Helpful insights on good business practices, commercial loans, alternative forms of financing and planning your company’s future.
June 29, 2010
Source: National Restaurant Association, http://restaurant.org/advocacy/news/hiring/
Employers can take advantage of two new tax incentives for hiring and retaining certain people who haven’t worked in the past 60 days. The benefits are part of the Hiring Incentives to Restore Employment Act. President Obama signed the HIRE Act into law March 18. Here’s how you can use the incentives when you hire qualified new employees:
• Get a break from the 6.2 percent payroll tax. Under the HIRE Act, businesses are exempt through year-end from paying their 6.2 percent share of Social Security taxes on qualified employees’ wages. Here’s the fine print:
- The payroll tax exemption applies to qualified employees hired between Feb. 3, 2010, and Jan. 1, 2011. It applies to those employees’ wages from March 19 through Dec. 31, 2010. The tax incentive is capped at $6,622 per employee (6.2 percent of wages up to the maximum taxable Social Security wage base of $106,800).
- Newly hired employees must sign affidavits certifying they hadn’t worked for more than 40 hours in the 60-day period ending on the day they start work. The IRS today released the final version of a sample affidavit, Form W-11, HIRE Act Affidavit.
- Employers claim the exemption when they file their quarterly Form 941, Employer’s Quarterly Federal Tax Return. Employers can begin to claim the exemption on the Form 941 filed for the second quarter of 2010. The IRS has issued a draft revised Form 941 to reflect the new payroll tax incentive.
- The employee continues to pay his or her 6.2 percent share of the Social Security tax, and both employers and employees pay the 1.45 percent Medicare tax on all wages.
- Other restrictions apply. For example, new employees mustn’t be related to the employer. Also, the employer must certify that the new hire isn’t replacing another employee unless that employee separated voluntarily or for cause.
Check the IRS’s HIRE Act: Questions & Answers for Employers for details.
• Get up to $1,000 for retaining those employees. If an employer continues to employ one of the above-described people for at least 52 consecutive weeks, the business also can receive an employee retention credit of up to $1,000.
Businesses claim the credit on their 2011 tax returns. The credit is worth $1,000 or 6.2 percent of an employee’s wages over 52 weeks, whichever is lower.
The employee retention credit follows the rules that apply to all general business credits under Section 38 of the Internal Revenue Code. The only exception is that any excess business credit resulting from the employee retention credit can’t be carried back. It can, however, be carried forward.
Note: Employers who claim the Work Opportunity Tax Credit when they hire certain employees from disadvantaged groups can claim either the HIRE provisions or the WOTC, but not both. Individual companies should compare the tax benefits associated with the WOTC (which offers a maximum annual benefit of $2,400 per worker) and the two HIRE provisions, to determine which provides the better tax benefit.
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Tags: Economic Policies, Economy, Federal Spending, Small Business
June 25, 2010
 - Economic and Financial Developments
by David Lau, CTO, Allied Affiliated Funding
As a former start-up entrepreneur, one of the things I quickly learned is to price my products and services to obtain a net profit that will allow for business growth. A typical business targets a net profit in the range of 7-12%, but this number varies depending upon the type of business. I aggressively set mine at 15%. In starting up a business, it is too easy to fall into the trap of setting your price below that of your competitors so you can generate more business. This may be okay for a short period of time, but over the long term, you will find this method is not productive. You obtain contracts, pay salaries, vendors, overhead, but at the end of the day, you just don’t have enough capital to buy that extra piece of equipment, start a marketing campaign, hire an additional sales person to increase your growth, or coast through a month of reduced sales. I have experienced this cycle firsthand, and it is counterproductive.
The challenge is to price your products and services to what the market can bear and be able to generate a reasonable net profit that will allow for business growth. If you feel the pressure to reduce your pricing, think of alternative and creative ways to add value while maintaining your pricing. Some ideas to maintain pricing would be to provide something of value to your customer – additional customer service, an extended warranty, vendor sample products, etc. Maybe you have a person in-house who is already covered in overhead expense, but can be offered to a customer to solve a problem such as training. Also, to increase your sales at a minimal cost to you, be sure to take advantage of volume discounts. Sometimes, simple measures like these are all you need to employ.
Of course, factoring your receivables is always an option to increase your cash flow, and this is where Allied can help. Several benefits of factoring are to: obtain an instant source of working capital/cash flow, finance rapid sales growth, fulfill payroll and tax obligations, purchase necessary equipment or inventory, take advantage of trade discounts, outsource accounts receivable management, and eliminate internal collection and accounting costs. These benefits obtained with extra working capital can be very advantageous for a small business. It certainly was for mine.
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Tags: Financial, Small Business, Working Capital
June 16, 2010
Pismo Beach, CA – June 14, 2010 - The International Factoring Association (“IFA”) today announced that three new members were appointed to its Board of Advisors for 2010-2012. The new advisory board members will serve a two-year term. The board members will assist the IFA in broadening the public understanding of the uses and benefits of factoring, help to design training programs, help to foster new ideas and innovations that benefit its’ member organizations. The new members appointed to the 2010-2012 Board of Advisors include: Paul Cottone, Allied Affiliated Funding, Dallas, TX; Oscar Rombola – ITC Invoice to Cash – Mississauga, ON, CANADA; and Tim Valdez – Transportation Alliance Bank – Ogden, UT.
Paul joined Allied in March of 2009 as Executive Vice President. He is responsible for Allied’s strategic alliances and for the integration and systematic approach of Allied’s acquisition opportunities. Prior to joining Allied, Paul was employed by Textron Financial, serving as SVP and Managing Director for the Finance Company Services Division of Textron Financial Corporation. Paul has significant experience in structuring, pricing, and syndicating senior debt facilities for independent commercial and consumer finance companies. Prior to joining Textron Financial, Paul served as SVP and Division Manager for the Rediscount Finance Group of Fleet Bank. In addition, Paul held leadership positions at Bank of America Business Credit Specialty Finance Group where he was SVP and Group Executive and at CIT Credit Finance, Inc. where he was SVP and Eastern Regional Manager.
“We are very pleased to have the opportunity to bring the expertise and insights of such a distinguished group of individuals to our advisory board”, said Bert Goldberg, Executive Director of the International Factoring Association. “I look forward to working with all of them over the next twenty four months”.
About the International Factoring Association
Headquartered in Pismo Beach, California and with over 350 corporate members, the International Factoring Association is the largest association of commercial finance companies in the world. Members include factoring companies, asset based lenders and other receivables finance companies. Since 1999, the International Factoring Association has provided a forum for member organizations to meet and discuss issues and concerns, share best practices, disseminate information and promote a single voice to the marketplace. The principal spokesperson for the factoring and receivables finance industry is the International Factoring Association’s Bert Goldberg. For more information visit www.factoring.org.
June 15, 2010
Controller, Computer Workstation Manufacturer, Austin, TX
“I will admit when my company was first notified by our current bank that our finance agreement would not be renewed, I was very concerned about working with a receivables factoring company. Nothing against the industry, I just felt it would be a negatively perceived in our market place. However, after spending a couple of days with the management team at Allied Affiliated Funding, I learned my concerns were totally unfounded. We have now been with Allied for almost six months, and I will say I am extremely impressed with their professionalism, flexibility, responsiveness and their continued desire to assist us in providing the capital we need to effectively grow our business. Even as our financial strength has improved, we have no intentions of moving away from Allied back to conventional funding. This has been a great partnership, and I would expect it to continue in the future. I would be more than happy to recommend Allied Affiliated Funding to any company.”
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Tags: Small Business, Success Story, Working Capital
June 8, 2010
By David Lau, CTO, Allied Affiliated Funding
As a small business owner back in the early 2000’s of Wirenix, Inc., my company’s products included high dollar telecommunication speech recognition equipment that resides in the service provider’s network and engineering services. Receiving orders, then delivering, required large amounts of capital as we had to procure computers, software, telecommunications gear, deliver the equipment to the customer’s central office, and perform integration/tests on site for final acceptance. This process could take upwards of 60-90 days. During this time, our vendors required net 30 days payment, but we still had to pay salaries and travel expenses.
The dichotomy in running a small business is you need capital to provide growth, yet it is difficult to obtain capital from lenders. In today’s environment with the financial meltdown, securing loans is especially difficult, making it even more challenging.
Fortunately, my company was introduced to Allied Affiliated Funding (formerly Allied Capital Partners). Allied provided the breath of fresh air we needed and eliminated one of the major roadblocks in pursuing multi-million dollar deals. With the funding provided by Allied, we knew we had capital to back up our delivery promises to our customers.
Given our past track record and through building a relationship with Allied, we were able to establish a factoring partner for our purchase orders. We did deliver in the 60-90 day window, received payments from customers, and Allied continued to provide factoring services for three years as we continued to grow and succeed.
One of the lessons learned in growing a business is to deliver on your commitments, both to your customers and to your lenders. This builds trust and opens doors to many more opportunities, not only in additional revenue, but increased capital as well.
Related Articles: Allied Affiliated Funding Provides $500,000 in Start Up Financing to Texas Staffing Company, Allied Affiliated Funding Closes First Factoring/ABL Transaction of 2012, Allied Affiliated Funding Provides $500,000 in Working Capital to Northeast Manufacturer, Allied Affiliated Funding Provides $750,000 in Acquisition Financing to Wisconsin Distributor , Allied Affiliated Funding Provides $5,000,000 Working Capital/Growth Facility to West Coast Manufacturer , Allied Affiliated Funding Provides $2,500,000 Working Capital Facility to Northeast Based Service Company , Allied Affiliated Funding Provides $3,000,000 Growth Capital Facility to North Atlantic Packaging and Fulfillment Services Company, Allied Affiliated Funding Provides $4,000,000 Growth Capital Facility to New York Wholesaler , Allied Affiliated Funding Provides $750,000 Growth Capital Facility to New York Wholesaler and Distributor, Allied Affiliated Funding Provides $300,000 Start Up/Growth Capital Facility to New York Service Company
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Tags: Small Business, Working Capital
June 2, 2010
Facility Amount: $1,500,000
Date Funded: 5/26/10
The Company: This New York staffing company is a 40 year old, primarily family-owned, marketing solutions company that executes on-site retail initiatives on behalf of retailers, consumer packaged goods manufacturers and financial service companies nationwide. They focus on in-store merchandising, auditing, product sampling and demonstrations, mystery shopping, consumer and “green” education, associate sales training, consumer acquisition, and signage placement.
The Issue: Over the past four years, the founder’s health has deteriorated as well as the financial performance of the business. Last year, a management team was brought in to help reorganize the business and focus on new product lines. The company had been factoring their accounts receivable with another factor, but they were at the end of their contract.
The Solution: Now entertaining other factoring companies, a member of the management team referred the company to Joel Flig at Allied. The pricing on their current factoring deal was significantly higher than what Allied was willing to offer and included additional minimum fee charges, something Allied does not impose.
The Win: Since the company was at the end of their factoring term and was now looking to increase their revenues in addition to identifying cost reductions, this working capital facility provided by Allied helps the company achieve both objectives.
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Tags: Joel Flig, Recent Fundings, Small Business
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