The Small Business Administration announced proposed changes to the 504 and 7(a) SBA loan programs this week, saying the tweaks would help streamline the application process and expand access to the programs.
The two SBA loan programs that would be affected by the proposed changes are the 504 and 7(a) programs. The 504 SBA loan program provides long-term fixed asset financing to small businesses, to be used for buying or improving land, buildings or equipment. The 7(a) SBA loan program aims to assist eligible small businesses in accessing credit when they are unable to do so elsewhere.
Both programs’ ultimate aims include facilitating job creation.
“Streamlining and simplifying has been a key focus of our agency over the last few years,” the SBA’s Karen Mills wrote in a press release. “The changes are the latest steps to reduce paperwork burden, with our eye on the larger goal of expanding access to capital and giving entrepreneurs and small business owners the financial resources to grow and create jobs.”
The proposed changes announced by the SBA include eliminating the personal resource test, which requires potential borrowers to “obtain a maximum level of personal finance resources.” Additionally, the SBA is proposing a revision to the rule on affiliation, which currently blocks potential applicants from obtaining loans under size standards, due to affiliations with other companies.
The proposed changes would also reduce the paperwork requirements for both loan programs and eliminate the “nine-month rule” for the 504 program, which limits businesses to including in their 504 project application expenses that have occurred only in the nine-month period prior to the date of application.
Lastly, the SBA is suggesting an increased accountability for the Certified Development Companies (CDCs), which are the “community-based partners for providing 504 loans,” as described on the SBA’s website.
Business insurance myth: Small business owners have a lot on their plates. In addition to being CEOs, they’re often CFOs, CTOs, CMOs, and just about everything else. On top of that, their personal finances are usually mixed with the business finances, making each dollar they spend or save that much more important.
This means that small business owners are often skeptical of new products and services (decidedly a good thing). But it also means small business owners have a heightened need to mitigate the many risks they juggle. The right business insurance can provide excellent protection, but small business owners should understand the truth behind these insurance myths before deciding on their coverage.
It’s that time of the year again when it’s out with the old and in with the new. This month is the ideal time to clean out business files to get a fresh start for the new year and get paperwork organized. Here are some tips to help small business owners get ready to file their 2012 taxes and get ready for 2013:
Today, President Obama signs the Jumpstart Our Business Startups (JOBS) Act into law. For those of you who haven’t been following the JOBS Act, it is a bill that will make it easier for startups and small businesses to raise funds, especially through online crowdfunding.
As an entrepreneur myself, I’ve been watching the evolution of the JOBS Act very closely. It passed Congress last week through a 73-26 Senate vote and a 380-41 House vote, including an amendment designed to protect crowdfund investors in order to make it easier for startups to access financing.
Both statistics and anecdotal evidence tell us entrepreneurship is the key to job creation. So, while the JOBS Act doesn’t relate to the job market per se, I asked a few crowdfunding experts how it might impact the unemployment rate.
“Simply, the JOBS Act will make funding more accessible for startups by allowing non-accredited investors to participate in the funding rounds, and this alone, I believe will be the main factor driving the increase in new companies being founded. And with new companies comes the need to hire staff. Without a doubt, this will help the current unemployment rate,” said Tanya Prive, founder of Rock The Post, a social networking platform for entrepreneurs to fund and swap resources.
The 2010 law governing gift and estate taxes is set to expire at the end of this year. For 2013, assuming Congress does not act, the lifetime limits on gift tax will fall from $5.12 million to $1 million. That means an individual can gift, over his lifetime, no more than $1 million tax-free starting in 2013. The top gift tax rate on amounts of more than that $1 million threshold is also scheduled to rise from 35 percent to 55 percent starting next year.
If you are living outside the U.S. and using a foreign address on your credit-card and electronic payment accounts, you will probably not be issued the new 1099-K tax form, says Barbara Weltman, a New York-based tax attorney and author of J.K. Lasser’s Small Business Taxes 2012. In the instructions governing 1099-K reporting, the IRS specifically exempts payment processors from having to report transactions made to payees with foreign addresses. (I took a look at what the new rule means for businesses in the U.S. in a previous column.)
Of course, if your accounts are set up under a U.S. address, you will get the form. And either way, if you are a U.S. citizen you must file a Form 1040 and pay federal taxes on your income, regardless of where it comes from, says Wonsun Willey, a tax partner in the Morgan Hill (Calif.) office of CPA firm Sensiba San Filippo. Depending on whether you own property or have business interests in specific states, you may also be required to file state tax forms, Willey says.
Starting in January 2012, business owners will begin getting new tax forms issued by their credit-card and online-payment processors and intended to keep businesses from hiding income. The form, called 1099-K, will document all 2011 transactions processed for sellers with more than 200 transactions and $20,000 in annual gross receipts. The IRS estimates that 53 million forms will be issued by such processors as eBay, PayPal, and Amazon as well as credit-card companies, says Steven Aldrich, chief executive officer of Outright.com, which makes online bookkeeping applications for self-employed people and small business owners. Aldrich spoke with Smart Answers columnist Karen E. Klein about how small business owners should handle the new forms.
The new 1099-K requirement was signed into law by President George W. Bush in 2008 but is just now taking effect. Why is the government mandating this?
Turns out customizing video game controllers for gaming addicts who want to shoot faster can be a decent business. Tim Erven says his five-year-old venture, Custom Gaming in Whippany, New Jersey, has been profitable since he started it, with revenue around $300,000 in 2011, and some 250 orders a week now, mostly through its Amazon storefront.
To keep up with demand, the 22-year-old has been trying to get banks to lend him as little as $10,000 to improve his website and rent a warehouse near his home. The six banks he’s approached have rejected his applications because of his age and because he hadn’t gotten a business loan before, even though his tax returns show profits and his parents were willing to put up their home as collateral. “From what the banks told me, asking for 10 percent of my annual revenue was reasonable, and what tends to be conventional, but even by decreasing the amount I was seeking I was still unable to obtain approval,” says Erven, who juggles balances on six credit cards to manage cash flow.
The economy grew slightly faster than initially thought in the fourth quarter and a gauge of factory activity in the Midwest hit a 10 month-high in February, pointing to underlying strength in the economy.
Gross domestic product expanded at a 3 percent annual rate, the quickest pace since the second quarter of 2010, the Commerce Department said on Wednesday in its second estimate.
The reading, which was up from the 2.8 percent pace the government reported last month and reflected modest upward revisions to almost all components of GDP, added to the recent run of fairly upbeat economic reports.
The tone of the GDP report was further bolstered by upward revisions to income and savings data, which should help support consumer spending in the face of rising gasoline prices.
According to data compiled in tax year 2009, more than 4 million Americans claimed the home-office deduction on their tax returns. That’s about 3 percent of the total 140 million returns filed in 2010. The number is likely to increase this year, with business startup rates having increased substantially in 2011.
Kathy Pickering, executive director of the Tax Institute, research and analysis division of tax-services provider H&R Block (HRB), says the average home-office deduction is valued at more than $2,600. Yet many taxpayers are unclear about how to claim the deduction, or they worry that if they do, they’ll face an IRS audit. Pickering says that although the home-office deduction is scrutinized closely, it should be used by those who are eligible.