What Kind of Website Do I Need, Are Websites Worth It

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Now that you’ve decided to build a website for your small business – congratulations. Your company will receive more visibility, better branding, and eventually more sales.

Before you build your site however, there are several questions you’ll need to answer in order to to determine if you should build a site through a low cost, do-it-yourself website platforms such as Wix, SQUARESPACE or GoDaddy, or make the significant investment in building your own robust website:

  • What products are you looking to sell on your site, and how do you plan on selling them?
  • Are you selling subscriptions? Will the purpose of your site be to make appointments for people to come into your brick and mortar business to buy products or services? 
  • Are you seeking to sell products directly through your websites via online payments?
  • Do you plan to feature industry content or a blog on your site?
  • How will your site stand Apart From Competitors?
  • What Actions Do You Want Site Visitors to Take?

What Should Your Site Accomplish?

Now that you’ve answered those questions, you essentially have two choices: You can use a DIY website platform, which does have its advantages – most of them charge a low monthly fee; provide an easy-to-use website template, and provide web security and basic analytics. This may be the best option to choose if you’re simply looking to expand your presence and just check off the “web presence” box for your business. 

For example, if you’re an independent restaurant owner who wants visitors to use your site to make reservations, or a car dealership owner who wants your site visitors to make appointments for test drives of your vehicles, then a DIY site may be the best choice for you.

DIY platforms do have their drawbacks, though. Almost all of them charge additional fees if you look to add features to your site, and many of them will ask for a large percentage of your revenue if you are seeking to use your site for direct sales. Additionally, the web template that you choose may be being used by other customers, so your website may not look unique.

If you want your website to do more, however, such as accommodate direct sales of your products, offer sales or discounts, or generate industry buzz through a blog page, then building your own website is probably the best bet for you. 

Be warned, however: while building your own site will be well worth the effort from a sales and marketing standpoint, it will be a long, arduous, and expensive process, and one that will require you to first analyze whether it will be worth the money to do so. 

Figuring Out if it’s Worth it

Now the question becomes: based on your wishlist for a website, is building a site worth the money? The answer to this question is paramount in deciding whether to invest capital into building your own site. The process of answering this question is also a bit complicated and may require you to hire an outside web consulting firm to assist you. 

The first thing to do is to figure out the cost of building a website. A basic laundry list of things you will likely need to spend money on in order to create your own site can include:

Do some research to find out the fees of website consulting firms and the market price for a web designer/programmer, if you choose to hire those. In order to house your website and make it available to the public via the world wide web, you can either purchase your own server – the machine that will house your site and may cost upwards of $1,000 – or hire a website hosting platform such as Bluehost or HostGator for a low monthly fee to house your website for you. 

There are many advantages to using a web hosting service – you won’t have to pony up the cash for your own server, and they provide web security for your site. Keep in mind, however, that a hosting platform will charge you the monthly fee for as long as your business’ website exists (which could be up to $60 per year), and there could be add-on charges if you look to make changes to your site.

In addition to hosting costs, leasing an original domain name through services such as GoDaddy, Domain.com or Name.com can cost anywhere between $20 to $50 per year, on average; and purchasing a domain name outright could cost you thousands of dollars.

Other costs to consider: If you do not have expertise in building a website, you may want to hire an experienced web designer/programmer to help you. Hiring an outside firm or an internal employee to do this may be expensive but making a mistake in building your site could be even costlier. Also, you will need a payment processing app to enable your customers to purchase items from your site. Apps such as Merchant One, Clover or ProMerchant will enable them to do that.

Estimating Your Site’s future Revenue

Now that you have an idea of the cost, the next thing you should do is have your website consulting firm assist you in creating a general, one-year projection of revenue for your site, since the process can be complicated. Some lenders may ask for this if you look for financing to build your site.

Of course, we all know that a general calculation of ROI is income minus cost divided by cost, but how do you calculate that if you don’t know what the actual revenue of your site will be? 

While it is impossible to calculate exactly what the revenue will be, you can make a rough estimation by examining the benchmark for similar-sized companies in your industry. The web consulting firm you hire should have data on this, or you can use an online tool called Similarweb, which tracks that. You can also use a web service called Unbounce, which can give you a benchmark conversion rate – the percentage of visitors of an ecommerce site who end up becoming customers. 

“This way, you’ll have an idea of what to expect in terms of revenue,” said Lucie Loubet, director of digital marketing at web design firm DesignWare. “Just remember to look at the paid vs. organic traffic breakdown in Similarweb to understand how much additional money you will have to invest in customer acquisition.”

Dawid Zimney, product manager at web consulting agency NerdCow, added “Your web agency needs to know your conversion rate, your market and your audience. They need to benchmark this against the historical improvements of the conversion rate on their clients’ websites.”

Another marketing term to know is customer lifetime value (CLV) – the estimated value of a return customer. For example, if you own a restaurant and you see certain customers coming back because they love your food, or a retail clothing store and you see customers returning for the service, you can calculate the average amount they spend per visit and multiply that by the number of times they visit your business. 

The website firm you hire can help you estimate the percentage of customers who will become repeat customers, as well calculate their CLV.

Final Calculation

Nikita Chen, founder and CEO of item authentication firm LegitRails, said the final step in calculating your website’s future ROI is to multiply the number of estimated customers with the CLV, and then determine whether that number is greater than the cost of building the website. The web marketing firm you hire should help you with that. 

“If the number is higher, you are in profit, and it is, therefore, a good idea to create the website,” she said. “If the number is lower (which could be the case if you’re running excessive ads) it might not be in your best interest. The figure you come up with at this stage will also determine your ROI,” said Chen.

Financing Options to Pay for Your Site

If you’ve realized that your needs require you to build a custom website but you don’t have the cash on hand to pay for it, that’s okay. There are several financing options you can choose from. 

A business line of credit may be a good option for you since building a website will not be a one-off expenditure. A business line of credit – much like a personal credit card – will give you the flexibility to spend as you go along in the process of building your site, and you will only be charged interest on what you borrow. You can also pay it down as you go along.

If you’ve predetermined a budget for building your site and plan to stick to it, then a business loan may be right for you. If you go to a traditional lender, they may ask you for a business plan or projected ROI on your website. Alternative lenders such as Kapitus will generally just ask to see your company’s revenue history and approve you for financing more quickly than a traditional lender.

Test Your Site First

Now that you’ve decided to go ahead with your site, you should have your web designer/programmer build a test site, typically referred to as a beta site. Pick the top functionality of your site, have your programmer design and build it, and release it online. The beta site should be a limited release of your website with the goal of gauging audience reaction a nd finding bugs before the final release of your site. 

The site is usually opened up to a limited number of users, such as employees of your company or friends or family. The idea of the beta site is to listen to their feedback and use that to make improvements or adjustments to your final website. 

Next Up

“If you build it, they will come…”

Now that you’ve done the calculations and figured out that building your own site is worth it, how do you build a site that is visually appealing, user friendly and will generate additional sales? In the next article, we will discuss what your site should look like to make that happen.

How Do Small Business Owners Build Their Websites?

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So you’ve decided to take your small business to the next level by building a website – you should congratulate yourself for taking the leap into the Internet. Whether you’re a small business with 200 employees and several different offices, or you’re an independent retail business or restaurant owner, you are about to expand your customer base and company brand to web browsers around the world. 

In our last article, What Kind of Website Do I Need, and is it Worth it?, we discussed the cost of the things you will need to build your site, such as a domain name, web hosting platform, etc. Here, we will discuss the steps you need to take to build your new site.

Starting from scratch can be confusing, as there are lots of choices to make. First, there are two ways you can go: if you are looking to simply promote your brand and check off the box for your business that says “online presence,” then low cost, do-it-yourself website builders such as Wix.com, SQUARESPACE or GoDaddy would be the best bet for you. 

If you’re seeking to build a robust site that can generate online sales and market yourself as an authority in your industry, then creating a site from scratch may be your best bet. This will, of course, require a commitment of time, patience and money, but it will be well worth the effort. 

DIY Website Pros and Cons

Using a DIY website builder is, of course, the cheapest route to building a new site, and there are plenty of advantages to using one of them: they’re relatively cheaper than building your own site, usually costing a low monthly fee; they’re easy to use, and they typically provide search engine optimization (SEO) and analytics features, as well as security. 

Some of the drawbacks are, however, that there can be hidden fees if you choose to expand your site, and other users may use the same website template that you’ve chosen, which would make your site look unoriginal. Here is a full list of pros and cons of using a DIY web builder that you should be aware of: 

Investing in Your Own Site – What you Need

If you are looking for a site that can process direct sales from customers, attract lifetime customers and build sales leads, then you most certainly should look to construct your own robust site from scratch. While this will entail a long, costly process, the effort will be worth it in the long term, as it will most likely yield the best results in terms of increased sales, brand recognition and customer base. The cost of a new website may be daunting at first, but remember the old adage, “you have to spend money to make money.”

Just consider – according to the US Census Bureau, e-commerce sales accounted for 13.8% of all retail sales in the first quarter of 2021, a steady rise from 5% in the first quarter of 2012. The pandemic only increased online purchases, as people had to make purchases from the comfort of their homes. Most economists believe, however, that the steady increase of online shopping, including food orders from restaurants, will only increase. 

Keep in mind that e-commerce sales are so prevalent now that they even contributed to the fall of brick and mortar giants such as Toys R Us, and economic experts believe e-commerce will only continue to rise. Given this, now is the time to offer your products and services online through your own site. 

A basic laundry list of things you will need to create your own site include:

  • High Speed Cable Internet;
  • A Domain name;
  • A Web hosting platform such as BlueHost, HostGator or GoDaddy, or your own server;
  • A Basic website layout;
  • A content management system;
  • A web designer/programmer, and
  • A Web-based Payment Module 

Designing & Building Your Site

Now that you’ve decided to build a website, know that designing a thorough and visually appealing site will be as important as the quality of the products or services you are selling. Examine the websites of your competitors to get ideas of what you believe works and doesn’t work.

The first thing you will need to do is ask yourself what you want your website to accomplish so that you can create subsets of your website’s welcome page. If you are seeking to expand the reach of your brand and ultimately increase sales, a basic list of items to highlight on your site could include:

  • A welcome page that will include your company’s logo, a basic explanation of who you are, your mission statement, and company reviews. 
  1. Remember, the welcome page is the first thing that web browsers will see, and it will be the initial reason they decide to stay on your site. Work with an experienced web designer to make it visually appealing, and without being too wordy, define your company and what it has to offer. 
  • A subset page that offers a catalogue of your company’s products.
  1. A subset page where browsers can actually purchase your products. This will also require your page to have a web-based payment module to process payments via credit or bank card.
  2. An “About Us” subset page informing browsers who you are, your history and perhaps any video presentation demonstrating your dedication to your products and services.
  3. A “Contact Us” subset page, and
  4. A blog subset page where you can write and post articles about trends in your industry to make you seem like an expert in your field. Content management systems such as WordPress, can make blogging easy.
  1. While it is time consuming, blogging SEO optimized articles about your industry is one way to keep potential customers coming back to your site and thinking about the industry in which you are selling products.

The second task you want to complete is to formulate a basic layout of your website. 

For our purposes, we used a fictitious company, “Joe Smith’s Construction Supplies,” to create an example of how you may want to outline your website:

Nuts and Bolts

As far as the nuts and bolts of building your own site goes, you can take courses to learn computer code and web design which, of course, will cost you time and money. Otherwise, you probably will need to hire a web designer/programmer to build your site. You can hire one on a freelance basis, but as you interview them, ask to see websites they have constructed in the past, as well as references. 

Once you do, work with both them and your website consulting firm to create a visually appealing, original and user friendly, responsive site that is optimized for computers, tablets and smartphones. You may even consider creating a limited test website, known as a beta site, to find any bugs in your site before you officially launch it. 

Next Up

“If a tree falls in the forest and no one is around to hear it, does it make a sound?”

What good will an awesome new website do you if no one is looking at it? Now that you’ve gone through the long and arduous process of building a great website, it won’t automatically mean more sales. 

In the next article, we will discuss general ways to draw viewers to your site. After all, web traffic turns into sales, and sales turns into potential lifetime customers. 

Collateral requirements for SBA loans.

What Are SBA Loan Collateral Requirements?

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Those seeking an SBA loan are likely familiar with the association’s sometimes confusing collateral requirements. Small business owners are required to name some amount of collateral when applying for an SBA loan, but it can be difficult to determine ahead of time how much collateral may be expected to finalize a loan or what necessarily constitutes collateral.

 

While there are several kinds of SBA loans, most common are 7(a) loans. Another kind of SBA loan currently in high demand is EIDL (Economic Injury Disaster Loans).  While 7(a) loans can be requested for any reason, EIDL are specifically disaster loans which have recently gained prominence as a form of pandemic relief. EIDL and 7(a) loans both have different collateral requirements. This article will explore exactly what each of these loan types require from borrowers in the form of collateral as well as other requirements of note. 

What Constitutes Collateral?


Before discussing collateral requirements, it is important to understand exactly what collateral is and what lenders and the SBA generally consider acceptable forms of collateral. Collateral, in its simplest forms, is an asset that a lender accepts as a form of security on a loan in the event of non-payment or a default. 

Examples of Generally Approved SBA Loan Collateral include:

  • Commercial or personal real estate
  • Accounts receivable
  • Standing inventory
  • Business vehicles
  • Equipment, and machinery

SBA 7(a) Loan Collateral and Requirements

SBA 7(a) loans are one of the most frequently sought loans by American small business owners and fall under three categories: Standard (7a), 7(a) Small Loans, and SBA Express. All collateral policies for 7(a) Small Loans and Express Loans are also true for Standard 7(a) loans up to $350,000.

7(a) Collateral Requirements

  • Loans up to $25,000 are unsecured and require no collateral.
  • Loans between $25,000 and $350,000 must follow collateral policies for similarly-sized non-SBA-guaranteed commercial loans.
  • Loans larger than $350,000 require the maximum amount of collateral possible from the borrower to fully secure a loan. The borrower must meaningfully demonstrate they have put forward all available collateral.
  • If a lender believes fixed assets do not fully secure a loan, they may also consider trading assets at 10% current book value.

Notable Variations

Both 7(a) Small Loans and SBA Express loans offer up to $350,000, but the SBA will only guarantee up to 50% of the loan amount for Express Loans. Guarantees for Small Loans are either 85% for loans up to $150,000 and 75% for loans greater than that.

7(a) Loan Additional Information

Applicants for SBA 7(a) loans must agree to an ABA (All Business Assets) lien. This means that all of an applicant’s business assets will be put as collateral for the SBA 7(a) loan. 7(a) applicants may also be subject to a UCC-1 (Universal Commercial Code) lien which gives a lender the legal right to access a business’s assets in the event a business defaults on their loan.

In addition to collateral, every person who owns at least 20% of an applying business must also sign a personal guarantee when seeking SBA 7(a) financing. A personal guarantee is an acknowledgement that the party signing is personally responsible for paying back a loan. Personal guarantees are essentially extensions of collateral. Instead of naming specific assets, however, an applicant agrees to use any assets necessary to pay back the loan.

When applying for an SBA 7(a) loan the lender will have the applicant fill out the “SBA Eligibility Questionnaire for Standard 7(a) Guaranty.” Which allows a lender to individually assess if an applicant has sufficient holdings to secure collateral.

SBA EIDL Loan Collateral Requirements

Unlike 7(a) loans, the SBA EIDL (Economic Injury Disaster Loan) program is exclusively distributed to small businesses that are suffering from a temporary loss of revenue due to a declared disaster. The EIDL program is currently accepting applications from businesses affected by the COVID-19 pandemic. The EIDL program has different collateral requirements than a 7(a) loan, notably because EIDL is a form of aid. Loans made through the EIDL program under $25,000 are still unsecured. Loans over $25,000, however, will require some form of collateral. Because the program often deals with disaster relief, the EIDL program will not turn away an applicant because they do not have a certain collateral value. If an applicant pledges the collateral available to them, a lender will often consider that collateral sufficient.

EIDL program applicants seeking loan amounts greater than $25,000 must also consent to a UCC-1 lien being placed on their business. Businesses applying to the EIDL program requesting more than $200,000 also require a personal guarantee from each person with a 20% or more stake in the business.

Collateral Overview

The SBA intentionally leaves collateral requirements vague in all loan programs. Necessary collateral is determined on an individual level between a lender and an applicant. More important than a dollar amount, however, is a business owner’s ability to demonstrate that they are committed to repaying a loan. Collateral in combination with personal guarantees and UCC-1 liens are mechanisms to assure loan programs are not taken advantage of or used unnecessarily.

Laying out strict financing requirements and cutoffs ignore the nuance of small business and may needlessly dissuade applicants. The most important step for a small business seeking a loan is discussion with a trusted financing expert. If your small business is interested in learning more about SBA loans and funding opportunities, get in touch with a Kapitus financing expert who can assess your options based on your unique situation.

Learn more about non-recourse financing

What is a Non-Recourse Commercial Loan

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An effective means to expedite a business’s growth is tactical commercial financing. A factor that may dissuade businesses from finalizing a loan agreement, however, is fear of default and the subsequent recourse from lenders. There are actually several types of loans where lenders will agree to not seek recourse after borrower default, which are known as non-recourse commercial loans. 

A non-recourse commercial loan is an agreement between a lender and a borrowing business where the borrower is not personally liable if they default on the loan. In the case a borrower defaults, lenders may not repossess any of the borrower’s property that was not originally put up for collateral. Lenders may seize profits from the business, but the business owner’s personal assets may not be taken.

Recourse Commercial Loan Versus Non-Recourse Commercial Loan

Traditional recourse loans require borrowers to make a personal guarantee that if their business defaults on their loan, the lender may seize bank accounts and other assets until the original debt is covered. In the case of a non-recourse loan, lenders may only seize agreed upon collateral in the event of borrower default. Even if the collateral does not sufficiently cover the full value of the loan, the lender cannot seize the borrower’s personal assets to recover losses from the original loan.

Carve-Outs and the “Bad Boy Guaranty”

Most non-recourse financing agreements have exceptions where the lender may collect beyond collateral in the case of borrower default. Exceptions to non-recourse agreements are called “carve outs,” or “Bad Boy Guarantees.” Most carve outs protect lenders in the case a borrower either misrepresented their intentions or committed a crime. Several common carve outs in non-recourse financing agreements allow the lender to seek recourse outside of collateral, including:

  • Borrower files for bankruptcy
  • Borrower commits fraud or other criminal activity
  • Borrower fails to pay property taxes
  • Borrower fails to maintain required insurance

If a borrower commits any of the acts specified in an agreement’s carveout clause, the non-recourse protections of the original agreement are nullified.

Qualifying for Non-Recourse Financing

Since non-recourse commercial loans are much riskier for lenders, conditions for approval are generally much more strict. Among traditional qualifications of positive balance sheets, a good business credit score and sufficient collateral, applicants must also meet the terms of a non-recourse guarantee. Similar to carve outs, the non-recourse guarantee specifies that the borrower, or the guarantor, must maintain certain obligations to retain non-recourse status. A non-recourse lender may require that the borrower sign a guarantee of performance, meaning that certain goals remain on schedule, or a guarantee of payment. Guarantees of payment stipulate that any profits made from the project financed by the original loan must be routed back to pay the accrued debt.

Since lenders face significantly more risk when making a non-recourse loan, non-recourse agreements are generally reserved for exceedingly low risk-of-default borrowers taking on long-term projects.

Types of Non-Recourse Commercial Loans

Real Estate

The most common type of non-recourse financing is non-recourse real estate loans. In the case of real estate loans, non-recourse deals commonly stipulate that the borrower must pay back the loans with profits made after selling the real estate – which is a guarantee of payment. If the property is developed, but does not sell or does not make a profit, the real estate itself is often considered sufficient collateral.

SBA

Non-recourse loans secured by the SBA are traditionally used to help small businesses secure financing for fixed assets such as real estate, office facilities and sometimes equipment. To decrease the direct risk for lenders, the SBA assumes a portion of the risk  for the loan and guarantees to cover a percentage of a loan’s full amount in the case of borrower default. If a borrower defaults on a SBA-secured non-recourse commercial loan, the government, not the lender, is liable for the guaranteed portion of the loan.

Development

Another common type of non-recourse commercial loan are non-recourse development loans. Development loans are specifically for developing commercial property and often finance a project through its entire process. Development loan agreements usually state that the borrower must begin repayment once they have started earning a profit. If a project is not profitable or does not complete development, then the loan will often be considered defaulted. When a non-recourse development loan defaults, the property which was financed will then be seized as collateral.

Non-Recourse Factoring

Similar to  non-recourse loans, non-recourse factoring agreements stipulate that in the event an invoice cannot be paid, the factor is liable for the losses, not the customer. Non-recourse factoring agreements, however, tend to have higher fees and/or more restrictive terms because the risk is much higher for the factor. Factors are more likely to offer non-recourse invoice factoring services to customers who handle a large and constant flow of invoices and whose clients have good credit. Depending on a company’s size and invoice capacity, recourse and non-recourse factoring are both viable options. Lenders also may consider the size and volume of a customer’s invoices before offering non-recourse factoring options.

Non-Recourse Overview and Considerations

Non-recourse financing may be a misleading name for this kind of financing, as almost every type of non-recourse deal still allows lenders to seek recourse of some kind. Non-recourse agreements are almost always reserved for deals where lenders can recoup their losses without additional recourse. However, semantics aside, if you’re able to qualify for non-recourse financing it can be a great way to keep your business on the growth track. 

If you are interested in learning more about non-recourse commercial loans, speak to a Kapitus financing specialist who can address your unique situation.

Top Payroll Software Systems for Small Businesses

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Spending time processing payroll is not what you want to be doing as a small business owner, as the chore can often be tedious, expensive, error-prone and time-consuming. 

Managing your payroll, however, is obviously one of the most important aspects of your business. The Software-as-a-service (SaaS) industry is skyrocketing, and utilizing top payroll software for your business can conveniently automate your payroll process for a small, monthly fee, and can help you avoid costly mistakes.

Advantages of Automating

If you manually process your payroll on your own via a spreadsheet, you should consider automating your payroll processing through relatively inexpensive software designed specifically for small- to medium-sized businesses (SMBs) to resolve the challenges of keeping up with your task. Whether you run a dry-cleaning business and only have two employees, or you run an accounting firm and have 20, the benefits of utilizing a good payroll software system are endless, and can help you:

  • Automatically keep up with new tax and employment laws and regulatory changes and incorporate them into your payroll system;
  • Maintain accurate payroll records in accordance with the Fair Labor Standards Act; 
  • Prevent unintentional under- or overpayments to employees which can complicate year-end accounting and W-2 processing and cause potential legal issues for you;
  • Ensure that you are properly withholding federal, state and local taxes from your employees’ paychecks, and 
  • Reduce administrative costs or time (if you’re the owner and are the one responsible for payroll).

If you think payroll software may be too expensive, think again. Kapitus has identified six of the best payroll software systems based on cost, capabilities, ease of use and the availability of customer support.

#1 Gusto

Gusto is ranked as the number one payroll software package by a variety of sources, including PCMag and US News and World Report, for its ease of use and low cost. Every Gusto plan offers Automatic local, state, and federal payroll tax filing, automatic state new-hire form filing, workers compensation administration, paystub and W-2 access for employees, and two-day direct deposit. 

Gusto offers four distinct packages: 

  1. The Basic package is $19 per month and $6 per employee and offers features such as automatic payroll filing, employee self-service and workers compensation administration.
  2. The Core package is $39 per month and $6 per employee, and offers automated tax filing in addition to what the Basic package offers.
  3. The Complete package is also $39 per month, but increases to $12 per employee. In addition to offering everything in the Basic and Core packages, it incorporates PTO tracking, time tracking, employee directory and onboarding services.
  4. The Concierge Package costs $149 per month and $12 per employee, and offers what the firm coins “complete and comprehensive HR support.”

#2 PayChex 

The Paychex Flex package starts at $39 per month and $4 per employee, and generally has positive user reviews for its ease-of-use and compatibility with most HR software systems. The price increases as you add more features. While Paychex does not detail the price increases on its main website, what differentiates it is that it offers cloud-based payroll management and HR software to small businesses. All Paychex payroll programs include new-hire state reporting, automatic payroll tax filing, and an employee financial wellness program. Paychex Flex offers 160+ reports with its payroll and HR packages – something that most payroll software packages do not offer.

#3 ADP

ADP is one of the oldest and most popular payroll companies. Reviews are mostly positive for its customer service and ease-of-use. It offers four RUN Powered by ADP plans, but you need to contact ADP to get a price quote based on your needs. Each plan offers basics such as direct deposit, automatic payroll tax filing, and W-2 submissions. Its cheapest plan, Core Payroll, does include employee onboarding, health care compliance forms, and a regular HR checkup. It’s more expensive plans include employee background checks and ZipRecruiter assistance plus more comprehensive payroll help, like wage garnishments and state unemployment tax deductions. 

 

#4 OnPay

OnPay starts at $6 per month and $5 per employee, and has garnered mostly positive reviews for the extra features it includes for which most payroll software companies charge additional money for. Even its most basic package offers services such as garnishing wages, withholding state unemployment insurance, and giving employees multiple payment options such as direct deposit and paper checks. OnPay also will tailor its payroll services to specific industries such as construction and restaurants at no extra cost. Unlike Gusto, however, it does not offer a mobile app.

 

#5 SurePayroll

SurePayroll has garnered excellent reviews for its guarantee to deal with the IRS in case you make any mistakes deducting taxes from your employees’ paychecks, including paying any fines that might be levied against you in case you do. The service starts at $19.99 per month and $4 per employee, and will charge more as you add on additional services. SurePayroll charges extra for services such as accounting integration software and is limited to QuickBooks and Xero. Time-clock integration starts at $4.99 a month. Still, the $29.99 it charges for its full-service payroll system makes it one of the cheaper payroll software services out there, especially given its tax guarantees.

 

#6 UZIO

UZIO starts at $30 per month and $4.50 per employee, and is specially tailored to small businesses with fewer than 10 employees. Its affordability and ease-of-use has garnered it positive reviews. Its self-service employee portal and automatic payroll tax deductions make it  simple and affordable. If you want to add additional HR support, you can upgrade to UZIO’s All-in-One package, which does not cost much more than its basic package.

All in all, while utilizing payroll software may be an extra expense, automating your payroll system is definitely worth the money. Doing so ensures that your employees get paid in full and on time, and it will avoid costly mistakes that could result in hefty fines by the IRS and other agencies if you make a mistake, 

corporate loans to suit your business situation

What Are The Best Types Of Corporate Loans

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Corporate loans are one of the most effective financing options for companies seeking to fund a new project or simply improve their cash flow. A corporate loan accounts for any kind of financing offered to a business, not an individual. There, however, are several kinds of corporate loans, all with their own terms and requirements. Exploring the various types of corporate loans offered to businesses can be massively advantageous to those looking to make the most of their financing.

 Commercial Loans

Commercial loans stipulate that funds distributed by a lender may only be used for business purposes. Commercial loans act as an umbrella term for several purchase-specific loans including commercial real estate loans. Commercial real estate loans can apply when financing any real estate purchase that will be used solely for business purposes; this can include general office spaces, retail locations and even apartment complexes. Commercial loans generally require considerable collateral from the business, almost always including the real estate or item being financed.

Commercial loans are generally reserved for larger companies since they are often used to fund large operations and have larger upfront costs.

Acquisition Loans

Acquisition loans are loans given specifically for financing a business’s purchase of a large asset from another business, or another business outright. Among the several types of corporate loans, acquisition loans often have the shortest window for both distribution and repayment. Acquisition loans, like commercial real estate loans, may only be used when purchasing an agreed upon asset, in this case another business or another business’s asset. Acquisition loans are often only given to businesses that do not have the liquidity for an acquisition but can meaningfully demonstrate to a lender that they have the capacity to take on the acquisition often through extensive collateral.

Term Loans

Corporate term loans are agreements between a lender and a business where a lender gives a specific amount of money with a fixed repayment schedule. Term loans are most often used for financing one-time purchases like equipment or vehicles, but they are also used as basic working capital. Term loans can have either a fixed or floating interest rate; floating interest rates will change depending on if an underlying index rises or lowers. Depending on the agreement, term loans can either be taken out in a single payment or in several smaller increments.

Revolving Credit

Similar to term loans, corporate revolving credit gives businesses access to a specific amount until the terms of the agreement end. Unlike term loans which pay out in capital, revolving credit allows businesses to draw and pay in the credit amount as many times as they like. Revolving credit is essentially a maximum loan balance that businesses can treat very similar to a line of credit, but revolving credit agreements are open-ended and do not have a specified end-date.

Self-Liquidating Loans

Self-liquidating loans refer to loans that finance projects, the revenue of which is then used to repay the loan. Self-liquidating loans are most often used by seasonal businesses or businesses with trackable busy periods. Self-liquidating loans can be used to buy inventory or machinery in preparation for a busier season. Once seasonal customers decrease and the need for working capital decreases, the business can use the increased profits made available by the loan to pay back their lender. To qualify for a self-liquidation loan, businesses often need to demonstrate through accounts-receivables records that their business has a cyclical busy season or many seasonal customers that would justify self-liquidation.

Asset-Conversion Loans

Asset-conversion loans act almost identically to a self-liquidating loan but are repaid by liquidating a business asset like accounts receivables, equipment, or inventory. Asset-conversion loans expect that whatever asset that would be liquidated to repay a loan is also put up as collateral. Asset-conversion loans, then, are traditionally in the amount equal to the value of the business assets put up as collateral.

Cash Flow Loans

Cash flow loans are used to fund daily operations like inventory, payroll and even rent. Cash flow loans are traditionally paid back with incoming funds. Before being approved for a cash flow loan, lenders traditionally consider a business’s accounts receivables and existing cash flow and then propose the terms of the loan to the business owner. Cash flow loans typically have more lenient credit requirements and require little collateral. Because of the loan’s higher risk, cash flow loans have comparably high interest rates and sometimes require blanket liens as part of the loan agreement.

Cash flow loans also have comparably high originations fees. The several increases in rate seen in traditional cash flow loan agreements come in exchange of the target business’s lack of assets or credit history.

Working Capital Loans

Working capital loans cover the same day-to-day expenses as a cash flow loan but are generally much longer agreements and used by larger businesses who may have cyclical clients or trackable busy and slow seasons. Working capital loans can last upward of 25 years especially when secured with a bank. Banks generally offer the most generous rates, but applying businesses must have a long-standing history of profitability, good credit, and a detailed history of positive balance sheets. To maintain liquidity during slow times, a working capital loan agreement may increase cash flow during and ease the burden of slower seasons. Working capital loans, then, are often reserved for businesses that can meaningfully prove to banks or private lenders that their existing assets, good credit, and long history of operation justify long-term financing.

Bridge Loans

Bridge loans, also called interim loans, are given to businesses often as a short-term loan before they secure long-term financing. Bridge loans essentially bridge a gap in capital so a business can reach a certain goal or new financing terms. Since bridge loans are created with a short-term goal in mind, the loan’s interest rates reflect traditional short-term financing; they have generally high interest rates and are often backed by collateral. An example of when a bridge loan could specifically benefit a business when acquiring new office space. A bridge loan could free up liquidity to purchase a new office space while the business owners wait to sell their old space. The most common corporate use of bridge loans, however, is when waiting on finalizing long-term financing. Bridge loans have comparably fast application-to-approval time in exchange for their higher interest rates and shorter terms.

 

Corporate Financing Options

With  several options for  corporate financing, businesses should do their research and determine which type of financing is best suited for their needs. For example: While commercial loans can be used for a wide variety of financing possibilities, more pinpointed, short-term financing like bridge loans or cash flow loans may better suit specific circumstances.

The most effective way to learn what corporate financing option is best for your business is to get in contact with a financing expert. If you would like to learn more about your options when seeking a corporate loan, get in touch with a Kapitus specialist who can address your unique situation.

How SBA Loan Forgiveness Works

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Not every small business owner is going to succeed on their first try, as roughly 20% of small businesses, on average, fail in their first year of operation according to the Bureau of Labor Statistics. This past year has seen even worse with approximately 140,000 small businesses failing due to  the COVID-19 pandemic. 

It is important to learn from your business failure and move on. After all, as author Sinclair Lewis once wrote, “Failures are finger posts on the road to achievement.” So, if your small business failed to take off the way you hoped and you have an outstanding SBA loan, there is some good news: there are steps you can take to have at least some–if not all–of the loan forgiven. 

No matter what type of SBA loan you took on for your business, be it a 7(a) loan or an SBA Micro Loan, if you have defaulted on a payment, you should talk to an attorney who specializes in dealing with the SBA, and consider applying for the SBA loan forgiveness program.

But, before you begin the process, there are several factors to consider when dealing with a delinquent, non-PPP SBA loan:

#1 Renegotiating With Your Lender

If you miss an SBA loan payment but are still holding out hope for your business, you’re going to get charged a late fee, so it is important that you keep a record of your payments as some lenders might not even alert you when you’ve missed a payment. Lenders generally don’t like to lose customers or money, so they most likely will seek to collect from you before they contact the SBA.

Some lenders may attempt to renegotiate the terms of the loan by offering a new loan repayment plan. If your business has been struggling due to the pandemic but is ready to get back on its feet soon, this may be a viable option for you as some lenders may offer interest-only payments until a new loan restructuring is complete. 

#2 How Does it Work?

If your business is no longer viable and/or you cannot renegotiate with the direct lender and apply for loan forgiveness, the first thing you need to understand is that applying for it will not guarantee that the entire loan amount will be forgiven by the SBA.

Once you apply, the SBA will evaluate your case and step in only after the direct lender has made every effort to collect on the defaulted loan. Afterwards, the SBA may purchase back 50% to 85% of the loan, and then turn directly to you, the borrower, to pay back the remaining balance. If you cannot pay back the remaining assets in full, you can submit to the SBA an “offer in compromise,” wherein you agree to pay back some or none of the loan, depending on your circumstances. 

This is the area in which you need to consult with a finance specialist or attorney who specializes in SBA loans, because the attorney can argue on your behalf that your loan should be fully forgiven. If you cannot pay back the remaining portion of the loan that the SBA states that you owe, it may actually seize your assets, which obviously is not a pleasant option. 

#3 Drawbacks of SBA Loan Forgiveness

Applying for SBA loan forgiveness requires some unpleasant steps. 

  • First, you must dissolve your business entirely and liquidate all business property. This means selling everything related to your business, including equipment, computers, office furniture, etc. 
  • Second, be aware that asking for SBA loan forgiveness will make it difficult for you to obtain an SBA loan when you move on to your next venture.
  • Third, asking for SBA loan forgiveness will negatively impact your business credit score and, potentially, your personal credit score if you were the guarantor of your business. This will make it more difficult to raise financing from both traditional and alternative business lenders in the future.

#4 Would it be Better to File for Bankruptcy?

Every business situation is unique, but if there is truly no hope for your small business, chapter 7 bankruptcy may be an option to explore. This type of bankruptcy would allow you to keep your assets and stop collection on any outstanding debt from business credit cards and loans. 

It is also very complex and costly, however. Chapter 7 would require court filings, as well as follow any legal procedures required under the Small Business Reorganization Act of 2019, which was enhanced under the CARES Act passed in March 2020. Legal fees and court appearances will add up and a court may still decide that you have to liquidate some of your assets to pay off a portion of debt still owed to your creditors. 

Again, this is an option you should discuss at length with a bankruptcy attorney or finance specialist. 

Keep Moving Forward

Once your SBA loan has been forgiven or wiped clean, do not be discouraged. The day will come when you can try running your own business once again. Learn from your mistakes and come up with another great idea for a new business! Remember, financing options will still be available to you even if you need loan forgiveness or declared bankruptcy.

Loan options for securing working capital

What Are The Best Long Term Working Capital Loans

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Maintaining a steady flow of working capital, otherwise known as operating capital, is the basis of a successful business. Many businesses, however, may have trouble keeping a steady flow of working capital even though they are profitable . Companies with seasonal highs, cyclical customers, or only a few clients accounting for large percentages of income may find their working capital is uneven. An effective means to securing an even flow of operation liquidity, then, is seeking long-term working capital financing, which businesses can use to  cover daily operational needs including payroll, ordering, and even rent.

As businesses look for ways to secure annual operational costs, it is important to understand what long-term options are available and which is best suited for the unique situation of the business. Starting a relationship with a financial institution can also be lucrative for businesses seeking other financing services like invoice factoring or specific equipment financing, as those services are likely to be offered by banks as well as private lenders.

Types of Long-Term Working Capital Loans

 

Bank Loans

While banks generally offer the longest-term capital loans at comparatively low rates, these loans often have exceedingly strict requirements for applying businesses. Before approval, banks will typically want  to see that the applying business has a long-standing history of profitability, good credit, and a detailed history of positive balance sheets. Bank loans for securing long-term working capital often have terms from as short as 3 years to as long as 25. Banks, however, often take the longest in distributing approved funds, sometimes as long as 60 days . In addition, they will sometimes enforce a prepayment penalty so be sure to thoroughly read and understand your contract before signing on the dotted line.

Private Lender Loans

Seeking a private lender to secure a long-term working capital loan is often a great alternative to banks since private lenders can offer competitive rates and more flexible requirements in exchange for shorter terms. Private lending working capital is often underwritten by a private investment bank, or individual, and tends to have more flexible repayment structures. Unlike traditional banks, private lenders very rarely implement prepayment penalties if a business repays a loan in full after 6 months. Private lender loans often have competitive rates, and terms up to 2 years. Private loans have some of the quickest funding time, even as little as hours after approval.

SBA Working Capital Loans

SBA loans are provided by traditional lenders like banks or even private lenders, but they are secured by the Small Business Association, meaning that if a borrower fails to pay back a loan, the SBA will cover a portion of the losses. SBA-guaranteed loans often have terms as long as banks, 3 to 25 years. But, because these loans are guaranteed by the government, they have very strict requirements and an intensive application process. Depending on a chosen lender, funds can become available anywhere from the day of approval to multiple months.

Asset Based Working Capital Loans

While asset-based financing is usually associated with short-term funding solutions, a company can still seek long-term working capital financing with their existing assets. Instead of using invoices as collateral, larger assets like real estate paired with equipment can lead to agreements that secure long-term capital. When dealing with an asset-based lender, there is no universal rule to determine how much asset collateral a business may need to secure a loan, but long-term capital often requires long-term commitment of assets like commercial real estate, vehicles, equipment, or even intellectual properties. Most asset-based, long-term working capital loans have terms from 1 to even 30 years. Asset-based financing agreements tend to take slightly longer to reach a borrower, often 1 to 2 weeks after approval.

FinTech & Online Loans

FinTech, or financial technology lenders, are likely the best way for start-ups or businesses with a less than stellar credit and revenue profile to find long-term working capital financing options. Fintech loans typically have very easy application processes and businesses can often get same day approval on one of several FinTech financing options. After finalizing an agreement, a business owner can have gone from application to capital in as little as a day. FinTech loans vary significantly by lender. And the sheer density of marketplaces and options means that rates are regularly subject to change. Terms often can range from 6 months to 5 years and as explained, FinTech loans are often the fastest way to secure capital with the least up-front revenue.

Cash Advance  

While not the best option for every business and every situation, Merchant cash advances are an unexpected, but viable, option for long-term working capital. Cash advance lenders can sometimes increase terms to levels that compete with traditional long-term working capital loans. Cash advances, however, are not loans. By agreeing to a long-term working capital deal with a cash advance lender, a business owner is selling a piece of their own future revenue at a discounted rate. By extending a payback period by 12 or 24 months, a cash advance can act quite similar to other long-term working capital options. Unlike short-term cash advances, long-term agreements generally demand that borrowers have good credit and balance sheets. 

 

 Choosing a long-term financial strategy is often daunting. Depending on your business’s size and field of operation, certain financing options may prove more helpful than others. If you would like to learn more about your long-term working capital options, feel free to speak to a Kapitus specialist who can address your unique situation.

What is Non-Notification Factoring

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Non-notification factoring is a type of invoice factoring arrangement between a business and their factor that limits the interaction between the factor and the customer as much as possible. There are a variety of reasons why a business may pursue a non-notification factoring deal, but the results for the business, factor and client are often the same as traditional factoring deals.

Invoice Factoring

Before we delve into how non-notification factoring differs from more traditional factoring, it is important to understand exactly what Invoice Factoring is. 

Invoice factoring, sometimes referred to as receivables financing, is the process in which a financial company buys a business’s unpaid invoices for a percentage fee. Factoring massively expedites cashflow for participating businesses, as invoices from accounts receivables that would regularly take 30, 60, or even 120 days to become usable capital can be sold to a factor and quickly turned into cash. When a factor buys an unpaid invoice, they will pay up to 95% up front. The factor will then pay out the remaining percent, minus fees, to the business when the customer pays the invoice. Typically, once a business is approved for factoring, the factor is responsible for collecting on the original invoice meaning the factor, not the business, will then reach out to the customer to redirect collection. This final step functions differently in a non-notification factoring deal.

Normal Invoice Factoring Versus Non-Notification Factoring

Traditional invoice factoring agreements function near-identically for the business, but changes happen in the dealings between the factor and customer. Once a business and factor agree to a non-notification deal, all notifications sent from the factor to the customer are done through white-label forms or forms on the business’s branded stationary or email signature instead of the factor’s. This means that even though the customer is still corresponding with the factor when paying their invoice, it appears they are dealing with the original business.

To further conceal the factor’s identity, payments sent from the customer via postage will often be sent to a PO box instead of directly to the factor. Electronic deposits from a customer will also pay directly to the factor, but because all notifications are sent either with the business’s email signature or branded stationery, it will appear as though they are paying the business directly. Non-notification factoring is a service that attempts to make the invoice process appear more seamless to the customer. By paying invoices that appear to be directly from the business instead of a factor, customers are simply given a more streamlined version of their part of an invoice factoring deal.

Qualifying for Non-Notification Factoring

Traditional invoice factoring qualifications are less stringent compared to other financing options like loans. When applying for factoring, a business’s credit score is not nearly as important as the credit scores of the customers who will eventually pay out the invoice. Non-notification factoring, however, will likely have several more requirements. Factors will often look for you to meet several criteria when choosing to make a non-notification deal with a business including:

  •  2 years or more in business
  • Low risk of bankruptcy
  • Minimum invoicing rate of $250,000 per month
  • 1 year or more of accounts receivables data
  • Credit-worthy clients
  •  Your business must fall within services or manufacturing includings

Exact requirements will often vary depending on the factor a business chooses to partner with. When making a non-notification factoring deal, expect that a factor will consider at least some of the requirements listed above, and may have additional requirements not listed. 

When to Consider Non-Notification Factoring

Non-notification factoring is a service specifically for the benefit of your customers, particularly when you don’t want them to know you are using a factoring company. Non-notification factoring can also improve a business’s relationship with a customer, as the business’s name and branding will be present for every step of the invoice process. Non-notification factoring may also help in the event a business and customer’s contract restricts the use of a factor. Such contracts usually bar a factor from sending notifications to the customer, so non-notification factoring often means a business can take advantage of the cash flow benefits of factoring and stay within the grounds of their contract. Businesses seeking a non-notification factoring deal because of contractual obligations will often need to share the contract with their factor.

Any time where a third-party contribution may hurt the relationship between a business and their customer, non-notification factoring may be an effective compromise. Non-notification deals, however, require a strong relationship between a business and their factor, as the factor must essentially act as the business when collecting for the invoice.

Weigh your Options and Speak to a Professional

Every financial situation is different. The most effective way to learn if you would benefit from a non-notification factoring deal or invoice factoring in general, is to speak to a lender or a financing professional. Invoice factoring is a massively helpful tool in increasing a business’s cash flow without the potential of debt brought on by a loan. If your arrangements with a customer could benefit from increased discretion or if you are interested in learning more about how a non-notification factoring deal may help you business, get in contact with a Kapitus specialist who can address your situation.

Purchase Order Financing For Government Contracts

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The money set aside for federal government contracts is set to grow even larger in the second half of 2021, and as business owners prepare to try and get their pieces of the pie, one of the financing vehicles that can help them is government purchase order financing. 

What is Purchase Order Financing?

Purchase order financing, (PO financing) which is offered by both traditional and alternative lenders, is a form of short-term financing that will enable your suppliers to get paid for goods and services that you need to fulfill an order for a customer. For example, if you own a small car dealership and you get an order for 50 limousines from a customer and don’t immediately have the cash to pay the manufacturer for those vehicles, you can use PO financing to purchase them.

The advantages of using this type of financing are endless. Through PO financing:

  • The lender will take on invoice collection responsibility with your customer;
  • You can maintain your existing cash flow without having to take on new debt;
  • You can fulfill orders and cover supplier costs without impacting your ability to cover operation costs, and 
  • PO financing will allow you to grow your business by showing potential customers your ability to quickly supply goods and services.

By using alternative lenders such as Kapitus, the application will be simple; depending on the creditworthiness of the customer, your rates can be as low as 1.25%, and you often can get approval within a day. 

Government Contracts Are a Gold Mine

The federal government offered $682 billion worth of contracts to private businesses in 2020, a 14% increase from 2019, and is set to offer an even higher amount in the next fiscal year, making it a gold mine for both small and big businesses alike. Contracts for health care providers and medical equipment suppliers jumped 50% in 2020, due in large part to the COVID-19 pandemic. Contracts for IT services – a field in which many small businesses operate – have grown by an average of $6.8 billion year-over-year since 2015, while contracts for miscellaneous services such as small construction and architectural projects and legal services are also expected to increase this fiscal year. 

Small businesses are expected to continue to benefit from government contracts this upcoming fiscal year, as the federal government’s contracting program will continue to ensure that a “fair proportion” of federal contract and subcontract dollars is awarded to small businesses. 

The government, under its Small Business Goaling Report, reserves contracts that have an anticipated value greater than the $10,000 micro-purchase threshold, but not greater than the $250,000 simplified acquisition threshold exclusively for small businesses. It also authorizes federal agencies to set aside contracts that have an anticipated value greater than the simplified acquisition threshold exclusively for small businesses and authorizes federal agencies to make sole-source awards to small businesses when the award could not otherwise be made.

Simply put, whether you’re a small medical research or supply company; a construction firm; an IT company; a law firm or even a small car dealership, there are all sorts of government contracts out there waiting for your business to bid on. 

PO Financing for Government Contracts 

If you do decide to try and take a slice of the government pie by bidding on a contract, you’re most likely going to need PO financing, since most government contracts require a large amount of materials. No matter what type of government contract you are bidding on, be it a Work-in-Progress or a Finished Goods contract, PO financing will enable your business to fill orders and avoid the risk of late delivery that could cause you to lose a government contract altogether. 

PO financing for government contracts allows your company to:

  • Bid on large government contracts by providing 100% funding for the transaction;
  • Have greater availability to funds than standard business orders;
  • Not have to rely on personal credit to get a loan, rather, lenders rely on the credit of the end-customer (and who has better credit than the federal government?), and 
  • Have access to flexible payment plans and loan sizes, depending on the business cycles and opportunities.

In all, while government contracts are highly competitive–especially for small businesses–your company needs to be ready with the supplies when you bid on them. PO financing will give you the funds and the flexibility to grow your business when you are ready to grab a piece of the government pie. 

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