ones look good and then thinking about which ones are going to be the best option for your business at that time. Turning down these risks are going to set you back any more than where you’re at now. Instead, look forward to the opportunity to get that offer again, and perhaps next time you’ll be ready to front the risks. No opportunity is worth losing your business over, so always consider the pros and cons that come with each venture, whatever that might be.

Don’t Hire Too Soon

Hiring is necessary for many businesses to do, some a lot more than others depending on where your business is currently. Every staff member that is hired needs to be bringing something new and substantial, especially when you start creating new roles too. Think about whether your company needs that extra person right now or whether it can be covered by someone who is already within the organization. They might need a pay rise or promotion, but it’s not going to be as expensive as what it would be to hire someone completely brand new and have another responsibility to pay out for as a business. Try to not make rushed decisions when it comes to recruitment because it can often happen, and that ends up being a regret which might end up affecting the financial health of it too.

Get A Loan For Big Expenditures

Loans are a good way to spread the costs of bigger expenditures for your business that maybe you just can’t afford in one go. It might be for something fairly important and an opportunity that is too good or detrimental for your business to miss out on. When getting a loan, you want to make sure you’re picking the right one and that a fast business loan is what you want and can afford to pay back. Remember that this is not your money, and therefore, you need to be careful with how much you’re asking for and how quickly you can pay it back. Loans are good for short-term borrowing, but it’s important to not get tied into something for too long that you start losing more money than you intended through crazy interest rates and hidden fees.

Invest In Quality

Quality is going to save you money because most of the time, it’s not going to let you down. A lack of quality will, and it’s good to remember this when it comes to whatever you buy for the business. Whether it be your manufacturing process and the suppliers you use or the type of workstations you have for your employees. Everything needs to be something you invest your money into because it’ll hopefully avoid you having to pay any of it back in the future. Quality won’t let you down when it’s good, and when it comes to business, you don’t want that to be something that’s happening when it could potentially affect your clients or customers. The lack of quality you have in your business as a whole, the more you’re going to find yourself paying out in the future. When you’re trying to save money, that’s not what you want to be happening.

Outsource Where Possible

Outsourcing is considered to be a popular thing for all businesses to do when they maybe don’t have the space or financials to pay for an extra person to work at the company. At the same time, it’s also good to be able to find an alternative when the task or job that’s required, doesn’t need someone full-time. You might want to consider doing this if you were thinking of hiring someone. It’s a good in-between until you find that you do need them. When outsourcing, make sure you’re doing your research to find the right companies and don’t forget to keep tabs on them. It’s important to make sure that whomever you pick, is someone you can keep up communications with to ensure everything ticks along perfectly.

Do Regular Budget Meetings

Keeping tabs on your money starts with budget meetings. These are worth being quarterly to make sure that you’re keeping up to date with everything that’s changing within the company’s departments. Budgets can change, and although some departments may stick to their budgets, others might not, and so it’s also important sign-off is something you make a thing when it comes to dealing with the finances of the business. That means someone or more than one has to oversee those big expenditures that could cost your business thousands. It’s a safety net worth having so that your accounts team are aware of any big costs that might affect the business for the rest of the financial year.

Using money in your business is something that should always be monitored as your business changes and develops. Focus on regular budget meetings and not making rash decisions when it comes to recruitment or taking risks. Outsource where you can and make sure you’re investing in quality when it comes to your business, in whatever way that might be.

Fund Your Dream Company! How to Get a Business Loan Without Fail

StrategyDriven Starting Your Business Article |how to get a business loan|Fund Your Dream Company! How to Get a Business Loan Without FailNo matter what your reason is for starting your own business, you’ve got to figure out how to fund your business. Unless you’ve got a nice nest egg and are ready to part with it, you probably need to learn how to get a business loan.

Many small businesses take out business loans to get the capital they need to start up their business and even pay for day-to-day expenses. Don’t get overwhelmed with the thought of taking a loan out.

Continue reading this article to learn about getting a loan to help you get your business off the ground and flying.

The Simple Truth About How to Get a Business Loan

Getting small business loans or other types of loan for your business doesn’t have to be daunting. After you read these tips, you can go through the process without worrying.

You don’t want to apply for a loan before the lender will approve your request. The more requests you have on your credit, the more of a risk it makes you look like.

Determine Why Your Business Needs a Loan

Lenders aren’t going to take “because I want it” as a good reason for why they should lend you money.

Before you speak to a lender, you need to have a solid reason why you need this loan. The more specific you can get about the reason why you need the loan for your business, the more likely the loan officer will see your vision for your business.

How Much of a Loan Can You Afford?

You shouldn’t decide to take out a loan for as much as possible. Before applying for the loan, you should know how much of a loan you can afford.

If your business cash flow isn’t enough to cover the loan repayment, your business and you could come into some serious problems. You should check to see when loan repayments are expected.

Some companies require that you repay them every month and others even require that you repay them every two weeks. Make sure to check the terms so you know when your payments are going to be due as well.

Create a Solid Business Plan

When you were going through the reason that you needed the money for your business, you likely had to work on your business plan. The more solid your business plan is, the more comfortable a lender will be with loaning you the money.

Depending on what you need the loan for, the loan may have different terms. Write out what you foresee happening with your business. You shouldn’t leave out any important details or numbers that will back up your plans.

What Is the Current Financial Status of Your Business?

If your business is already in operation, it will be easier to get the loan. When your business is already in operation, you have some proof that you know how to do business.

Before applying for your loan make sure that your credit history is as spotless as possible. Lenders are likely to review your personal credit history and that of your business as well.

If you look at your credit report and see there are errors or old debts that haven’t been deleted, you need to request to have them taken care of right away. If you have derogatory items on your credit report it will either cause the lender to deny you or charge you a much higher interest rate.

Besides for your credit report and score, lenders are also going to look at your business cash flow. If you have a strong cash flow then lenders feel confident that you’ll have the means to pay the business loan back according to the agreed-upon terms.

If your credit history and cash flow aren’t enough to get the loan, you should look into what collateral you have to offer. If you have something that will secure the loan, the lender is more likely to trust you with their money. If you don’t pay the money back then they get whatever it is that you put up for collateral.

Look at Your Lender Options

Don’t let loyalty keep you broke. It is important that you look at multiple lenders and see what kind of rates they will offer you.

Even if you’ve done business with a certain bank for years, you might check with online banks and see if they have better rates. Since online bank’s overheads are lower, it is easier for them to offer lower interest rates to their customers.

Prepare All Necessary Paperwork

Putting all of your necessary paperwork together can take quite a while. Make sure you don’t miss any important forms or your loan may be delayed or denied.

If you’re getting a USDA or an SBA loan then you might need to fill out paperwork for the government as well as for the lender in question.

There may be some differences in the loan application process but generally, you’re going to need to include your business plan, financial statements and also your cash flow information.

You may need to provide further documentation if what you provide is deemed to be less than satisfactory.

Learn More About Business & Leadership

Now that you know how to get a business loan, you’re good to go and ready to launch and/or grow your business. Why stop learning now?

Bookmark your favorite parts of our blog so you can come back for more great reads later.

Is Taking a Small Business Loan Worth It?

StrategyDriven Managing Your Finances Article |Small Business Financing| Is Taking a Small Business Loan Worth ItThe word ‘loan’ doesn’t have a nice ring to it in any sense. Whenever we talk and hear about loans, it usually points towards difficult times and thorny situations. However, business loans can’t be seen through a singular point of view. One has to apply context to commercial loans because oftentimes they are actually tied with business opportunities.

Whenever any entrepreneur starts mulling over the idea of taking a small business loan, he/she has to deal with a wide range of different opinions and suggestions. Some people strongly advocate against loans. By sharing gloomy and sometimes scary anecdotes, they try their best to deter a person from taking business loans.

Then there are people who act as the cheerleaders of loan companies. They only know the benefits of business loans and how they have turned around the fate of many ventures. Lastly, there is a group that takes a cautionary approach. They give an objective overview of taking business loans.

We will recommend you to listen to the last group. It is important to get a precautious take when you are thinking about getting a small business loan i.e. factor in all the upsides and downsides before making the final decision.
Here, we are going to discuss the instances when business loans can be beneficial or detrimental. Go through them and make a decision that suits best your unique business needs.

Instances When It’s Profitable to Take a Business Loan

There are certainly many valid reasons where getting a loan actually helps in growing the business further. Let’s look at all such instances.

Physical Expansion Becomes Imminent

When you don’t have any further space to set up any new cubicle or when you have don’t enough area to accommodate all your customers— these instances actually indicate two things:

  • Your business is booming
  • You need more physical space

However, experiencing business growth doesn’t mean you have enough capital to take on physical expansion. We all know that the commercial real estate market always remains bullish and it’s not easy to get the required space at the desired location with your existing purchasing power.

In such cases, where a business is growing and requires more physical space for streamlined commercials operations, it is better to go for business loans. Persisting with the same congested business premises amid continuous business growth can prove to be counterproductive. You will certainly pay back the loaned money in a few months or years. However, the business growth that you are going to accommodate through physical expansion will pay you dividends for decades.

For Better Credit Prospects

If you have the vision to turn your SME into a large-scale commercial operation, then you are definitely aware of the line of credits and how important they are for the sustenance of big companies. However, it should be kept in mind that financial institutions don’t just dole out lines of credit to everyone.

A business with no lending and credit history can’t apply for a line of credit. There should be an impressive credit record to your business’s name. This can be built by taking smaller business loans and then making on-time regular payments. Besides building a good credit profile, taking small business loans on a regular basis also ensures that you don’t find yourself in a capital drought at any given moment.

Lastly, constantly working through smaller loans also results in building a good affiliation with any specific lender or lending company. This again helps when you apply for bigger loans and line of credits.

For Buying Equipment and Inventory

It’s a no brainer to file for a small business loan when you have to get any equipment or any other business inventory. These tangible items run your business and you can’t ignore them just because you don’t have the required capital at the moment. Let’s try to understand the profitability of a business loan in this context through an example.

Let’s suppose that you need two workstations worth $2,000 for a project that can bring in $3,000 in profits. But at the moment, you don’t have enough money to allocate $2,000 for this purchase. So, what you should do? Pass on the opportunity or take a small business loan to get the required equipment? We would recommend you to go to the latter option.

In the above-mentioned example, even securing a loan on a high interest rate (e.g. 25%) will generate a profit of $500. Moreover, the addition of two workstations to your business assets is a permanent gain that you are going to get. In short, it’s a win-win situation. This is the reason why taking loans for primary equipment and inventory rarely go wrong.

Instances When It’s Risky to Take a Business Loan

There are some instances where you should give a second thought on taking business loans.

If Cash Inflow Is Already Really Thin

Going in debt when your cash inflow is already flickering might not be a good option. Making debt repayments is not easy when you have very limited cash to play with. Any aggravated scenario can also lead to collateral, which is the worst possible thing that can happen to your business. In any tricky situation, it is better to first consult business loan experts. The advice of experts working at this company can come in really handy when you are in two minds regarding applying for a loan amid receding cash inflow.

With a Low Credit Score

For whatever reason, if your business now stands with low credit score, this it might not be a good idea to make things by acquiring a high-interest loan. Low credit score makes it less lucrative for lenders to offer loan offers. So, they compensate for it by increasing the interest rate. Before applying for a small business loan, it would be better if you first work on your business reputation and credit score.

The above discussion makes it clear that applying for small business loans for the right reasons pay dividends. Moreover, it is important to have good business reputations if you are going to incorporate borrowing in your business model.