With the release of President Obama’s FY2011 Federal Budget on February 1, 2010, we can now track the proposed changes that will affect every business and citizen of the United States. The final budget will change between now and whenever Congress finishes their work, but there are a few noticeable proposals that will have good and bad affects on American small businesses.
The Budget Document that describes the actual monetary proposals is 192 pages long (download here http://www.gpoaccess.gov/usbudget/fy11/index.html ) and can be, well frankly boring.

We have identified 4 proposals that we find are both good and bad for small business.

4 Good Proposals
• Eliminating capital gains tax for investments in small businesses. This should attract considerable amounts of new investment capital.
• Immediately implement a small business job and wage tax cut in 2010. This should give you confidence to hire and expand your business with a $5,000 tax credit for each new employee.
• Immediately implement a small business investment tax credit. This will allow you to write off up to $250,000 in qualified investments in 2010.
• Making the research and experimentation credit permanent. This will continue to attract investment for start-ups and investors in innovative businesses.

4 Bad Proposals
• Re-instate the 36% tax rate for individuals making over $200,000 and families over $250,000. Successful small business owners and families will pay more income taxes.
• Changes to IRS worker classification regulations. This will expand the definition of employee and reduce the independent contractor status leading businesses to hihger the benefit costs.
• Changes to accounting rules on inventories. This will lead to increase in taxes on inventories.
• Changes to accounting rules on transactions. There will be increased reporting requirements on deals over $600, increasing the number of transactions being taxed.

In general, we feel that these changes will help the small businesses that need financing now. These are changes that encourage you to hire and expand your business. We can provide the small business loan, cash advance for your business to grow in 2010.

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Here is how a business cash advance (sometimes called a merchant cash advance) works. A business cash advance financing company will purchase a portion of a small businesses’ future credit card sales. In return for this purchase, the small business will receive a lump sum of cash, deposited into its business checking account. It is quite common for the small business owner to receive this money within a week of being approved. Most companies in this financing industry will offer a one-day approval process once receiving a completed application.

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The Wall Street Journal wrote a sad story citing examples of personal bankruptcies resulting from failed businesses.

We point this out mainly because there are alternatives to business loans that frequently do not require a personal guarantee to repay in the event a business fails.  These are so-called standard business cash advances.  There are many providers of such business cash advances, also known as merchant cash advances.

Are there drawbacks to using sources of business capital that do not require personal repayment guarantees?  Yes. The first is these frequently require that the business switch its credit card processing to a new provider. The second is that this form of financing usually provides a smaller amount of money than a longer-term loan-like product would provide.  This is because the financing company assumes repayment will occur in a year or less, whereas loans repayment terms often assume a longer duration, ranging from one to five years.  Third, this form of capital is viewed as expensive by some.

However, when you consider the benefits of a business advance, frequently including no personal repayment guarantee and access to capital in under a week, these more than offset the potential negatives.

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At the time, monthly credit card sales were $40,000.  The cash disbursement happened about a week after the approval process.  The shoe store had inventory for a new set of more popular shoes delivered shortly after the cash showed up.

The next month’s credit card statement shows $60,000 in sales, owing in no small part to the increase in inventory.  Certainly there were other factors at play like back-to-school shopping and perhaps the economic revival so often-reported.

Still, we were pleased to be part of the company’s success in leveraging an injection of new working capital to increase sales.  We hope to report back about how this special retailer’s sales are going in a few months.

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You may contact us at 1-877-221-3003 or learn more about the opportunities.

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