Different types of pensions for the Self Employed:

There are two different types of personal pension plans available to the self-employed. Below is a guide to both, with a brief overview of what a pension plan is in the first place.

Personal pension plan – a personal pension plan is a basic investment policy for retirement, whereby you end up with a lump sum and an income throughout your retirement.  You can get a personal pension plan at any high street bank, investment firm and some retailers, like big supermarket chains.

The pension holder contributes a certain amount of money into the pension which is then invested and should yield returns in order to build up a fund.  The amount of pension payable during retirement then is dependent upon how much has been contributed into the scheme, and how well the investment has performed, as well as the “annuity rate”.

25% of the pension can be paid as a tax-free lump sum.

Stakeholder Pension Schemes – a stakeholder scheme is a type of personal pension plan i.e. it is designed to supply you with a lump sum and income in your later years.  Stakeholder pensions have a set of minimum rules set out by the government.  These include:

-          Minimum contribution of £20

-          No penalties on transferring the fund to another pension or on increasing, decreasing, stopping or restarting contributions.

-          Charges capped at 1.5% of the fund each year for the first ten years and 1% a year thereafter.

Self Invested Personal Pension – A self invested personal pension or SIPP is another type of pension plan which allows the pension holder a lot more control over the investments made with the pension.  The same kind of tax, contribution and eligibility rules apply, but with an SIPP an individual can choose where the money is invested.

The plan holder can have direct control over the investment strategy or can hire a stock broker or fund manager to look after the investment.  The SIPP is set up as a trust, which means the plan holder can borrow money from the fund to invest as long as the trustees agree it is in the scheme’s interest.

Getting the Advice you Need:

The self-employed are one of the most neglected groups of people when it comes to getting sound financial advice.  Between 1998 and 2004 the percentage of self-employed people with a pension plan dropped from 64% to 49% according to the Office for National Statistics, with more than half of self employed women lacking any kind of private pension.  This is why a national pension helpline has been set up by The Pensions Advisory Service to offer advice specific to those who are self-employed.  If you’re self-employed and thinking about your financial future then it’d be a good idea to speak to a professional financial advisor to get the help you need.

Article contributed by Danielle

Starting a small business is immensely challenging, and growing your start-up into a successful, profitable business is even more difficult. Statistics from the Small Business Association Office of Advocacy show that 50% of small businesses fail within the first five years. Although these numbers may seem daunting, having a sound business plan and using strong marketing strategies will help you grow your business.

Challenges Facing Small Business Owners

1. Location, location, location. When operating a small business, location is key. Having an accessible location draws in customers and generates repeat business. Although prime locations sometimes translate into expensive rent, this isn’t always the case. Perhaps you own a small Christian store that sells baptism gifts, books, and music. Finding a storefront near several churches may be more advantageous than shelling out cash for a shop in the glitzy downtown shopping area. If you’re opening a trendy boutique, however, you want to be in a fashionable shopping area. Think strategically about your business plan, customer demographics, and products before choosing a location.

2. Getting and retaining new customers. Repeat customers are the lifeblood of a small business. Without a loyal customer base, it’ll be difficult to generate profits and grow your business. A strong advertising campaign can get customers in the door, but it’s the overall experience they have that will keep them coming back. Cultivate a welcoming environment by hiring pleasant staff members, instituting customer satisfaction policies, and offering promotions for loyal customers. Maintaining core values of honesty, respect, and trustworthiness earn your customer’s repeat business.

3. Marketing the business online. Traditional forms of advertising such as billboards and print ads still draw customers, but social media is a potent force for small businesses. Generate a social media presence by using Facebook, Twitter, Foursquare, Pinterest, and LinkedIn to connect with your customers. Offering discounts or announcing promotions over Twitter or Facebook is a great way to draw new customers. Giving a small reward to customers who “check in” on Foursquare also creates buzz about your business.

Using a Cash Mob to Grow Your Business

A relatively new phenomenon utilizes the power of social media to promote local businesses. Blogger Chris Smith from Buffalo, N.Y., came up with the idea of a cash mob after observing flash mobs, large groups of people who congregate at a particular location to perform an entertaining act before swiftly dispersing. Smith thought that cash mobs could be a great way to inject money into the local economy.

Cash mobs have sprouted up around the world, with over 200 cash mobs in the United States alone. The rules are simple: customers must show up at a local business at a predetermined time, spend approximately $20 and socialize with fellow cash mobbers. Cash mobs are organized via social media sites such as Twitter or Facebook. Organizers target small businesses that are independently owned to promote the local economy.

Getting involved with a cash mob can cause dramatic small business growth. In addition to a one-time injection of money on the day of the cash mob, these groups often return to the business as repeat customers. Cash mobs are sometimes featured in local news media, giving your small business further publicity.

Blogger Andrew Samtoy keeps track of cash mob activity on his Cash Mob blog. To encourage a cash mob to target your small business, reach out to organizers like Samtoy via Facebook or Twitter to make your case. Cash mobs look for businesses deeply tied to the local economy that give back to the community and depend on local customers for business. Contacting a cash mob organizer is the most efficient way to bring this type of activity to your business.

About the Author

Danielle recently participated in a small, local cash mob and is now the proud owner of a shiny new bible cover and cross necklace. Read her business musings on suitsandladders.co.uk where she blogs on behalf of Sears and other brands she uses.

This is why many small business owners are turning toward companies like merchantcashinadvance.com, and applying for merchant cash advances instead of traditional loans or credit lines. What is a merchant cash advance? It’s working capital that is advanced to you based on future sales – typically credit card transactions – that you repay by turning over a percentage of every credit card sale you make, until the advance is paid off.

There are many reasons that a merchant cash advances is wise choice in a source for working capital. Here are a few:

1) You can use the funds for anything. Whether you’re putting in a new stove, putting full-page ads in the local paper, increasing your staff, or moving to larger quarters, you can use your advance to pay for it.

2) Qualifying is easy. Unlike traditional lenders, merchant cash advance companies don’t care about your credit profile. As long as you can demonstrate a successful track record of credit card sales (usually $5,000/month for six-twelve months, though these numbers vary), you’re likely to be approved with minimal paperwork. Merchantcashinadvance.com makes approval even easier, by offering frequent specials waiving application fees.

3) Funds are disbursed quickly. In most cases, you’ll have access to your cash advance within 72 hours of approval, and often you’ll receive them within 24 hours of approval.

4) Payments are not fixed. Because payments are made by skimming 15-20% of every credit card sale you make, you’ll never struggle to make a fixed payment in a month when business is slow. Conversely, in months when business booms you’ll get farther ahead toward paying back your advance. Both these things make it easier to work with your existing cash flow.

These are just four of the ways merchant cash advances can help you expand your business, but it’s worth noting that cash advances exist for businesses that don’t do a lot of credit card sales, as well. Merchantcashinadvance.com offers invoice cash advances and ACH cash advances, as well, so even if you don’t do a lot of retail sales, a cash advance is definitely worth considering.

This is a guest blog post from one of our supporters.

‘The reason is that banks and other financial institutions do not take them seriously due to their Gender. As a result of which they lag behind in building businesses on their own.’

This assumption is obviously not true. Many loan requests by women business owners are rejected because of their lack of ability to plan. While acquiring a business loan, gender does not matter. What matters is the time you have spent in preparing the loan proposal and how thorough you have been in it.

According to the National Women’s Business Council (NWBC),
“There were 7.8 million businesses owned by women in America in 2007. Of these, about 11.7% employ full-time workers, generating average annual receipts of over $1 million. The total revenue generated by all the women-owned businesses across the country (not considering farm-based business) has increased to $1.2 trillion. Women-owned businesses make up about 52% of all the businesses in the social and healthcare assistance arena.”

So can Women Acquire Loans Easily?
The answer is ‘yes’. It is rather easier for women to acquire loan and finances for their small businesses as compared to their male counterparts. A problem usually occurs in the application process as lenders ask for documents required in applying which are often not prepared.

Mistakes Women Make
Women make extremely basic mistakes while choosing the right funding company and also while choosing the suitable loan program for their small business.

• Choosing The Wrong Companies for Loan
Instead of researching and finding the most suitable loan providing institutions most women depend entirely on what their friends suggest. They are often misguided, due to which they lose most of their money in repaying large interests rates ending up in debt.

• Vague Business Plan and Loan Proposal
While planning to enter the next phase of your business you cannot just move forward without a plan. If you have a plan in mind then you need to write it down so that it can be evaluated by professionals.

With that comes a loan proposal which reports about you and your business, your future business plan, your financial requirements, how much money you require, how and where will you use it. How you intend to pay back the loan, and what your plans are if you are unable to pay it back.

• Lender’s Application
This is the application of trust between you and the money lending institution. Even if you have a bad credit history, specify only the truth in your lender’s application. Omitting details may be extremely unprofessional on your part.

• Financial Statements
Be ready with your two years of tax records and two years of Business and personal bank statements when applying for a small business loan. Though you may not require them immediately but eventually, yes you will need them. If you don’t have an established business already, then your personal tax record and personal bank statement will help you in creating a trust with your lender as being a reliable and responsible individual.

What should be done?

Not every loan gets approved. But assuming that women loans are often rejected is a farce, we need to dig deeper into the reasons instead of finalizing a hypothesis. In case your loan application is rejected, then you need to find other sources of funding and prepare a better case for yourself.

The Federal government does not provide grants for women to start or expand a small business. But the story does not end here. There are plenty of places where women can acquire loans for their small business all they require is research. Merchant companies are one such source which can provide women with the funding they require within 72 hours time.

Business cash advance companies have customized plans especially for women entrepreneurs. Not only this, they also assist women business owners in entire process and guide them through.

Merchant companies help women entrepreneurs in owning and operating small business without the hassle of high-interest loans or other cash advance options. They provide financial securities at affordable rate. Such companies do not stop any payments on bad credit histories. Instead, they evaluate your position from time to time and make your repayments flexible.

A large percentage of jobs have been created by women small business owners whose business requirements are often not taken seriously. The government should pay special attention to women business owners as they are a valuable asset for American economy.

Anyone who has read (or seen) the news in the last couple of years would know that the UK has a problem with lending to small businesses. To a certain extent this problem is understandable, after all, the banks lent too much and too riskily, and in doing so precipitated the biggest financial crisis for 80 years, as far as lending goes, it’s a case of once bitten, twice shy.

Which is all very well and good, but since small businesses and start-ups make up the engine room of any major economy, this problem is actually choking off credit to small companies. If you’re an entrepreneur with a bright idea it’s even worse, your chances of getting business finance are extremely slim.

Which leaves you with very limited options, and the most viable one is borrowing on your own account. Taking on business debt as an individual is a risk, but it’s one that many entrepreneurs take and can be your only way of getting finance.

The first thing you’ll need to do though is get a free credit report from a company like CreditExpert. Any entrepreneur needs the lowest borrowing rates that they can get, so if your personal credit rating is in good shape, that’ll help a lot.

Next, you need to think about the sum of money that you need to borrow, do you need tens of thousands, or low four figures? If you’re in the first category you’ve got two options: remortgaging, or a personal loan. The cheapest option is definitely remortgaging, but if things don’t work out you could lose your home so it’s a high risk move.

An unsecured personal loan is more expensive but just as long-term. However, if you can’t meet the repayments then the damage is relatively limited (inasmuch as you’ll still have a roof over your head), so it might be a better option. It’s worth talking to an independent financial advisor about how much you can borrow, what your repayment options are, and what the overall structure of your debt will be.

For smaller amounts you can borrow on credit cards. This isn’t very risky if you’re careful and organised and can move debt around quickly to make advantage of good deals, but if you’re not financially minded, it’s probably worth avoiding credit cards and going for a more straightforward loan. Despite the bad press, credit cards are actually the cheapest way of borrowing, but only if you use them right, if you don’t they can be astonishingly expensive.

However you borrow, the important thing is to know exactly how much your repayments are going to be every month, this is a sound foundation for financial planning. It’s also well worth knowing whether there are things like early repayment penalties attached to the debt, after all, if your idea catches fire and you make money quickly, you’ll want to get rid of your personal debt as quickly as possible and replace it with more traditional business financing.

Image: Michelle Meiklejohn FreeDigitalPhotos.net

Article Contributed by Bill Hazelton

It takes a lot of guts to run a small business these days. You need to be your own boss, your own IT team, your own cleaning crew and, most importantly, your own accountant. Typically, money is always tight in the first year (or few years for some), and things will only get tougher if you can’t find sources of financing to support your early growth track. The problem is that ever since the economic implosion that started back in 2008, the banks have severely tightened their lending criteria.  So, what does a small business owner have to do to find funding for his or her business? Get creative.

To successfully fund your new business these days, you’ll have to think outside the box, over the box and sometimes even on top of the box. We’re talking Zappa-style unorthodox here. If you’re not exactly the creative type though, it might be difficult to conjure up creative financing ideas.  In order to help you kick-start the thought process, we’ve come up with a list of 5 creative ways to fund your small business.

1)    Pitch your business to a local university.  Institutions of higher learning just love seeing small businesses succeed. Universities worldwide donate millions of dollars in grants to promising start-ups every year. If you think your company brings something new to the marketplace, why not compete for funding from your alma mater? While you might have to take on a few interns if you win, funding from local universities is a legitimate option to consider.

2)    Try ‘crowd funding’. In years past, crowd funding was simply a euphemism for begging.  But in 2012, asking strangers for a little bit of money has become all the rage in the start-up community. What makes crowd funding different than investing is that donors don’t expect to receive a stake in the business when they hand you $100. Instead, they typically ask for some sort of recognition or reward. For instance, if you’re opening a bakery, you might give a few charitable individuals a plaque on the wall and free cupcakes for life. On balance, it’s another legitimate source of financing that new small business owners should strongly consider.

3)    Sign up for a small business credit card. Small business credit cards have gotten a bum rap recently, but the truth is that these cards can actually be incredibly useful tools for launching and managing the financial aspects of any small business. They provide great options for tracking expenses, managing your cash flow and also provide a great backstop in financial emergencies.  A card like the Capital One Spark Cash Select is a fine choice for prospective new small businesses.

4)    Make a deal with the angels. If your business has serious growth potential, an angel investor might be a source of financing to investigate.  Angel investors are wealthy businesspeople that are willing to provide capital for promising start-ups. The only catch is that angel investors will require an equity stake in the business, which might require a cut of your profits in the short run, an equity position and a voice in management and strategic direction on a long term basis.

5)    Get a microloan. The SBA maintains a microloan program that provides small short terms loans to small businesses.  Maximum loan amounts are capped at $50,000 but have an average microloan amount of roughly $13,000.  These SBA loans are a great way to fund working capital needs or to purchase inventory, supplies, machinery or equipment.  While you won’t be able to buy a new lot for that new retro diner you just opened, an SBA microloan might be enough to provide that new grill you’ve had your eye on.

Sources of financing for small business have multiplied in recent years, but you still need a very compelling business model to convince investors that you’re worth their time. The reality is that securing an angel investment or venture capital funding is highly unlikely for the vast majority of new businesses.  Guy Kawasaki said, “[The] probability of an entrepreneur getting venture capital is the same as getting struck by lightning while standing at the bottom of a swimming pool on a sunny day.  This may be too optimistic.”  The good news is that most small businesses don’t really need that type of funding.

In the end, the most credible sources of financing for the vast majority of small businesses will still be a micro loan, crowd funding or a small business credit card, which are all viable financing options.  All in all, those options aren’t half bad.

About the Author

This is a guest contribution from Bill Hazelton, CEO and Founder of Credit Card Assist, a leading pro-consumer, credit card information resource.

Changes to child benefit payments for thousands of higher rate tax payers come in to effect in April 2013. Here’s how to keep your tax-free child benefit if you’re a higher rate taxpayer.

If you are a higher rate taxpayer that currently receives child benefit payments you could lose thousands of pounds a year when changes to child benefit come in to effect in April 2013.

Depending on how much you earn it may be possible to reduce your taxable income below the 40% higher rate tax threshold so you still keep these payments.

Here are your options:

Invest in a pension
The quickest and probably the easiest way to keep your child benefit is to increase, or begin making contributions to a pension.

This should be done by salary sacrifice and can be paid into an occupational pension run by your employer or to an independent personal pension.

Doing this will reduce your taxable pay and, depending on your contribution, could bring you beneath the higher tax rate threshold so you get to keep your child benefit payments.

If you have a family to clothe and feed, you may feel that paying into a pension is lower down your list of priorities, however putting more into your pension could leave you better off come April 2013.

For a family with 3 children, child benefit is currently worth £2,449.20 a year, so paying an extra £1,000 or £2,000 in pension contributions would not only boost your retirement savings but is likely to leave you better off overall as well.

There are two main was to set this up, either by simply increasing the amount of your salary that is paid into your pension, or by sacrificing a part of your salary (perhaps a pending pay rise) in exchange for greater pension contributions from your employer.

Throw into the mix the tax relief that you get when you pay into a personal pension and opting to keep under the higher tax threshold this way can be very tax effective.

For more help deciding whether a pension is right for you, read our guide: Should I Get a Pension?

Childcare vouchers
Purchasing childcare vouchers from your pre-tax pay is another way to reduce your taxable income and could help you keep your child benefit.

Childcare vouchers can be used to pay for registered childcare at a nursery, playschool, childminder or after-school club.

Basic rate tax payers purchasing childcare vouchers for the first time can buy up to £55 of vouchers a week. So if your current salary is just over the higher rate threshold it’s worth investigating this option.

Buying the full £55 a week of childcare vouchers could reduce your taxable income by £2,916 a year, which may be a sufficient amount for you to be classed as a basic rate tax payer.

This is because tax-exempt benefits like childcare vouchers are excluded from the tax rate assessment. So, for the purpose of childcare vouchers, you can earn up to £45,391 a year before being classed as a higher rate tax payer.

Even if your child is too young to be left in child care, you can still purchase vouchers and use them at a later date. Although each voucher will have an expiry date they tend to last a long time.

For more information on childcare vouchers, read our guide: How to Get Help with Childcare Costs.

Register as a company
Reducing your pre-tax salary by purchasing childcare vouchers or investing in a pension will be the two options open to most people worried about losing their child benefit payments.

However, depending on your circumstances and terms of your employment you may be able to keep you child benefit by setting up a company.

Essentially this involves setting up your own private limited company, paying yourself a minimal salary and declaring the rest of the money you earn as dividends from your company.

However, this option is best suited to the self-employed as well as freelancers and consultants not directly employed by a business and simply isn’t an option if you are a full time employee earning an annual salary.

This option could also make your personal finances considerably more complicated so you may need to seek advice from an accountant to ensure you are paying the correct levels of tax on all areas.

Change your working patterns
If you or your partner are a higher rate tax payer but the other perhaps works part time or stays at home, it may be worth considering changing your working patterns so you remain eligible for child benefit payments.

The higher earner could take advantage of flexible working arrangements or switch to lighter working hours to drop below the income threshold, while the lower earner could look at increasing their hours if they work part time, or finding some other means of making up the difference.

While this may not be a feasible option for some couples, balancing your salaries a little more evenly could mean you get to keep the child benefit payments and leave you better off overall.

Salary sacrifice?
You may think that you can sign up for a host of different salary sacrifice schemes in order to reduce your income.However company cars, phones and other benefits are considered to be benefits-in-kind and part of your salary.

This means that you don’t get the same perceived salary deduction as with paying into a pension or purchasing child care vouchers.

Take a pay cut?
Taking a pay cut to reduce your income below the higher rate tax threshold so that you can keep your child benefit may seem like the easiest option.

However, while doing this could mean you lose less than doing nothing at all, paying the money you would have scarified into a pension would essentially have the same effect.

Regardless of your attitude to pensions, investing in your future in this way will leave you better off rather than just sacrificing the money so it’s very much worth considering.

If you don’t have a pension, why not try following our Action Plan: How to get a Pension.

Before you take any action to reduce your taxable income it’s important to research the full implications so that you make the right decision for your household finances.

About the Author:

By Martin Lane from money.co.uk

With the deadline for filing fast approaching, we felt it’d be useful to establish a list of tax tips and reminders for home-based businesses. In particular, those who started their businesses in 2011 have much to learn when it comes to the ins and outs of dealing with the IRS. Using your home as the site of an ongoing enterprise may seem like it requires diligent navigation of the tax code to avoid an audit, but the process is not nearly as complex as you may think. With half of American businesses located within the home, how could it be?

While it may be a little late to put some of the following to use for this tax season, these pointers should become engrained into the tax paying planning for your home-based business:

Time your startup expenses accordingly: Up to $10,000 in costs of enterprises that are losing money – mainly those just starting out – can be deducted as capital expenses. This can include just about everything that goes into establishing a home-based business, from advertising costs to supplies. Therefore, it’s wise to get all the necessary purchases bought and paid for prior to your small business getting up and running.

Fear not home-office deductions: Many folks starting out with a home-based business mistakenly believe that the IRS has a separate division of employees that analyze every move of entrepreneurs working at home to catch them double-dipping. But regulations for home-based business deductions have loosened in recent decades, and the IRS has a webpage that describes in detail what constitutes a home office deduction.

Keep track of mileage: You may think you won’t put more miles on your automobile for the sake of your business than the standard deduction accounts for, but you may be surprised when you add it up at the end of the year. Many miles mean big deductions, so keep track of how much you’re driving for your business from the get-go, even if you don’t expect to do much traveling.

Put the kids to work: Wages count as business expenses, and children can earn up to $5700 ever year and not pay taxes on their income. The result is simple: give your kids positions within your company, cut them checks, hand out W-2s, and enjoy the tax breaks as a result. If you’re going to be handing out allowances and using the help of your kids anyway, this strategy makes a lot of sense.

Stay organized on all levels: From receipts to invoices to mileage, you need to keep track of everything in order to minimize the surprises come tax time. But more importantly you need to consistently adhere to a realistic home business budget in order to not only prevent making poorly planned financial choices that may lead to major tax burdens later one, but to be better prepared in the event that such emergency debts to the government need to get paid.

Starting a home-based business is one of the most American of entrepreneurial experiences. But so is paying taxes. Giving Uncle Sam his correct cut is sure to keep you from hiding your assets in Edmonton self storage out of paranoia, as well as enable you to have as much money as possible to further invest into your enterprise. It’s one of the few aspects of starting a successful small-scale enterprise that’s easier said than done.

About the Author:

This Guest Post is written by Samantha Peters, an active blogger who enjoys writing about anything of interest to entrepreneurs and business start-ups.

As an entrepreneur it can be all too easy to focus on making money and re-investing in your business, and neglect the prudent measure of developing some savings. Saving accounts can be an essential back up when you experience cash flow problems, a challenge that your business will inevitably face at some point. If you have yet to think about opening additional saving accounts to act as reserve finance for your business the most important thing is to act now – and this process need not take up a lot of time. There are a range of saving accounts and other savings vehicles that are easily accessible through retail banking. Here we will take a snapshot of the options typically provided through retail banking by looking at the saving accounts provided by Santander, one of the major players in the market.

The Instant Access Account offered by Santander is in many ways an ideal option for the small business. The instant access descriptor could be viewed as applying in a couple of ways, as this account is managed online, and so easily accessible in a hurry. This account also offers instant access to the cash within, without incurring any penalties for withdrawal. At the time of writing, the interest rate of 3.1% on offer for the initial deal period of 12 months is not far off what more restrictive savings vehicles can offer. This all means that this type of account should be used as reserve for at least a portion of your savings, as the accessibility of the money is perfect for dealing with temporary cash flow problems.

If you expect to have significant cash to park in a savings account in the near future you can look to develop more growth on the balance by locking the money away in a bond. As is typical of the market, the Fixed Rate Bonds offered by Santander deliver superior interest when compared with the Instant Access option, provided of course that you sacrifice the ability to get your hands on the cash before the term of the bond ends. Fixed rate bonds therefore present a more long term saving strategy, delivering better growth the longer you agree to keep the cash locked away. On the flip side, the inflexibility of the deal means that fixed rate bonds are definitely not suitable as your sole savings vehicle, as you will not be able to access the money early – before the bond matures – to address cash flow problems without incurring a penalty that will pretty much wipe out any growth that has been achieved.

Those that are registered as ordinarily resident in the UK for tax purposes can also look at the tax free savings options provided by the range of ISAs (Individual Savings Accounts). This type of account was introduced by the UK government to encourage citizens to save, offering tax free growth on balances up to a specified annual limit. For more information on ISAs and who qualifies to open these accounts, try looking at: www.hmrc.gov.uk/isa/faqs.htm.

Choosing a Business Structure [Business.com]