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4 Ways Small Businesses Can Benefit From the CARES Act

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StrategyDriven Managing Your Finances Article | 4 Ways Small Businesses Can Benefit From the CARES Act

As a business owner, you’re probably always searching for ways to keep your business running smoothly. However, with the ongoing COVID-19 pandemic, it’s not as easy as it used to be. Small businesses have been hit particularly hard, with many struggling to stay afloat. Thankfully, the CARES Act offers several benefits that can help small businesses navigate economic challenges.

Signed into the law in March 2020, the Coronavirus Aid, Relief, and Economic Security Act, or CARES ACT aims to provide economic relief to individuals and businesses impacted by the COVID-19 pandemic. The act includes several provisions that are aimed specifically at helping small businesses.

Small businesses are vital to the US economy. In fact, they account for 99.9% of all enterprises in the United States and employ more than 47% of the private workforce. However, many small businesses are struggling to stay afloat due to the ongoing pandemic. The CARES Act can help ease some financial burdens small businesses face.

If you’re a small business owner, it’s important to understand the benefits of the CARES Act and how you can take advantage of them. To help you get started, the ERC Today has created a CARES Act Eligibility Guide. This guide can help you determine which benefits you’re eligible for and how to apply for them.

In this article, we’ll look at the benefits of the CARES Act for small businesses and how you can use these programs to keep your business afloat during these challenging times.

Paycheck Protection Program       

As a small business owner, navigating the financial impact of the COVID-19 pandemic has likely been a major challenge. Fortunately, the Paycheck Protection Program (PPP) is one part of the CARES Act that can help ease the burden.

PPP was established to help small businesses keep their workforce employed during the COVID-19 crisis. The program provided $349 billion in loans to eligible businesses to cover payroll and other operating expenses to maintain employment levels. Loans can be partially or completely forgiven if firms meet certain criteria.

To be eligible for a PPP loan, your company must have fewer than 500 employees and have been in existence on or before February 15, 2020. Some other eligibility requirements include the following:

  • You must use at least 60% of the loan amount for payroll expenses for full forgiveness.
  • Sole proprietors, self-employed persons, and independent contractors

The Payment Protection Program (PPP) in the CARES Act offers the following benefits:

  • Provides small businesses with forgivable loans to cover payroll and other essential expenses during the COVID-19 pandemic.
  • Allows businesses to keep employees on payroll and avoid layoffs.
  • Offers a streamlined application process with reduced paperwork requirements.
  • Offers loan deferral for up to ten months, with interest rates capped at 1%
  • Provides additional funding for minority-owned and rural businesses through set-asides and dedicated funding.
  • Supports independent contractors, sole proprietors, and self-employed individuals who are eligible for loans based on their payroll costs or net income.

Economic Injury Disaster Loans (EIDL)

The EIDL program offers loans of up to $2 million to eligible small businesses and non-profit organizations affected by a disaster, including the COVID-19 pandemic. These loans are intended to cover operating expenses that the company could have covered if the tragedy had not occurred. Here are some benefits of EIDL for small businesses:

  • Low-interest rates of 3.75% for small businesses and 2.75% for non-profits
  • Repayment plans that can last up to 30 years.
  • For loans of up to $25,000, no collateral is required.
  • The money can be utilized for various business needs, such as rent, utilities, and payroll.
  • EIDL advances of up to $10,000 are also available, which do not need to be repaid.

To apply for an EIDL, you must have been in business as of January 31, 2020, and meet certain eligibility criteria. You can apply directly through the Small Business Administration (SBA) website.

It’s important to note that EIDL loans are not forgivable like PPP loans, meaning you’ll have to repay the loan amount and interest. However, the low-interest rates and long repayment periods can make it a manageable solution for businesses struggling during the pandemic.

Employee Retention Tax Credit (ERTC)

The ERTC is a refundable credit that can be used to offset certain employment taxes. The ERTC aims to motivate firms to retain employees throughout the COVID-19 epidemic.

To claim the ERTC, your business must have experienced either a partial or full suspension of operations due to a government order related to COVID-19 or a significant decline in revenue. Additionally, businesses must have fewer than 500 employees to qualify.

To claim the ERTC, you must report the credit on your quarterly employment tax return. If the credit exceeds the amount of employment taxes due, you can request a refund of the difference.

There are several benefits of the ERTC for small businesses, including:

  • The credit is worth up to 70% of eligible wages paid between March 12, 2020, and December 31, 2021.
  • The maximum credit is $7,000 per employee per quarter, making it a substantial financial relief for small businesses.
  • The credit can be applied retroactively to 2020, meaning businesses that did not claim the credit in the year can still do so on their amended returns.
  • The ERTC is available to businesses that received PPP loans, meaning businesses can take advantage of both programs to help them through the pandemic.

Flexibility with Retirement Plans

The temporary flexibility offered to retirement plans is one of the CARES Act measures that might help small enterprises. This provision is designed to provide small business owners and employees with greater financial flexibility during the pandemic.

One of the key changes to retirement plan rules is the increase in the loan limit. The CARES Act allows eligible participants to borrow up to $100,000 from their retirement accounts, compared to $50,000 from the previous limit. This higher loan limit may provide additional funding to small business owners and employees to help them withstand the economic effects of the pandemic.

In addition, the CARES Act also includes provisions that allow for penalty-free distributions from retirement accounts for individuals affected by the pandemic. Eligible individuals can withdraw up to $100,000 from their retirement accounts without incurring the 10% early withdrawal penalty that typically applies to distributions made before age 59½. These distributions can be spread out over a three-year period and can be repaid within that time to avoid tax liability.

Conclusion

In conclusion, the CARES Act can significantly benefit small businesses facing economic challenges due to the COVID-19 pandemic. It’s important to explore all options and take advantage of the assistance available. By utilizing the CARES Act benefits, small businesses can overcome financial hurdles and continue to contribute to the

Common Financial Mistakes Small Businesses Make and How to Avoid Them

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StrategyDriven Managing Your Finances Article | Common Financial Mistakes Small Businesses Make and How to Avoid Them

Finance is at the very heart of every business! Understanding and managing figures pertaining to your business helps to improve the survival rate of your business. Irrespective of the size of your business, correct management of your expenses can pave the way for the smooth functioning of your business.

More often than not, small business owners often fall prey to financial mistakes. No doubt, to err is human, but several small businesses cannot afford to make such mistakes. On the brighter side, many of these mistakes can be easily avoided if paid close attention to. In this article, we’ll dive deep into the most common mistakes small businesses make and how one can avoid them successfully. Read on to find out more!

1. Venturing in Without a Clear Plan

Starting a business without a clear plan for your finances is like walking blindfolded. You may never know when you will falter and fall. Hence, it is highly advisable to develop a business plan that maps out your business finances, the business model and the nitty gritty involved in its implementation.

No doubt creating a business plan is an arduous task which involves time, money and effort. But it sure puts you in a better spot with regard to your future expenses by bringing clarity along the road. It is also a great way to formulate realistic financial projections and set a stipulated budget aside for the coming year. Needless to say, this entire process can help you avoid bankruptcy.

If you are just starting out with your business and looking for professional help, then you must reach out to commercial financial consultants who are highly experienced in this field.  Financial consultants are a one-stop solution for all your financial concerns – be it tackling operational challenges or looking for investment opportunities for your business. These finance experts can help you stay ahead of the game and beat the competition too!

2. Repurposing Previous Budget Plans

A common tendency for many small businesses is to repurpose the previous year’s budget plan for the years ahead. While this process might seem time-saving, it can in fact jeopardise business operations in the long run.

For instance, your business may now be operating in a different financial climate as opposed to the previous year. It can also be hampered by market conditions, pandemics, recessions or even natural calamities. These influences can have a solid impact on the working of your business as consumer spending habits change, and the cost of commodities increases or decreases depending on market conditions.

It is completely understandable to use the previous year’s plan as a benchmark for comparison. However, it is extremely vital to tweak it while keeping the current business circumstances in mind when creating a new budget for the year.

3. Opting for Personal Debts

Businesses often work in a volatile and unpredictable market. These conditions often lead to setbacks for your company, especially in the beginning stages of your business. Moreover, these setbacks can lead to financial repercussions, making it difficult for you to carry on.

More often than not, business owners consider personal finances and savings to fund their daily operations, work on business expansion or recover from setbacks. Hence, an alternative solution is to discover cost-effective low-credit loans.

These emergency loans are quick in nature and tailored specifically for individuals who are on a low credit score. This process ensures you do not need to dig into your personal finances and still manage to stay afloat through verified and genuine sources of finance.

4. Spending Far Too Much Unnecessarily

It is really tempting to get your hands on the best technology that can streamline your business or perhaps heavily invest in marketing activities that can help you reach a wider audience.

It could be a swanky office space that you want to invest in for your business or hiring highly experienced employees. Certainly, the key here is the prosperity of your business as these factors can provide the much-needed push for your business. But maybe being frugal for the time being is a better alternative than going back to zero. Besides, it doesn’t make much sense to spend recklessly while you are still trying to boost profit.

It is imperative to formulate a realistic budget and stick to it for the time being. There are several things that a business can do away with at a nascent stage such as a posh office space or the latest technological gadgets. These little saving tips can certainly help your business function better in the coming years.

5. Failure to Set Up an Emergency Fund

In these uncertain times, one is likely to face unexpected expenses on the way. Emergency funds can be a great way to safeguard your business from these. To simplify, these are the type of savings that help in preventing debts during an unforeseen situation or crisis.

It is highly recommended to set up two types of emergency funds. One that specifically covers the business front and the other that helps with personal finances. Actively saving up can also help in running your business comfortably.

How do you know whether your savings are enough? For starters, consider whether you can comfortably run your business for the next 3-4 months without any flow of income. If yes, then you have enough savings to start with. Ensure to demarcate between your business account and personal account. More often than not, entrepreneurs add their personal expenses to the business account, which leads to difficulty in the management of cash flow.

6. Failure to Focus on Cash Flows

Small business owners often fail to pay attention to their cash flows and profit margins on a regular basis. Ignoring the expenses and revenue generated by your business may lead to many other problems. For example, avoiding the math will hamper your overall business operations in the long run.

Keeping a tab of your daily income and expenses can give you a fair idea of your progress and keep you on top of things. Moreover, this rough estimate can help you project your potential profit margins and be aware of cash flows in the business.

7. Underestimating the Power of Financial Tools

The days of managing business finances manually are long gone. Although this process has its own perks, it is open to several inaccuracies and mistakes. Not to mention it can be cumbersome and inconvenient for a business owner to manage on a daily basis.

There are several accounting software and tools that are inexpensive and can help ease the process of making informed financial decisions. Additionally, these tools offer accurate and reliable information from a single source, eliminating confusion and miscalculations.

8. Not Paying Enough Attention to Research and Marketing

While it’s fairly understandable that this might not be your first priority when starting a business, research and marketing can significantly help you boost business growth. Investing highly in marketing isn’t a requirement in your initial years of work. However, one must keep track of organic marketing methods as these can drive sales and ROI for your business.

Creating a solid content marketing strategy that is focused on your ideal audience is a better approach than running paid ads in the developing stage of working. This can boost brand awareness and brand visibility as you offer information and engaging content to your audience.

The flip side of this is that small business owners end up spending a huge cost of their savings marketing in the initial stages of work. At the very beginning, you might have to experiment with different marketing strategies and some of them might not even fare well, leading to a big hole in your pocket.

Hence, it’s best to gather a fair idea of the market and its working before you dive into investing heavily in marketing-related activities.

To Sum It Up

Starting a business from scratch can often be intimidating and arduous for any small business owner. However, being equipped with sound knowledge of the industry and the best practices to follow can help it stay afloat. While some setbacks are unavoidable, a conscious effort to learn from your mistakes is what makes an entrepreneur stand out from the crowd.

Common financial mistakes such as spending lavishly or not keeping a tab on your cash flows can deeply hamper the daily functioning of your business. It is imperative to reach out to professional financial consultants when stuck at any stage of working.

Remember to actively make decisions to save up and have an emergency fund as a backup. In case of emergencies, it is always a great idea to look for low-credit loans that are quick and accessible to all. Keeping these tricks in mind can help you minimise the risk associated with business and pave the way for a successful venture.

How Can You Manage Your Small Business Finances More Effectively Using Loans?

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StrategyDriven Managing Your Finances Article | How Can You Manage Your Small Business Finances More Effectively Using Loans?

Using loans effectively can be critical for any startup business. It can give you access to a lot of areas you might not have been able to explore before. There are a few different types of loans you might need to consider, and they can help you to fund your business correctly early on and encourage you to make the best financial decisions possible.

Why Are Loans Vital to Small Businesses?

Business loans are an option available to businesses to help with finances. Much like any other loans, they come with interest to pay, and there is also variable loan vs fixed to consider. Also like other types of loans, a business owner’s credit rating can be a deciding factor in whether a loan is approved or not, and it impacts the interest rate of any loan as well. Knowing this at the start can have massive repercussions for the future of your business, and can get you off to the best start possible by helping you to afford equipment and services, that you might not have done otherwise.

1. Using Loans to Combat Downtime

Using a loan to tackle the issue of downtime can be a good decision for any starting business. This can be due to what you can (or can’t) currently afford for either training your employees or getting better and more reliable machinery into the company. This can help you to get certain processes running more efficiently so that when there are any little hiccups, problem-solving doesn’t take hours out of your day. This kind of efficiency saves money in the long run, but it also costs money to get started – the kind of money you might not have just yet.

2. Using Loans to Automate Systems 

Automating repetitive operations can be important for saving you both time and money. This is because automation can firstly reduce downtime, and secondly, take a lot of pressure off of employees. This can make all the difference when you are starting, where everything is up in the air, more than a little chaotic, and everyone is putting in some serious hours. Automating long and laborious tasks, such as certain HR jobs and parts of project assembly, can help you to create a far more efficient business, and take a lot of work away from your overly stressed employees when it matters.

3. Using Loans for Internal Promotions

Internal promotions are cheaper than external promotions. They are also far better due to the very important fact that you are already familiar with your staff, and they already know the business – even at this early stage. It also increases employee loyalty throughout the company too, as other employees will know that they can improve their station within the company. However, you might need to get in a little extra money to cover the costs of mistakes and also make sure that your employee has the best start possible in their new position, such as getting them any new equipment they need, especially if the role is new in the company.

4. Using Loans to Help With Outsourcing 

Outsourcing is great for both new businesses and well-established companies. There are so many ways that your business can benefit from outsourcing. However, outsourcing can be very expensive, and getting the right service for your business might take a few tries to get right. You will find that by taking out a fixed loan, you will be able to trial a few services, such as IT, HR, and even marketing, to source the best solution that you can, which is exactly what you need to get a head start on the competition.

5. Business Intelligence 

BI software is a powerful tool for your company. However, like a lot of things in the business world, it can be expensive. You will find that by finding the funds to get the software up and running, you will get great benefits from it. It is an investment that can help to propel your business marketing, data analytics, and product design, and can help you generate ideas that will shape your future business.

To Wrap Everything Up

The right loan is a vital tool for any business, but critical for small or startup businesses. You will find that they can open doors to a huge number of new opportunities for your business, whether that happens to be software, services, or outsourcing. This can help you to build a better business from day one, and help you get the boost you need early on to establish to your customers that your business is here to stay, all while diligently managing your finances to make the best decisions for the future.

10 Ways to Manage Your Small Business’ Finances

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StrategyDriven Managing Your Finances Article | 10 Ways to Manage Your Small Business’ Finances

Starting a small business can be exciting and rewarding, but managing finances can be challenging. If you run a small business with its finances out of control, don’t worry, you’re not alone. Many small business owners struggle to manage their financials, from keeping up with taxes to understanding the basics of investing. It can all seem difficult—but it doesn’t have to be. Proper management of your business’ finances can help ensure its long-term success. With a little guidance and a smart strategy, managing your finances for success is achievable.

In this blog, we provide various tips and tricks on effectively keeping track of your funds and saving more money so that you can maximize your company’s growth. So let’s help you create a plan for taking control of your financial future.

1. Utilize Financial Management Software

The first step for small businesses is finding a useful tool to manage lease agreements and expenses. Financial management software can be a useful option. It can help you automate your financial processes, manage cash flow, and keep accurate records.

When choosing financial management software, look for invoicing, expense tracking, and financial reporting features. Cloud-based software is an excellent option because it allows you to access your financial information anywhere, anytime.

While many financial management software options are available, some small business owners may be interested in finding a free lease accounting software option. Lease accounting software includes features like lease tracking, reporting, and document management. Some companies also offer payment plans with more advanced features, so small businesses can choose the plan that best fits their needs and budget.

2. Set Financial Goals for Your Small Business

Financial goals can help you stay focused and motivated and guide your decisions. To set effective financial goals, you must ensure they are specific, measurable, achievable, relevant, and time-bound.

For instance, you can set a goal to increase revenue by a certain percentage, reduce expenses by a certain amount, or save a particular amount for an emergency fund. Setting financial goals can help you identify what to do to achieve your objectives and measure your progress.

3. Create a Budget for Your Small Business

A budget helps you plan and prioritize your spending, track your expenses, and ensure you have enough funds for your business needs. You can create a budget by estimating your income and expenses. Be realistic and include all your business expenses, including rent, utilities, inventory, salaries, and taxes.

After that, subtract your expenses from your income to determine your net income. If your net income is negative, you need to adjust your spending to reduce your expenses or increase your revenue. Stick to your budget and review it regularly to ensure you are on track.

4. Monitor Your Cash Flow Regularly

Cash flow is the lifeblood of your business, and monitoring it regularly is crucial for effective financial management. Cash flow refers to the amount of money coming in and going out of your business. You need a positive cash flow to pay your bills, invest in your business, and grow.

So, create a statement showing your cash inflows and outflows for a specific period. Analyze your cash flow statement regularly to identify any areas of concern, such as a decline in sales, increased expenses, or late customer payments.

You can also use accounting software or other tools to automate your cash flow monitoring and make the process more efficient.

5. Separate Business and Personal Finances

Mixing personal and business finances is a common mistake for small business owners. It can lead to confusion, inaccurate financial reporting, and tax issues. Separate your business and personal finances to avoid these problems.

Create a business bank account exclusively for your business transactions. This way, you can easily track your business expenses and revenue and prepare accurate financial statements. Separating your finances will also make it easier to file your taxes and avoid any issues with the IRS.

6. Implement an Accounting System

An accounting system helps you to organize your financial information, prepare accurate financial statements, and make informed decisions. Choose a user-friendly, affordable accounting system that meets your business needs. Make sure you or your staff are trained to use the system effectively.

7. Manage Your Taxes

Small businesses must pay various taxes, such as income tax, payroll tax, sales tax, and property tax. You can manage your business’ taxes effectively by understanding your tax obligations, keeping accurate records, and filing your tax returns on time. You may also need to work with a tax professional to ensure compliance and maximize your tax deductions.

8. Keep Accurate Records

Without accurate records, you won’t know how much money you’re making or spending, and you won’t be able to make informed financial decisions for your small business.

Collect records of all financial transactions, including invoices, receipts, and bank statements. Use accounting software or other record-keeping tools to help you stay organized and ensure that your records are accurate and up-to-date.

9. Monitor and Control Your Expenses

You should regularly review your expenses to identify areas where you can cut costs and reduce overall spending. Consider using accounting software or other financial management tools to monitor your expenses. Review your expenses regularly and look for opportunities to reduce costs, such as switching to a less expensive vendor or negotiating lower rates with suppliers.

10. Plan for the Future

Planning for the future allows you to set financial goals, create a budget, and make informed decisions about investments and expenses.

Consider the current state of your business and where you want it to be when planning for the future. Develop a long-term financial plan that outlines your goals and the steps you’ll need to take to achieve them. Review and update this plan regularly to reflect changes in your business and the market.

Conclusion

Managing small business finances can be challenging, but incorporating these tips into your business finance management strategy can improve your financial health, help you make informed decisions, and allow you to achieve long-term success. Remember to regularly review and update your financial plan and seek professional help when necessary. You can focus on sustaining and growing your business with a solid financial management strategy.

Unexpected Costs of Running a Small Business

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StrategyDriven Managing Your Finances Article |Small Business Costs| Unexpected Costs of Running a Small BusinessRunning a small business may seem easy to do on paper, but there really are so many other things that you need to think about. One of them is unexpected expenses because this can easily be the downfall of your business.

Extra Office Space

Sure, a home office may work for your small business, but zoning and other related regulations may require you to have something a bit more official. When making the decision to rent or purchase a property, you need to think about how much space you have now and how much you actually need. A lot of companies will offer you temporary office space, which is great if you are not quite sure which direction you need to take your business in, or even the arrangements that you are going to have. Utility costs can also eat away at your budget. Leased spaces will often include these types of costs as part of your agreement too, so look into those and always make sure that you are getting the best deal.

Equipment and Maintenance

The tools that you need to run your business need to be maintained. You may also need to pay out for equipment you didn’t think you’d’ need, such as a scanner, copier or even a shredder. Stationary should also be included in your budget because this can also eat away at your money more than you realise. If you want to save money here, then consider buying equipment second-hand from a range of auction sites. You should also buy stationery or any other related equipment in bulk, as this will help you to cut down on the cost per item.

Employees

Salaries, medical leave, health insurance and even training can factor in a large amount of cost for your budget. If you fail to invest in your employees by providing them with a reasonable wage or even a clean office environment then they will leave and this will cost you even more in the long-run. The cost of replacing an employee can be extortionate depending on the avenues you need to go through, so make sure that you set aside a good amount of your budget to accommodate this.

StrategyDriven Managing Your Finances Article |Small Business Costs| Unexpected Costs of Running a Small BusinessSecurity

If your business is not secure then you will be putting it at risk. It doesn’t cost a lot to invest in
CCTV installation, but you would be surprised at how much it could help you to prevent break-ins. You should also focus on securing your network as well. This can be done through encryption, which will cost you, but it is most certainly a worthwhile investment.

Shrinkage

Shrinkage refers to inventory loss at some point between the purchase you make for the items and the sale you make to your customers. Shrinkage can occur through vendors not shipping the required total of products, couriers losing packages or even poor inventory management. This expense can be entirely prevented by being diligent and by also making sure that you document and process every single step of the shipment until it reaches your customer.