Category: Finance & Capital

Article Contributed by Kristen Gramigna

Businesspeople understand that a good credit score is a valuable asset, especially if you intend to get a business loan. A good credit score comes with many advantages, including strengthening your negotiation position, protecting your personal credit rating, limiting personal liability, conserving cash flow, limiting accumulation of personal debt, and maximizing financing opportunities. So improving your business credit score is well worth the effort.

How can you do this effectively?

Your personal credit history affects your business credit prospects only if you plan to use a personal loan to finance your business. In this case, you can get the capital you need only if you have a good credit history, and your personal credit score dictates not only how much money you’ll get, but also the interest rate, terms, and conditions of the loan. Thus, finding the most effective ways to improve your credit score is crucial. So, what should you do?

1. Request Copies of Your Credit Report: Visit The Annual Credit Report (theannualcreditreport.com) which provides credit reports issued by the three main bureaus — TransUnion, Experian, and Equifax. Be certain you understand all the data, including the details regarding your payment history, current loans, and total amounts owed.

2. Check for Inaccuracies: Your credit report may include incorrect or incomplete information. So check your credit report thoroughly and ask the credit bureau to fix incorrect or incomplete data. Don’t forget to ask for a copy of your new credit report after the error correction has been confirmed.

3. Pay Bills on Time: Your credit score relates to paying your bills by the due date. If you’re unable to keep track of your bills, setting automatic payments from your bank account is a great idea. If you opt for this convenience, be sure you have enough money in your bank account to avoid overdraft fees.

4. Understand How Credit Scores Are Determined: Credit scores are determined based on specific criteria, such as the number of unpaid bills, comparisons between the amount of debt and credit limit, whether you have a long or short credit history, if you’ve applied for a new loan, and how many and what type of credit accounts you have. To achieve a high credit score, the following factors are considered: If the amount you owe is much lower than your credit limit; if you’ve paid all of your bills; if your long credit history shows low balances and timely payments; if you haven’t applied for new accounts recently; and if you manage a mix of credit cards and installment loans without any issues.

1. Use a Professional Service: If you’re unable to repair your credit on your own, find a credit counselor who can help you develop a plan to manage your finances and pay off your debt.  However, be aware that some agencies charge excessive fees that will put you even deeper in debt.

About the author:

Kristen Gramigna is Chief Marketing Officer for BluePay, a merchant account provider that also offers payment gateway services. She brings more than 15 years of experience in the bankcard industry in direct sales, sales management, and marketing to the company and also serves on its Board of Directors.

Article Contributed by David Spring

Even in the current global financial climate, new businesses are setting up shop in Canada every day. But these remain challenging times, and if your business is going to not only survive but succeed, you need to get a few things right from the start, particularly as far as finances are concerned. Here are five tips that may give you a head start.

#1 – Decide what kind of company is right for you

The most fundamental choice to make at the start, and one which may affect your business affairs greatly later on, is what type of structure your company will take. For many small start-ups with limited assets sole proprietorship or a partnership is the way to go, but these do have the disadvantages of leaving you personally liable for what the business owes if things don’t go so well. This risk can be avoided by making your business a corporation, but this is more expensive from the outset and means you must follow a variety of tightly controlled legal procedures and regulations.

#2 – Identify what financial advice is available

If your business is going to stay financially viable then you’re going to need some degree of financial advice to carry you forward. This might simply be online resources such the CRA’s (formerly Canada Revenue) website – and Revenu Quebec’s website for Quebec residents -, or you may see fit to hire an accountant to provide more in-depth financial advice. A third option that may particularly suit those with limited financial resources is to use dedicated accounting software designed by professionals to make sense of your finances.

You should also shop around for the best bank accounts and business credit cards to ensure they’re working in your favour.

#3 – Identify the most suitable accountancy package

Right at the start, you should also identify what type of accountancy package will work best for your company. Hiring an accountant is one option, but this is often not feasible for new start-ups. You can of course do it yourself, but this can be time consuming and may result in errors. Again, a viable compromise is to use accountancy software to handle your own accounts. This can save a considerable amount of time and help you to keep your records up to date.

#4 – Keep accurate records to simplify tax returns

Likewise, specially designed tax software can help you to keep track of your taxes, and can give you a real time view of what is owed to the CRA.

#5 – Draw up a cashflow forecast for your first year and have a contingency plan

It’s important to plan ahead, and drawing up a 12-month budgetary forecast of your monthly business revenue and outgoings can help you to do just that and foresee any potential cashflow problems in advance. You should also have contingency plans in place for if things don’t go as planned. This might consist of money in reserve to cover ‘slow’ months, or you might plan to target a different market if sales don’t take off as expected.

About the Author

David Spring blogs about personal finance and taxes, covering everything from accounting software to strategy for small businesses. He has written articles in both English and French.

Article Contributed by Mark James

Fear, worry, panic. All emotions that an impending tax deadline can register in the entrepreneur. Not just on a financial basis but on a little logistical basis too.

Not having any sway in government circles I can’t help too much on the financial front but I can help on the logistical front, drawing upon my own time spent as a solopreneur.

So, if you’re a little lax with your tax and struggling to get your accounting back on track, here’s a few tips that might help you throughout 2013…

First up, get to grip with the tax facts

For most of us, tax is taxing by its very nature.

Driving much of this confusion is the fact that legislation is constantly changing, making it a struggle to keep up with what you’ll need to pay, what you’re entitled to and the impact all of this can have on your finances.

Thankfully though, the IRS have recently taken strides to demystify things a little, introducing ‘webinars’ to explain the current tax system and just what you’ll need to do to get your taxes successfully filed. Taking a look at these should help improve your tax knowledge for 2013 and help ensure that you avoid any nasty fines.

Make accounting part of your routine

Integrating some accounting into your daily or weekly routine can greatly reduce the stress come tax return time, so see when and where you can put time aside and save this purely for some bookkeeping.

Yes, it may be dull in comparison to the other facets of running your business, but it’s nonetheless vital. Put it off and you’ll just heap more stress on yourself later down the line. Get to grips with your accounts sooner, rather than later.

Organise every aspect of your paperwork

Good organisation is integral to establishing healthy looking accounts.

Keeping all your documents in a disorganised draw or shoebox can cause unnecessary grief, making it a struggle to find those important documents when you most need them.

Instead, look into establishing a filing system, with different sections for invoices, bank statements and all the other facets of your finances. This should make constructing your accounts easier and decrease the stress come tax return time.

Get techy with your accountancy

Elsewhere, it’s worthwhile perusing over some of the accountancy apps and software currently available, as there’s a lot that can make financial management easier.

Apps like Pageonce offer a platform to keep track of all your ingoings and outgoings whilst the online accountancy market continues to grow, offering a neat and tidy place to keep all your accounting affairs online.

See what you need help with and explore the app store. Chances are that with over a million apps in there you’ll find something.

As we near the end of January, New Year’s resolutions are inevitably being cast by the wayside. Gym memberships going unused, diets being disobeyed and smokers relighting their cigarettes across the globe…. don’t follow suit with your accounting resolutions!

About the Author

This article was contributed by Mark James, an in-house Writer for Crunch, UK based small business accountants. He specialises in Small Business and Finance, more specifically how start-ups can succeed in what’s a tough economic environment.

If you own a start-up or small business, you’ll have a lot on your mind.  Your income depends on the quality and quantity of your work, your marketing strategies and even the state of the economy, because you rely on people being able to afford your services or products.

But one thing you don’t need to lose sleep over is what would happen if you were sued by a client for personal injury or financial loss, or have your business premises and equipment destroyed, damaged or stolen.  Those risks can be easily insured against, as would any related legal fees.

General contractor liability insurance is paid on behalf of an insured party to render services and compensate for negligence according to a law or contract. There are two ways to utilize commercial general liability insurance. It is available through an Occurrence Form, which provides liability coverage for loss or injury that happens during the policy period (regardless of the date on which the claim was reported), or through a Claims Made Form, which provides coverage only if, during the policy period, a written claim is made.             

This type of insurance is designed to protect policyholders from lawsuits and other claims, which is particularly important for businesses. If the policyholder is sued for claims that took place during the policy’s coverage period, they will be protected, and should be able to avoid financial peril. There are many factors to consider before purchasing commercial and professional liability insurance policies.

In conclusion, it is necessary to insure against the sorts of threats your business is most likely to encounter regularly, instead of the occasional rare threat that is encountered once or twice – if at all – over the business’s lifespan. To get started on protection for your business, speak to your trusted advisors today. Most insurance partners should be able to provide you with business liability insurance quotes that are tailored to your business needs.

You own a small business, but accounts receivable are piling up. It seems that everyone is a “slow pay” these days, but your business needs working capital to operate- and it needs it now. Your banker wants more collateral, and he will not accept your accounts receivable for that purpose, so what is one to do?

The “answer” for many struggling businesses has been a new entry in the field of finance – the Merchant Cash Advance, or “MCA,” for short. Bankers may have fled from the small business community due to credit risk, but there is ample investor cash on the sidelines looking for better returns even when risk profiles are high. This new funding source, however, is expensive and may not be suited for your business model, such that extreme caution should be exercised before heading down this funding path.

What is an MCA? In most cases, it is tied to your daily credit and debit card activity with your merchant processor, although many providers have expanded into making these advances available on an unsecured basis to qualifying small businesses. Technically speaking, these advances are not loans, do not fall within fair credit law dictates, and are for the most part unregulated. Depending on your weekly billing history, a portion will be advanced for your use. A factor from 20% to 50% or higher is added, and then the total is collected ratably over an agreed upon time period from your daily receipts.

If it works for you, this funding source can grow with your business, but experts warn prospective applicants to be cautious; “Next to borrowing from Tony Soprano, MCA’s are very expensive and often have repayment penalties that prevent the borrower from getting out of a difficult situation.” The industry arose five years back when banks departed the scene. Usury complaints and unfair business practices have subsided to some degree, but here are a few tips to follow before jumping into this:

• First, read up on the funding method and become familiar with what it is and how it works. Internet search engines can direct you to a host of articles and independent testimonials on this topic. The North American Merchant Advance Association website is a good place to start. It was formed in 2008 to “set ethical standards for the industry”.
• Does your business model have quick turnover and high margins to support the high costs of this funding option? For example, a $20,000 advance might carry a 20% fee and require a $2,000 payback over twelve months in a best-case scenario. This interest-rate tab computes out at a 40% rate, and higher still for shorter payback periods, which are more common. Does your business have the capacity to generate the necessary margins to cover this expense and remain profitable? Experts once again counsel, “With this short repayment period, a majority of the company’s credit card revenue is deferred to pay back the loan instead of being available to cover operating expenses.”
• This option should not be viewed as a long-term alternative. It is designed for an immediate need. You need to get in and get out quickly. “MCA companies are great at offering to loan additional money to borrowers based on the increase in monthly credit card transactions or when a loan matures. It is very easy for a company to fall into the trap of continued borrowing from an MCA when it may no longer be necessary.”

MCA’s are the latest funding option to hit the market, but proceed with caution and understand your risks before committing.

Ms. Bekiroglu is a published freelance writer and editorial consultant for www.mobilepaymentgeek.com. After receiving a Bachelor of Arts degree from the University of South Florida, she became determined to eliminate her student loan debt, thus becoming very knowledgeable about money management. Now she seeks to educate others with tips in both personal and business finance.