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SBA Loan Programs

General Small Business Loans: 7(a)

The 7(a) Loan Program, SBA’s most common loan program, includes financial help for businesses with special requirements.

Microloan Program

SBA’s Microloan Program provides small, short-term loans to small business concerns and certain types of not-for-profit child-care centers.

 

The Microloan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000.
 
The U.S. Small Business Administration provides funds to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance. These intermediaries administer the Microloan program for eligible borrowers.
 
Eligibility Requirements:
 
Each intermediary lender has its own lending and credit requirements. Generally, intermediaries require some type of collateral as well as the personal guarantee of the business owner.
 
Use of Microloan Proceeds
 
Microloans can be used for:
 
  • Working capital
  • Inventory or supplies
  • Furniture or fixtures
  • Machinery or equipment
 
Proceeds from an SBA microloan cannot be used to pay existing debts or to purchase real estate.
 
Repayment Terms, Interest Rates, and Fees
 
Loan repayment terms vary according to several factors:
 
  • Loan amount
  • Planned use of funds
  • Requirements determined by the intermediary lender
  • Needs of the small business borrower
 
The maximum repayment term allowed for an SBA microloan is six years. 
 
Interest rates vary, depending on the intermediary lender and costs to the intermediary from the U.S. Treasury. Generally, these rates will be between 8 and 13 percent.
 
Application Process
 
Microloans are available through certain nonprofit, community-based organizations that are experienced in lending and business management assistance. If you apply for SBA microloan financing, you may be required to fulfill training or planning requirements before your loan application is considered. This business training is designed to help you launch or expand your business.
 
Find a Microloan Provider
 
To apply for a Microloan, you must work with an SBA approved intermediary in your area. Approved intermediaries make all credit decisions on SBA microloans. For more information, you can contact your local SBA District Office or view the list of Participating Microloan Intermediary Lenders in the Attachments list below.  
 
Ask a Question in the SBA Community
 
If you have questions about applying for an SBA microloan, you can post it to the SBA online community.

 

Real Estate & Equipment Loans: CDC/504

The CDC/504 Loan Program provides financing for major fixed assets such as equipment or real estate.

Disaster Loans

SBA provides low-interest disaster loans to homeowners, renters, businesses of all sizes, and most private nonprofit organizations. SBA disaster loans can be used to repair or replace the following...

 

Source: www.SBA.gov

 

10 Common Tax Mistakes that Cost You

 

1. "I can do it myself." "Most small business owners do not have the tax knowledge they need to stay out of trouble, but they won't pay for planning," says Botkin. "They're cheap so they use TurboTax. But TurboTax won't represent them if they get into trouble." Sure, as a member of the profession, Botkin has a vested interest in recommending that you hire a CPA. Maybe you really are capable of doing your own tax planning. Maybe you can also rewire your office, build your own website, and represent yourself in court. That doesn't mean you should. Just sayin'.

2. "I keep my receipts so I don't need a tax diary." Every small business owner must keep an accurate tax organizer, says Botkin, and it's not the same thing as an expense log. "A tax organizer has all the questions that the IRS requires you to answer about travel, entertainment, and other expenses. It will bulletproof your records and eliminate procrastination, and if you're audited, it shifts the burden of proof to the IRS," he says. Anything that allows you to feel smug in the presence of an auditor has got to be worth its price, which is not cheap in this case. You'll spend over $100 for a decent tax organizer/diary.

3. "Yay! A big fat refund." Many people are thrilled when they get a big check from the IRS. Wrong reaction, says Botkin. "A refund means you've given the government interest-free money for a long time," he says. "If you have withholding, you want to adjust it to the point where you get very little refund."

4. "I'll just borrow a little from employee withholding." When they're short on cash, it's often tempting for small business owners to dip into the trust fund that's used for employee withholding and Social Security. "Many employers think ' this is my money,'" says Botkin. "It isn't. If they borrow from withholding or Social Security, they are personally liable, with huge potential penalties."

5. "Let's make everyone an independent contractor." Employees are expensive. Independent contractors, not so much. So why not make everyone independent contractor? It's not that easy, says Botkin. "If you're going to designate a worker as independent you have to treat him as independent," say Botkin. Typically, independent contractors can make their own hours and have control over where, when, and how work is completed. If the IRS determines that you incorrectly designated an employee as independent, you may be subject to penalties for not collecting Social Security taxes, and for more than 40% of workers compensation for the specified time period.

6. "I can pay myself whatever I please." If you're incorporated, not really. Say you typically pay yourself $100,000 a year. After a good year, you decide to increase that to $300,000. "You have to substantiate a reason for the increase, or part of the money can be disallowed by the IRS as unreasonable compensation," says Botkin. "Then it can be taxed at the corporate level, and distributed as a dividend. And then you'll pay tax on the dividend." Ouch!

7. "My bookkeeper would never steal from me." "It's vital for every small business person to have one person who writes the checks and another person doing the accounting, and never the two shall meet," says Botkin. He says that he's met hundreds of small business owners who have had their bank accounts cleaned out by embezzlers. So unless you have a trusted family member handling all your finances, make sure that you have different people handling accounting and accounts payable. Nope, this isn't a tax tip per se, but drop the ball on this one and you won't have to worry about paying taxes because you may not have a business.

8. "That can't possibly be deductible." Not so fast! The dry cleaning for the suits you wore at that business conference in Duluth? If you were away overnight, it's deductible, says Botkin. A movie and dinner with friends, with whom you also talked business? Also deductible he says, even if your business discussion didn't occur at dinner, but within the same 24-hour period as the social engagement. Just make sure it's all documented in your tax diary (see #2). Educate yourself on all the juicy deductions you may be missing out on.

9. "This isn't a hobby, it's a business." Say the "business" you started, selling seashell picture frames online, consistently loses money (those trips to Cape Cod are expensive, after all). The IRS may decide that you don't have a business at all, but merely a hobby. In that case, you'll no longer be entitled to the same deductions. "They'll also disallow your losses," says Botkin. "The government is the biggest bookie -- they'll subsidize your losses, but they want part of your profits."

10. "I can't afford to hire my kids." Well, sure you can. Especially your kids who are in college. Pay them a reasonable wage for the work they perform (Botkin paid his daughter to build and maintain his website, for instance), and you'll be able to deduct their wages as a business expense. Then, suggests Botkin, have them use the wages to pay for college. Voila! You've just made college tuition deductible. Also, remember that up to $5,800 in income is tax-free for your children.


source:CBSNews

 

5 Tips to Keep Your Home-Based Business Legal


A home-based business can be anything from a single programmer or consultant who virtually hangs a shingle to a vintage clothing company, jewelry maker, window washer, or cupcake baker. These are the 5 tips to keep your home-based business legal:

1. Pick the right business name. Make sure you do a search for your businesses' name, and clear the trademark. "Check first with your Secretary of State's Office for the use of your businesses' name in the state and county, and then do a national trademark search," says Akalp, whose company provides free name searches. "If you find someone else using the name, consider paying a service for a comprehensive name search to make sure you're not going to impinge on another company's trademark--the last thing you want to do is to have to change your business name after you've starting doing business."

2. Pick the appropriate business structure. Consult with a tax professional before you determine your businesses' legal structure. While you can start doing business as a sole practitioner today, there can be tax advantages to forming an LLC or an S-Corporation. Additionally, having a corporation can provide you with an air of legitimacy--you're no longer "some dude working out of his basement."The decision to form an LLC or a Chapter s corporation can also be based on your comfort with formality. "An LLC provides maximum legal protection with minimum paperwork," says Akalp. "An S-Corporation is good for a company who can handle the paperwork and you can qualify to be on the payroll as an owner. If you're not ready to incorporate, create a fictitious business name, also known as a "DBA" or Doing Business As name."

3. Get a tax ID. While a sole proprietor can give a social security number to vendors or customers for their records, it is best to get a tax ID, also know as an EIN, which issued by the IRS. "You don't want your Social Security number floating everywhere," Akalp states. It is also more professional to have an EIN. These are required for an LLC or Corporation.

4. Obtain a registered agent. If you're working from home, you may not want clients to know it. Since the legal address for your corporation is made part of the public record, you may want business and legal notices to be delivered someplace other than your home. For an LLC or S-corporation, a registered agent's address is substituted for yours for purpose of public notices. Additionally, says Akalp, if you're not incorporating, you can get a P.O. Box or use a mailing company for a DBA entity.

5. Get permits or licenses. As home-based business owner, it is your job to check on local permits. You may need a business license. A cupcake baker may have to undergo a health inspection, and there may be zoning rules as well. Akalp advises, "Handle them from the start rather than dealing with it after the fact, as you may have back payments or penalties for ignoring the rules."Will you be starting a home-based business this year? Have you benefited from other advice about home-based business creation? Please share what you've learned in the comments section or ask any questions.

(Article based in a publication from Inc Magazine)




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