Debt is a word many people dread, and for good reason. We spend most of our lives paying off debt – student loans, car finance, credit cards. No wonder we have come to associate debt with bad and difficult times when we have very little money and need to be careful with our spendings. However, not all debt is created equal, and certainly, not all debt is bad.
In fact, there are times when incurring a little debt is good for the long term health of your finances. If you are going into debt to buy a new, luxurious car, go on a lavish holiday to some exotic place, or afford any type of short-lived fun; that creates a bad debt. However, if you take a loan to invest in your business and modernize your office, or find a great opportunity for residential real estate investing and borrow some money to purchase a rental property; that is definitely a good debt. If a loan can help you to make investments and generate returns further down the line, it is worth to take it. This is especially true when you’re running your own business.
Business debt can actually help you to grow your company. But how do you know when its good debt rather than bad debt? When is debt a good investment for your company? And are there any other options?
Debt or Equity?
When business owners are looking for capital, they have two main options. Sell shares in the company, or secure a loan.
Equity financing means there’s no need to repay funds. There’s no extra financial burden placed on the company. But there’s a drawback. If you opt for this type of funding you have to share profits and decision making responsibilities with your shareholders.
In contrast, debt financing means taking on a loan and interest. This may become problematic if that loan doesn’t help your company to generate greater revenue. But, in contrast to equity financing, you maintain full control of your business profits and decisions.
But before you decide which financing option is for you, you need to know when it’s appropriate to take on business debt. Here are a few times when taking on business debt is a good idea.
When Business Debt is Good Debt
Investing in Marketing
You may have the most amazing product or service on the market, but if no one has heard of it, you’re not making any money from it.
Marketing often comes way down on the list of business essentials. It seems that there’s always something more pressing to pay for.
That is why creating a marketing budget is a good reason to accumulate a little debt. That money can be used to pay for PPC ads, billboards, magazine space or advert design. And to develop a long-term marketing strategy.
And the upturn in customers and revenue should help you to pay back the loan you’ve taken out.
Taking on New Employees or Upgrading Your Workspace
If you started up your company alone, you’ve likely endured long days and short weekends in order to get things off the ground. But there’s only so much you can get done in a day.
When you’ve reached your limit and need to add another pair of hands to the team (and/or the space for them to work in), it may be time to take out a short-term loan. Take into account wages and any costs associated with hiring a new employee when deciding on how much is appropriate to borrow.
A new employee could bring new skills to your business, allow you to improve the speed and quality of current operations, or give you the time to step back and strategize over the bigger picture.
Either way, the aim is that by expanding you’re workforce and/or workspace you’re increasing the company’s income potential – even if it means initially going into a little debt to be able to afford this expanding.
Improving Your Customer Offering
The longer you spend in your industry, the more you spot areas for improvement. You might realise that your product no longer fully meets your customers’ needs. Or a new competitor has launched a service that outranks yours.
You might even realise that a certain business tool or program is needed in order to improve your customer experience and business performance.
An injection of money at this point can help you to develop your product or service, or even offer new products and solutions to your clients, thus staying at the top of your game and ensuring a good level of income.
Building Your Credit Rating
Your business has a credit rating just like you do. And you need it to have a good rating if you want to secure a loan.
Requesting and paying back smaller loans in the early stages of your company’s life can help you to secure bigger loans in future. It may also help you to develop a relationship with a specific bank or lender, again making future loans easier to come by.
As you can see, not all business debt is bad debt. Take on good debts in order to grow your company and your revenue.
Need Money Now? Here Are 7 Ways You Can Gather Small Cash Fast
Running short on your monthly budget? Don’t worry, we have you covered.
This article will provide you with 7 of the best quick money options to get you out of your small cash binds. Obviously, when you need money and that too urgently, a small personal loan seems like the best way out. There are no obligations, other than repaying the loan, and also the money is completely legal.
In this article, you’ll find everything, including short-term personal loans and other money-making tricks to satiate your financial needs.
So, stay with us and keep reading to know more.
Online Installment Loans
As already mentioned short-term personal loans are one of the first thoughts to cross many minds when they need urgent money. However, most don’t really know where to look and what to look for in a short-term personal loan.
A rather convenient way to access these unsecured loans is going through an online money lending network. Of course, accessing lending options online reduces the paper-tussle and also speeds up the process.
Typically, taking out an installment loan from a private lender or a bank would require you to visit their corporate office. On the contrary, the online process eliminates all these hurdles.
All you need to do is fill in some basic details, choose the term and amount of the loan, and submit your application. It would usually take not more than 2-3 minutes. Plus, you stand a better chance of receiving an economical loan and that too without having to share your credit history or score.
Payday Loans For Ultra-Short Fund Needs
An alternative to installment loans is a payday loan. While installment loans, as the name suggests, are to be repaid in parts, payday loans are to be repaid one-time.
Notably, these loans are most suitable when you need a very small amount of money. For example, accessing a payday loan for a $500 loan is wise, but when you need more money, it would be better if you look for installment loans.
Although, many lenders offer payday loans up to $5000 or even more, you should only choose these loans when you know you can repay in time and without fail. The biggest issue with payday loans is the processing fee and comparatively high-interest rates against conventional loans.
Liquidating Your Assets
The aforementioned loans are mostly for those who do not have any assets to liquidate or mortgage against. Of course, when you have no savings or investments, you can presume to have no backup. And you’re left with no other option than seeking a short-term personal loan.
If you already have some investments, let’s say, mutual funds, it is better to sell them off rather than taking out a loan. The benefits of liquidating your assets are you need not to pay any interest. But instead, you also get access to your earned profits, in terms of dividends.
That being said, there is also a catch to this option. It is only advisable to liquidate your assets if they have reached maturity. In some cases, your bank or your financial manager won’t let you sell funds.
Mortgage Against Your Property
Another alternative to liquidating your assets is seeking a mortgage against them. While most commonly, a mortgage is offered against an immovable asset, such as a piece of land or a house, but you can also access a mortgage against other high-value assets.
For example, you can seek a mortgage against your mutual fund’s policies, or you can also place your insurance policy as collateral.
The benefit of seeking a mortgage against your assets is only that you still own your assets. They are only being placed as collateral and will only be redeemed if you fail to repay your debt.
Organizing A Garage Sale
Quite possibly you’d have a lot of stuff at your home or your office that you don’t use anymore. There could be endless reasons for it including you may not need them anymore.
It is a good idea to sell them off to make some money when you know you don’t need them anymore.
Organize a garage sale for the stuff that you don’t use or need. Not only will it bring you the necessary funds but also help you get rid of all the clutter from your place.
Take Up A Side-Hustle
One of the best ways to make some quick money is by taking up a side-hustle. In fact, according to a survey, nearly 63% of Canadians have a part-time job apart from their regular stream of income.
Taking up a part-time job will solve your financial problems once and for all. Many part-time jobs are available either on a contract or hourly basis. It means you can expect to receive the payment for the work you do as soon as you complete and submit it.
It is noteworthy that you have endless options to choose from when it comes to taking a part-time job. You can take up freelance graphic design projects, or content writing orders. Or you can also take up a waiter’s job at a nearby diner. All you need is to know that you have the necessary skills needed to perform the task you take up.
Loan Against PF or 401(k) Account
Most of the time, financial advisors opine that withdrawing from PF or 401(k) accounts will harm a person’s credit score. And, as a matter of fact, this is true to some extent.
Despite the fact, there could be situations where you may find no other solution to your financial crunch.
But, still, it is rather best to seek a loan from your 401(k) account. The benefit is, your PF is still secure and all the interest that you pay adds up to your savings only. However, there’s a catch to this as well. When you take out a loan from your PF account, it is rather important that you pay it off in time. Otherwise, it may reflect as a distribution of payments and you may have to pay a penalty on the amount you borrow.
Facing a cash crunch is no ordeal. It could happen to anyone. What’s rather important is steering out of this financially troubling situation the most efficient way. You need to find a solution that not only fulfills your needs but also protects your financial future.
Will I Lose My Business After Filing Bankruptcy? Understanding Your Options
Bankruptcy does not necessarily mean going out of business. Many companies, even major national and international brands such as General Motors, Marvel Entertainment, Six Flags, and Texaco, have used bankruptcy to reorganize their debt and other obligations. This reorganization allowed them to continue business operations – leaner and meaner, so to say.
This article lays out your business bankruptcy options and the consequences of filing business bankruptcy.
Chapter 11 Bankruptcy – Business Reorganization
A business intending to continue to operate, but with debt obligations, it cannot meet, can file Chapter 11 and reorganize its debt. A Chapter 11 bankruptcy begins with filing a petition and disclosure statement listing all assets and debts, including an income statement, and either a proposed plan for reorganization or the intention to file a plan. The owners of the business then become the “debtors in possession” and continue business operations while the Chapter 11 case is pending.
The reorganization plan will include all creditors’ claims organized by class, and each class will be treated separately. Some classes may have claims paid in full, others’ claims may be “impaired,” which means modified in some way, often paid less than what is owed. The creditors whose claims are impaired vote by ballot on the plan, the ballots are tallied, and the court holds a confirmation hearing to determine whether to confirm the plan.
The Chapter 11 Plan Must Be Feasible
Creditors want to be paid, and they often argue to the court that the proposed plan is not “feasible,” meaning, your business cannot hope to pay and perform under the plan considering its past performance, current finances, and anticipated future finances. This is a strong and persuasive argument, so if you are considering filing Chapter 11 be sure to craft a plan that will restore your financial situation and that your business can and will execute.
Once a plan is confirmed, the business operates as usual but pays creditors or performs its modified contractual obligations according to the confirmed plan. Once the plan is fully paid and performed, the business is discharged of liability for the unperformed or unpaid obligations.
Chapter 13 Bankruptcy – Sole Proprietor or Single Member LLC Reorganization
If you are a sole proprietor, a single-member LLC, or a married couple owning a business as a partnership or LLC, in most cases, you can file a personal Chapter 13 bankruptcy petition rather than Chapter 11, Why would you want to? Because tax law recognizes you and your business as one entity, not separate entities, you can use Chapter 13 to reorganize and discharge both personal and business debts and obligations.
Chapter 13 has many other advantages over Chapter 11. A personal Chapter 13 filing is a less onerous, more streamlined process and the filing fee is much less than Chapter 11. The attorney fee will be much less as well, as Chapter 13 has far fewer administrative requirements and requires fewer court appearances than Chapter 11.
How to File Chapter 13 and Reorganize Business and Personal Debt
If you decide to file Chapter 13, you (or you and your spouse) will meet with an attorney and craft a Chapter 13 petition and schedules, disclosing all income, expenses, assets, and debts, both personal and business. Once you take the online Credit Counseling course, your petition and schedules along with your certification of completion of the course will be filed. You will also file a proposed Chapter 13 repayment plan.
Using the Chapter 13 plan to Reorganize and Discharge Debt
Your attorney will also help you craft a three or five-year repayment plan that will allow you to do any or all of the following:
- Catch up with a mortgage, auto loan or lease, and business loan arrears;
- Catch up with any unpaid support obligations, such as alimony or child support;
- “Strip off” second mortgages, third mortgages, or HELOCs if the value of the property is less than the amount owed on the first mortgage;
- “Cramdown” any outstanding auto loans to current market value, and pay them off through the plan at prime plus 1-3%.
Regular Income is Required for Chapter 13 Bankruptcy
You must be able to show that you will have enough income to fund your plan and pay your ongoing expenses. If you do, the court will confirm your plan and in three or five years when you’ve completed your plan payments, you will be discharged of all unsecured debt and you will have reorganized your finances, both personal and business.
Chapter 13 for small business owners can achieve the same thing as Chapter 11, without the expense, time, and creditor oversight, but with the added benefit of dealing with personal debt and discharging any personal guarantees on business loans.
Chapter 7 Bankruptcy – Business Liquidation
If there is no reasonable possibility of continuing business operations even if some debt is reorganized, then Chapter 7 bankruptcy may be the only option. In a Chapter 7 business bankruptcy, the Trustee sells all business assets, if any, for the benefit of creditors of the business, and the business closes its books and ceases operations.
Chapter 7 bankruptcy is an opportunity to discharge all debt obligations of the business, which may include pensions, unperformed contract obligations, and business loans. The downside of Chapter 7 business bankruptcy is that if any individual personally guaranteed a business loan, that individual is still liable. The upside is that business owners walk away free of debt and contractual obligations, and may start another business in the same or a different field.
Chapter 7 for Sole Proprietors or Single-Member LLCs
If the business in question is a single-member LLC or a sole proprietorship, or a married couple owning it as an LLC or partnership, in most cases the business owner(s) could file a personal Chapter 7 case and have both personal and business debts discharged, inclusive of personal guarantees for business loans.
Business bankruptcy can get complicated, especially with the varying laws governing business structure state-to-state and the myriad ways a business can obtain financing. Before making any decisions, you should consult with a business bankruptcy attorney, who can provide you with an analysis of your options based upon your unique financial situation.
About the Author: Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy Philadelphia bankruptcy lawyer.
How to choose an accounting firm for your business?
Tax laws undergo changes and additions every year. All these changes tend to confuse businesses, trying to find what each change means for them. It is the role of accountant firms to keep track of all these changes in the tax laws. And thus, rescue businesses from getting trapped in financial hassles and tax liabilities. Accounting firms expertise in managing day to day accounts and advising companies on complex financial matters.
If you are starting your own business, you must be considering consulting an accountant firm for your finances. You don’t know when you’ll need them, and it is totally normal. Right now, you’re focused on transforming your idea into a settled business. And while you do that, we’ll take you through some essential tips on how to choose an accounting firm for your business.
Experience in the field
Several people have CPA credentials and can perform an audit for your business. But the critical factor is who has worked in your specific industry. A person or a firm which has dedicated years in handling nuances of your sector knows what will work best for you. They will be able to offer solutions for your problems more quickly and thus, manage your finances better. A sector like technology has companies with massive and complex accounting structure and investors having high expectations. A knowledgeable company should also be able to help you with business proforma, but don’t expect them to just include the service for free. Pro forma business analysis goes hand in hand with accounting services.
Similarly, some accounting firms have thorough expertise in the audit. But your company requires immediate assistance in taxation. Hence, it is essential to talk to the CPA about their proficiency in your sector and knowledge in different tax laws.
How much do they charge?
A fee is a vital aspect to consider when hiring an accounting firm. It is obvious that different firms charge differently. Large firms, like Deloitte, will charge massive numerations in comparison to a boutique accounting firm in your city. The fees also depend on the kind of assignment they are getting. There are firms which set special rates for every task while others offer a full year service and charge for the same. The prices per job depend on the task they get like preparing profit and loss statement, personal income tax filing or collecting a statement of net worth.
Some accountants write bills on hourly services. If that is the case, then you need to know the standard hourly rates and if these rates change often.
How important is the location?
Before the dawn of technology, having an accountant near me was important. But now, the boundaries of communication and collaboration have shrunk significantly. As technology advances, working with firms abroad through cloud-based technology is just as simple and effective as working face-to-face. There are cloud accounting features that allow you and your accountant to work on your finances and taxations using real-time data. It diminishes the confinement of location and thus, allows better search of services for your needs.
But the decision still lies in your hands. Your decision will be based on your finances and how to handle them. Honestly, while technology allows collaboration through the internet, there are certain situations which require face-to-face intervention.
Opt for a certified or chartered accountant
Several countries have governing bodies that check qualifications and maintain high accounting standards. In different countries, accountants are known with different names like Certified Public Accountants or Chartered Accountants. CPAs or CAs are highly qualified individuals who have completed degree-level studies with professional internship programs.
Hiring a certified or chartered account makes sure you get the right service and financial advice. Their qualification adds value to your business. It means to make sure your company grows from the word “Go!” you must hire a professional accounting firm from the start. Several tax preparation firms employ and train preparers to help clients through income tax filing. But when it comes to catering to more significant accounting needs, you’ll be better off with firms employing CPAs.
Can they grow with you?
When you invest in a business, you make it clear that you’re ready to enter the big leagues and with zest. To make this happen without any glitches, you need to have a CPA firm that has the human resources and expertise. Your CPA must stick with you to see you grow from a start-up to IPO or exit phase. There are countless things to consider: does the firm have the expertise to stick with you, does it has the staff for the job, or they are facing their acquisition? If any of this is true, you’ll have to go through the whole process of finding a new firm once again.
It might fine at the moment when you’re working with an accountant for small business. But once you start growing, you can’t waste time on finding a new CPA when you should be focusing on your business.
The team assigned to you
When you hire a firm to do an audit, you are buying the communication style of the team undertaking the service. An experienced team doing the audit will save you resources when they utilize their expertise and tools at hand. You need to ask the firm questions on who will be handling your case and if they will be a part of the meeting. Ask them about their previous experiences with other clients and how the following team works on-field. You must be sure that the team you are assigned is the best one.
Converse with government and business entities
Several countries stress on small businesses since they boost a significant share of their economies. To help small businesses grow, the government rolls out plans, packages, and assistance. If you are a small business owner, you can use this assistance and network of business entities to get an accountant.
Whichever accounting firm you choose for your business, remember that they will have access to your sensitive data. So, do your research and take your time to finalize one. Talk with your fellow business associates to get a picture of how accountant firms deal with clients. And since you have the power of the internet in your hand, use social media to dig in deeper. Trust is key!
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