Is Incorporation the Right Move When You’re Ready to Expand Your Small Business?

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When you’re launching a new business, one of the most important decisions you have to make is how to structure your venture. If you’re running the show alone, operating as a sole proprietorship often makes the most sense.

However, you may rethink how you want to define your business as it evolves. If you have an interest in expanding your operations, then incorporating your business is a logical next step.  However, incorporation is a bit more complicated than being a sole proprietor. Weighing both the advantages and disadvantages of incorporation can help you determine whether it’s something you should pursue.

How incorporating can fuel your business growth

From a growth perspective, incorporation benefits you in two ways. First, it allows you to establish credit in your business’ name. If you want to apply for a loan, establish a line of credit or open a corporate credit card account, you wouldn’t have to put your personal credit on the line. Having credit in your business’ name can also come in handy for obtaining working capital if your personal credit is less than stellar.

Besides that, operating as a corporation works in your favor if you want to raise funds using angel investors, venture capital or crowdfunding. Typically, all three require you to hand over some sort of equity stake in the business. In order to offer shares through equity crowdfunding, to a VC, or an angel investor, you’d have to be incorporated first.

Are there any downsides to incorporation?

Like any other business decision, you have to consider the potential drawbacks of incorporating before making a move.  The cost and the time involved to complete the incorporation process are the most significant obstacles to watch out for.

The requirements for forming an S-corp, C-corp or Limited Liability Company (LLC) vary from state to state; but generally, there’s a good deal more paperwork involved than establishing a sole proprietorship. The fees for filing your articles of incorporation can run several hundred dollars alone.  If you hire an attorney to wrap things up, you could be looking at an even higher price tag.

Besides that, corporations also have to deal with a more complicated tax filing. Sole proprietors report business income on their personal tax return. However, it is not as simple to file your taxes when you’re incorporated.

Corporations have the advantage of being able to pay less in taxes.  They are also able to claim higher deductions for business expenses.  But, corporations are exposed to double taxation. Meaning, the corporation is required to pay income tax.  At the same time, the shareholders pay income tax on dividends. If you’re a smaller company and the only shareholder, that could add up to a bigger tax bite compared to what you might pay as a sole proprietor.

Weigh the cost against your business goals

Incorporating early on in the game may not give your business much of a boost.  There is also a high expense, that you may not be able to justify.  However, if you’ve been in operation for more than a year, then incorporation can be an excellent stepping stone to growth.  Compare the immediate cost of incorporation to your anticipated return on investment to measure its usefulness as an expansion tool.

Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped businesses in hundreds of industries.  Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.

Growing a Business Without Venture Capital, Why.

Growing a Business Without Venture Capital? Why Burn Rate Still Matters

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When you hear the words “burn rate,” you most likely think of startups that are just getting off the ground and relying on venture capital for their funding. While burn rate is something brand-new companies need to be concerned with, it’s not something that established businesses can afford to overlook either.

If you’ve been in business for awhile and you’re ready to grow, here’s what you need to know about burn rate and how to manage it more effectively.

Burn rate defined

In the simplest terms, burn rate is a measure of how quickly your business is using up its cash reserves. That could mean money that you’ve drawn from your own savings, funds you’ve borrowed from friends and family, loans and lines of credit or money you’ve raised through a crowdfunding platform.

Calculating burn rate is fairly simple. You subtract your monthly business revenues from the amount of cash you’re spending. For example, let’s say your small business has a $10,000 monthly cash outflow but it’s bringing in $8,000 in revenue. Your net burn rate is $2,000. If you have $20,000 in cash reserves, you’d be able to continue normal business operations for 10 months.

Why burn rate is important for growing businesses

When you’re a self-funded business, managing burn rate is vital because it influences the pace at which you’ll be able to expand. It’s a good way to gauge how much liquidity your business has and how long you’ll be able to keep the doors open without having to seek out additional sources of working capital.

A lower burn rate is generally considered optimal. A negative burn rate means you’re able to add to your cash holdings month over month. From a growth perspective, it’s helpful to look at burn rate in the context of where the money’s going. A higher burn rate in the short term can translate to more profitability, depending on how the money’s being used.

For instance, if you’re drawing on your reserves to cover the cost of hiring of new employees, making a major equipment purchase or expanding your business location, a temporarily higher burn rate may be justified by the return on investment (ROI).

How to manage burn rate effectively

Keeping your cash flow on an even keel is something of a balancing act, particularly when growth is part of your long game. With that being said, here are a few pointers that can help you keep your burn rate in check.

  • Reduce waste.

    A straightforward but effective way to slash burn rate is to eliminate unnecessary spending. One way to do that is by rethinking the way you utilize your resources. For instance, if a key piece of equipment breaks, ask yourself whether it’s more cost-effective to replace it or repair it. Cut down on paper waste by going digital with documents as often as possible. Making simple changes can be a boon for your burn rate over time.

  • Refine your invoicing system.

    Another way to avoid gaps in your cash flow is to have a clearly defined invoicing process. Allowing clients to wait 60, 90 or 120 days to pay isn’t feasible when you’re trying to grow. Be selective about who you extend credit to and -depending on the type of business you are running – encourage customers to pay in cash whenever possible.

  • Refinance debts if you have them.

    If you’ve taken on small business loans to fuel your growth, refinancing them could help with minimizing burn rate if it results in a lower monthly payment. Just be sure to calculate how much refinancing costs in terms of the interest and fees to make sure it’s worth it.

  • Focus on boosting revenue.

    Increasing sales is another smart way to curb cash burn rate problems. If you’re not netting the sales numbers you’d like, take some time to rework your sales strategy and processes.  Expanding profitable services or product lines while ditching ones that aren’t making as much money could be one option. Revamping your marketing campaign is another. If demand for what you’re selling is steady, raising your prices could result in the higher revenues needed to take your business to the next level.

Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped businesses in hundreds of industries.  Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.

Are You at Risk for Credit Card Fraud? What You Need to Know About EMV

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As we approach the one-year anniversary of the EMV switch, a majority of businesses still haven’t made the transition. According to a poll conducted earlier this year, only 37 percent of US retailers are EMV compliant. Despite the fact that they can now be liable for fraudulent charges occurring as a result of their outdated payment technology, many businesses do not fully understand all the benefits of making the switch.

If you’re one of the many small businesses that haven’t yet upgraded, it’s important to know both the risks and the benefits. Here are a few things to know about EMV.

Fraud Has Decreased

Counterfeit fraud has dropped by more than 18 percent among some of the biggest merchants, according to Visa. EMV cards have a built-in computer chip that holds the financial information the system needs. Unlike strip-based cards, criminals can’t create an EMV card using only a cardholder’s account number, expiration date, and three-digit code.

Unfortunately, counterfeit fraud is on the rise among merchants that haven’t upgraded. This indicates that criminals are targeting businesses that are still having customers swipe at the register. Retailers who haven’t made the switch may see their vulnerability continue to increase as more merchants finalize the migration process.

Merchants Are Now Liable

The promised liability shift happened as planned, with banks sending retailers bills detailing all of the chargebacks that resulted from their failure to upgrade.

One payment network reported an increase of 50 percent in chargebacks, with businesses urged to make the switch to avoid similar charges in the future. Prior to EMV, banks always absorbed the cost, but in a post-EMV world, liability switches to the party that was responsible for a transaction being unsecure. When businesses upgrade, they protect themselves from liability.

For some retailers, the entire process is frustrating.  Many have had their equipment in place for months and are still awaiting certification. The three major card companies recently reported that they have streamlined processes to make it easier for businesses to finalize the upgrade.

If you haven’t been certified yet, it’s important to put the process in motion as soon as possible, especially with such long wait times. Once you’ve let your payment processing provider know you’re interested in making the transition, you should be sent an upgraded card reader. At that point, you’ll merely be waiting for a certification team to complete the setup process. There are now third-party providers that promise to speed up this process.  Therefore, it might help to research this option before beginning your wait.

Security Concerns

Even once your business has made the switch, though, you aren’t 100 percent safe. Experts predicted, “card-not-present fraud” to increase once EMV was in place, and preliminary reports suggest they were correct. According to the Global Fraud Attack Index, card-not-present fraud increased 11 percent following the EMV deadline. However, it’s important to note that online fraud increased 215 percent in 2015 as a whole. The change could be more closely related to an increase in online shopping in general.

In addition to upgrading to EMV, businesses should consider fraud prevention in their brick-and-mortar locations and on their ecommerce sites. This can include software that detects multiple requests from the same IP, matching contact information to billing information, and putting customer-friendly return policies in place to avoid chargebacks. Even small steps can help a business protect its income.

EMV helps businesses reduce credit card fraud, but it isn’t completely foolproof. Business owners should finalize the process of transitioning to EMV. But, they should also continue to pay close attention to fraud prevention tactics, especially if they sell products online. As criminals discover they can no longer commit fraud at physical locations, they’ll likely turn their attention to websites, where they only need the number, expiration date, and verification code to make purchases.

Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped businesses in hundreds of industries.  Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.

Small Businesses Face Pressure to Provide Retirement Plans - What Your Business Can Do

Small Businesses Face Pressure to Provide Retirement Plans: What Your Business Can Do

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Previous generations placed a high priority on benefits when choosing a job. If a small business offered a high salary but no benefits, job candidates might turn it down for a lower-paying government job that had health insurance and a pension.

Now that small businesses provide more than half of all U.S. jobs, pressure is increasing to include benefits with each job offer. The Affordable Healthcare Act already has small businesses considering their responsibilities when it comes to medical benefits. But in recent years, employee advocates have begun calling for retirement plans for small business workers. If you run a small business, it’s important to know the legal requirements and options for providing retirement savings.

States Increasing Pressure

In Connecticut, Illinois, Maryland, and Oregon, qualifying small businesses must deduct a certain percentage of an employee’s paycheck for retirement. No employer matching is required yet, however, which is good news for budget-challenged small business owners; but employers are required to put a program in place and manage it in the states that have passed these laws.

The Pension Rights Center maintains a state-by-state list of updated legislation relating to small business retirement plans. Monitor this list to ensure you’re in compliance with local laws as they change.

Small Business Options

Only 14 percent of small businesses offer a retirement plan, according to the Government Accountability Office, and those employers face numerous challenges. In recent years, though, it has gradually become easier, as the financial industry has begun to meet the demand for small business retirement plans. Here are a few options for small businesses.

  • Employee Fiduciary—This Mobile, Alabama-based corporation specializes in low-cost retirement plans for small business. On its site, Employee Fiduciary announces that it has the lowest total fees for 401(k) plans in the country.
  • Vanguard—Small businesses can choose from small or individual 401(k)s and SEP or Simple IRAs with low expense ratios and no setup fee.
  • ForUsAll—This startup specializes in offering a 401(k) that is easy to set up and manage. Each investment has built-in administrative and investment fiduciary protection and a transparent cost structure.
  • Dream Forward Financial—Like ForUsAll, Dream Forward is a startup that is geared toward making 401(k)s accessible to small business owners. Employees have access to the site’s Emotional Advisor to help them determine which plan is best for them.
  • SaveDay—This startup provides free, personalized advice to help employees choose and manage a 401(k) plan. Employers can sign up, test drive the experience, then encourage employees to sign in and set up their own plan.

Small businesses may assume that signing employees up for a retirement plan will cost them serious money. In truth, they can often meet any legal requirements by simply facilitating the process. As they grow, employers will likely find they can start to match employee contributions.  In addition, they’ll find that a retirement program can be a perk that will help them attract and retain employees.

Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped businesses in hundreds of industries. Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.

How to Be a Fair Manager in a Family-Owned Business

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For many years, families ran small businesses, with some owners passing their companies on to the next generation. Today, many entrepreneurs often start businesses without involving relatives at all.  But, as the business grows, it can be tempting to enlist children, spouses, and other family members to help.

When that happens, it brings additional complications, especially for companies operating as a hybrid of family members and unrelated hires. If workers sense nepotism, it can put a serious dent in morale. Here are a few tips to keep things fair when managing both family members and outside staff in your business.

Have Written Policies

The best way to demonstrate your commitment to enforcing policies equally is to provide them in writing.

Create a thorough manual that documents your policies on everything from hiring to vacation time to termination. Include a description of the criteria necessary to qualify for promotions.  Finally, make sure you hold all employees to the same criteria, regardless of their relation to owners or managers. All employees should also sign a written job plan that outlines their day-to-day duties.  You should compare the plans against each other to ensure fairness.

Conduct Regular Evaluations

You should have each employee receive a regular performance evaluation that includes a written document and a consultation. Employees should sign the document to certify that they received it. This process will help you if you ever find that you’re charged with favoritism for terminating one employee instead of another. A documented history that you’ve discussed an issue with a worker will be exactly what you need if litigation is involved. It’s imperative that supervisors exhibit fairness at all times during this process, evaluating relatives by the same objective criteria that they use for rest of the team.

Hire Non-Family Managers

As your business grows, make sure your leadership team includes a substantial number of non-family members. Any relatives on staff should report to non-family members when possible. This will have the added benefit of placing distance between you and your relatives, which will make it easier to separate business from your personal relationship. When a supervisor comes to you to explain performance issues with your relative, advise them as you would if it were any other employee, taking care to resist the temptation to protect your loved one.

Take Accusations Seriously

If one of your employees levels a charge of favoritism at you or one of your team members, take that accusation seriously. Dismissing it will only alienate that employee, as well as others on your staff. Let the accuser know you will fully investigate the matter and take measures to correct any problems. If you’ve made the mistake of unfairly promoting a family member, you may have to reverse the promotion until every interested employee has had the chance to interview for the opportunity. This type of claim may be a sign that it’s time to take a serious look at your operations. You need to identify areas where you may be favoring your family members over the employees who aren’t related to you.

Running a family-owned business can be tricky but by having standards in place, you’ll create a foundation that will help you fairly manage your employees. You’ll likely need to take extra steps to make sure you don’t show favoritism. If you have others on your management team, though, they can sometimes let you know if you’re crossing the line.

Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped businesses in hundreds of industries.  Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.

How 5 Small Business Owners Capitalized on Viral Ideas

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Small business owners are always looking for ways to stretch their marketing budget while increasing their bottom line. With internet buzz at the time centered around the Olympics, Harry Potter and Pokemon Go, here are five business owners who have been able to capitalize on these trends.

1. Host a themed book launch party

Harry Potter fans have been eagerly awaiting the launch of the script-turned-book that features their favorite Harry Potter characters. As a result, one Denver bookstore took advantage of this by hosting a wizard-themed launch party, transforming this quaint bookstore into Diagon Alley.

To entertain attendees, the book store featured games, drinks, snacks, a photo booth and a costume contest.  In addition, attendees were offered the chance to get an exclusive 15% discount on any purchase of Harry Potter and the Cursed Child. Surprisingly, over 200 people attended with a good portion of them pre-ordering the book ahead of time, or purchasing it at midnight.

2. Stock best-sellers from popular movies

The movie Interstellar, featuring Matthew McConaughey, hit theaters in 2014. It was critically acclaimed and well-received by moviegoers. The fashion world took notice of the jacket worn by McConaughey throughout the film, and one company decided to capitalize on the interest. “We stocked the jacket and were quickly inundated with orders from all over the world,” explains Max Robinson, who works at Ace Work Gear.

“Although the film came out almost 2 years ago, we’ve managed to maintain that business by implementing viral campaigns. We associate ourselves with the film as much as possible. Last year we held a 1-year anniversary screening of the film at our store. Over 50 people attended the event. Of those 50 people, 26 walked away as customers. This year we’re planning something special for the 2 year anniversary of the film. Hopefully we can sell even more jackets this time!”

3. Sell merchandise that references TV shows

Much like stocking up on a piece of clothing featured in a popular movie, some business owners can boost business sales by updating their merchandise, such as t-shirts, hats or other clothing items, to feature quotes or sayings from trending TV shows.

One example of this is entrepreneur Michelle Money, who sells custom t-shirts and other merchandise with references to ABC’s The Bachelor and The Bachelorette franchises. She offers these items for a limited time during the 8-10 weeks that the show airs.  The timeliness of her merchandise is a big driver in increasing sales and profitability.

4. Spend $10 on a video game

Pokemon Go has captivated old and new fans since its launch this summer. Its popularity means that many small business owners took notice and capitalized on the trend.

For example, according to an article by Bloomberg, the owner of L’inizio’s Pizza Bar in Queens, NY spent $10 on Pokemon Lures.  The Lures helped to increased L’inizio’s sales on food and drink by 30% in one day. Pokemon Lures are attached to a Pokestop.  Pokestops are near stores and other popular attractions within cities. Pokemon Go players are attracted to the area since the lures are designed to increase the amount of Pokemon for them to catch.

This local pizza bar isn’t the only one taking advantage of this craze, however. Local eateries, small retail stores and big city corporations are taking advantage of this trend as a way to increase sales.

5. Capitalize on popular sporting events

The Olympics are one example of a popular event that’s watched all over the world. However, this same idea can be applied to other popular sports and seasonal events for your business. In preparation for the added news coverage, David Tabor, Content Digital Marketer at Joosr, started implementing strategies to help boost business for his digital app.

“After we wrote a blog post about the Olympics, linking it to our books and tips on how to be Olympic ready, we sent the piece to a large fitness blogger for publishing. Our following exploded,” says Tabor. “Our company, Joosr, publishes summaries of the world’s best non-fiction books for a neat mobile app. This strategy boosted traffic and conversions to our both our website and app!”

Cashing in on viral ideas is not only possible but can be very beneficial when planned out properly. With just a bit of prep work, and staying updated on trending topics, you can boost your business’ bottom line.

Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped businesses in hundreds of industries.  Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.

What Owner Refinancing Means for Your Retail or Office Space

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There continues to be a tectonic shift occurring in the commercial real estate industry and it has tenants rattled. The aftermath may not have impacted you yet, but it should be on your radar.

Big box retailers are serving as anchors to move out and the brand names that we’ve come to know and trust closing shops or vanishing entirely. As a matter of fact, this is causing a hotbed of tenant confusion that’s bound to erupt.

At Cherry Creek Mall in Denver, CO, a recent owner refinance has tenants worried. Some speculate the landlord might be experiencing financial woes. Of course, they asked if this indicates whether they should begin plans to relocate. Tenants want to know if their businesses are at risk.

The real deal: owners are taking advantage of lower interest rates

In May, the Michigan-based landlord Taubman Centers, Inc. (NYSE: TCO), one of the largest REITs (Real Estate Investment Trust) in the nation, and owns and manages high-end retail and mixed-use properties, announced it had secured a $550 million, 3.87 percent, 12-year fixed loan. The deal, backed by Metropolitan Life Insurance Co,. was said to be used to repay an existing $280 million, 5.24 percent loan. Leveraging assets to restructure loans at lower interest rates is a standard procedure in most areas of real estate, not just commercial.

One long-time retail tenant who operates a franchise at the Center said he received an Estoppel Certificate in the mail, but had no idea what it was or what to do with it. The document looked unfamiliar and the intimidating legal jargon caused him to fear the worst. Anxious to find out more, he contacted his organization’s corporate office. Without delay, they were able to help him clarify matters and resolve the situation.

However, many small business retail and office tenants like restaurateurs and service professionals don’t have access to legal departments. Instead, they’re forced to pay expensive attorney’s fees in order to have simple legal documents interpreted that aren’t that complicated.

Another wave of owner refinance deals are expected to sweep across the nation. WP Glimcher Inc. (NYSE: WPG) is said to be just one of several major developers exploring refinance options.

How Developer Refinance Deals Impact Tenants

An owner refinance is no cause for alarm. However, the main issues that arises from these deals are Estoppel Certificates. Your commercial lease probably contains a clause that states you, the tenant, agree to answer letters within an allotted time frame or the landlord can answer on your behalf. Furthermore, it’s imperative that you answer and return this document on time.

What is an Estoppel Certificate?

Estoppel Certificates confirm the contractual relationship between you and your landlord. Its purpose is to evidence to a third-party, such as a financial institution, that the provisions in a lease are true.

Answering can be fairly simple. All tenants need to do is fact-check the information. This is to make sure the provisions contained are the same as those in your original lease agreement, such as the annual minimum rent, percentage rent, and license period clauses. Cross-reference each document word by word. If anything is substantively different, contact the landlord and have it corrected before signing.

Invoice Financing: Solutions for Subcontractors

Invoice Financing: Solutions for Subcontractors

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As a subcontractor, your business often depends on the contractor whose project you’re working on.  The contractors are paid upfront for their work.  However, it can be days or even months for the contractor to resolve your invoices for services rendered. So how do you keep things running smoothly in the meantime? If you’re comfortable taking on debt over the short term, invoice financing can be an effective way to secure the working capital you need.

What is invoice financing?

Invoice financing, also known as accounts receivable financing or factoring, simply means borrowing money against your business’s unpaid invoices. The amount you’re able to finance can range from 50% to 90% of the balance you’re owed. So if you have an unpaid invoice of $20,000 for electrical work that you did for a home builder, you’d potentially be able to borrow between $10,000 and $18,000, depending on which invoice financing company you choose.

Why invoice financing can be a good fit for subcontractors

There are several ways to obtain working capital during a cash crunch. When strapped for funds, business owners may consider a variety of alternative financing options.  Some of these options include inventory financing, merchant cash advances and short-term loans.  Invoice financing, however, is particularly well-suited for subcontractors for a few reasons:

Financing is fast

When you need to meet payroll or purchase supplies, you can’t afford to wait for a contractor to pay you. With invoice financing, it’s possible to get the money you need in anywhere from two days to two weeks, allowing you to avoid delays in the meantime.

Designed to be repaid quickly

The nature of subcontracting means that in most cases, you can expect payment within 90 days or less of completing a job. Accordingly, lending companies structure this type of financing in a way so that you repay what you borrow once the invoice is paid. Compared to a loan which can take years to pay off, invoice financing is more appealing. Lenders do not lock you into a long-term payment plan.

Collateral and credit guidelines are more relaxed

If you were to go to a bank for a business loan, they’d want to see a strong credit history. They’d also want to see that you had something of value as collateral. If you run a smaller subcontracting operation, your business assets are limited to your equipment, tools or a work vehicle. The upside of invoice financing is that the invoice itself serves as your collateral.  In addition you don’t need perfect credit to qualify. Just keep in mind, lenders may raise an eyebrow if your credit history includes something serious like a foreclosure or bankruptcy.

Calculating the cost

Because invoice financing is an alternative borrowing option, it doesn’t come with the same fees and interest rate structures as traditional loans. Instead of an annual percentage rate (APR), the lender assesses a processing fee. This lending company will charge this fee against your “reserve”.  Reserves are the difference between the value of your invoice and the amount you finance. There’s also a separate factor fee based on the length of your repayment term.

Here’s an example:

A contractor owes a plumber $100,000 for services rendered.  The invoice financing company is willing to front you 85% of that total or $85,000. The lending company will hold $15,000 in reserve.  They will use this money to pay fees (such as processing and factor fees).

The financing company charges a 3% processing fee against the $100,000 invoice, totaling $3,000. Now you’ve got $12,000 in reserve. You’re also responsible for paying a 1.15% factor fee, which comes to $1,500 weekly. It takes the contractor four weeks to pay your invoice. This means the financing company keeps another $6,000 out of the reserve funds. When the lending company receives the money you initially borrowed, they will return the remaining $6,000 to you. Altogether, you’ve paid $9,000 to the finance company.

If you’re thinking that seems steep, you have to ask yourself what’s more important—avoiding a fee or getting the working capital you need. The speed and convenience that invoice financing affords can justify the expense if it allows you to remain competitive in the subcontracting arena. Just be sure to compare terms from different lenders before applying.

 

Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped business in hundreds of industries.  Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.

Why Short Term Debt Is the Answer When You’re Ready to Expand Your Salon or Spa Business

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Needing to expand is a good problem to have as a beauty salon or spa owner. It’s a mark of your business’s overall health when demand for your services makes an additional location or the hiring of new employees a necessity.

Before you can move forward with an expansion, however, you’ll need to decide how you’re going to pay for it. Taking on a long-term loan is one option. However, it means tying up your cash flow for an extended period of time. Using short-term debt to get the working capital you need is a smarter way to help your salon or spa grow.

Short-term financing: How it works

Short-term debt can take several different forms. However, many are not suited for expansion projects. A merchant cash advance allows you to borrow against your business’s future credit card receipts to cover things like payroll or inventory purchases. Equipment financing is another short-term alternative. This may be appropriate if you need to upgrade your chairs or invest in a new massage bed.

When looking to expand an existing location or opening a new one, a short term loan may be the best choice. Unlike a traditional bank loan, short-term loans don’t stretch the payoff out over 10 or 20 years. Instead, these loans are designed to be repaid relatively quickly, usually within anywhere from three to 36 months. Depending on the source of the loan, you may be able to borrow anywhere from $5,000 to $500,000.

Advantages of using short-term debt to expand

There are several reasons why short-term debt is more attractive than a long-term loan for expansion projects. First, it’s generally not as difficult to qualify for short-term financing as far as the credit requirements are concerned. If your salon or spa is a few years old but you haven’t had much opportunity to build up a solid business credit history, that’s not a deal-breaker for approval.

Next, this kind of debt is more accessible when it comes to how quickly you can get funding. If you have a dire need to bring in a couple of new stylists to keep pace with your growing customer base, it’s possible to get a loan or another short-term debt in as little as two business days. That’s much more appealing than having to wait several weeks to hear from the bank regarding a loan decision.

Finally, short-term financing in most instances doesn’t require any sort of collateral. When you own a service-based business like a salon, you may not have many tangible assets beyond your equipment or inventory. This is more true if you lease rather than own the space where your business operates. Not having to put up any collateral alleviates some of the financial pressure that goes along with obtaining financing.

Choosing a short-term debt provider

Salon and spa owners have multiple avenues for finding short-term debt opportunities to make their expansion plans a reality but they’re not all the same. When you’re looking into funding sources, it’s important to pay close attention to the details.

With short-term debt, the expectation is to make payments on a daily basis versus monthly. While that may not be the case with every financing provider, you should be aware of what form your payments will take. This is especially true if your business revenue ebbs and flows seasonally. If you’re seeing a huge influx of clients during the wedding and prom seasons, for example, but business is more evenly paced the rest of the year, you need to be sure you can afford the payments regardless of how much revenue you’re generating.

Cost is the other primary consideration. Short-term debt, including short-term loans, often come with a factor rate in lieu of an annual percentage rate. The factor rate is essentially what determines the cost of borrowing. If you’re taking on a $100,000 loan with a factor rate of 1.15, for instance, you’d repay $115,000. Before you commit to short-term debt, check with the provider to determine whether they use an APR or factor rate and what the rate is so you know what the total repayment cost will be.

Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped business in hundreds of industries.  Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.

4 Tips for Getting More Online Reviews for Your Business

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At one time, if a customer wanted a business recommendation, the best resource was a trusted friend or family member. With the growth of online and mobile review platforms, those referrals can come from complete strangers, with customers having access to numerous reviews on the same product or service.

For businesses, this has created an environment where reviews are an essential part of an online presence. In addition to the SEO benefits, online reviews help build customer confidence in a company. In fact, according to a survey from BrightLocal, 92 percent of consumers read online reviews for local businesses, up from 88 percent in 2014. With such reliance on reviews, it’s important to create an environment where customers feel comfortable leaving feedback. Here are a few tips to help you get online reviews for your business.

Provide the Platform

The first step is to ensure you have a presence on all major review sites.  This comprehensive list is a great start, but make sure you also cover any local or specialized sites that collect business feedback. One way to ensure you haven’t missed a crucial site is to search for reviews on some of the more popular businesses near you. Also conduct a search on products or services similar to yours with the word “review” after it and make sure when customers look up those reviews locally, they find your site.

Ask

Some of your most loyal customers will leave a review based on a simple request from you. During the checkout process, ask customers to review you on a specific site. If you have a core group of loyal customers, directly request that they leave you a positive review. One way to boost your presence is to offer customers an incentive to recommending you online, such as entry into a contest with a lucrative prize. The only negative to this is that you may find a few negative reviews mixed in with the positive.

Simplify the Process

Often you’ll find that simply asking your customers to leave a review doesn’t get results. Even if they plan to post something, life gets in the way. One way to overcome that is to make it easier for them to follow through. In addition to in-store signage, print a reminder on every receipt. For online purchases, include a link on your “thank you” page or any post-purchase email you send. The customer experience will be fresh on these customers’ minds and they’ll be more likely to follow through than if they waited.

Listen to Customers

While some customer feedback can be disregarded as opinion, all too often brands find valuable information in their reviews. Pay close attention to the feedback you get, both on third-party review sites and through your own website and emails. Watch for trends across multiple reviews and consider them as you make decisions about your business. Customers tend to provide feedback when they feel very strongly about an experience. This feedback, whether positive or negative, can lead to skewed results. However, taking those extreme opinions into consideration can help you identify and address issues that could be costing you customers. Personally responding to any negative reviews can be a great way to turn the experience into a positive. Most customers will appreciate the fact that you reached out to help. At the very least, you’ll show your reviewers that you take customer service seriously.

Online reviews are key to winning new customers. By providing stellar customer service and encouraging existing customers to review your business, you can create a positive online reputation. Over time, you’ll be able to use those reviews to identify things within your own organization that you need to change to keep customers coming back.

 

Strategic Funding provides needed operating funds to small businesses. Strategic Funding has helped business in hundreds of industries.  Industries served include: restaurants, personal services, construction, medical, manufacturing, agriculture, retail stores, automotive, and food stores.

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