FUNDING YOUR SMALL BUSINESS

Transcription

1 FUNDING YOUR SMALL BUSINESS Contact: Melissa Serafin, Main Street Program Coordinator (503) Visit us at

2 We make every effort to keep our materials and information updated and accurate. If you know of other funding sources for small businesses or spot a mistake in this packet, please let us know. This packet is meant to provide information to small businesses. It is not meant to dictate legal or tax decisions, and we cannot provide tax or legal advice. Research a topic thoroughly before deciding on a course of action for your business.

3 BEFORE YOU START Ask yourself a few questions: Why are you starting a business? What niche will your business fill? What differentiates your business from what s already available? Who are your customers and competitors? Who is your ideal customer? How can you reach that customer? Do you have a marketing plan? What supplies, materials, equipment will you need? How many employees will you need? How long can you fund your business before turning a profit? How long can you live off your savings? Consider start-up as well as operational costs. How in debt are you willing to go? This is a vital question to answer. Make sure you are comfortable with the level of debt your business will require. Have you estimated how much money you ll really need? You should not have to return to fundraising repeatedly during the startup phase. Have you factored in unexpected costs? What taxes will you need to pay? What kind of insurance do you need? What are your strengths and weaknesses? What skills will you need to work on to run an effective business? Have you set specific goals and deadlines? What will your new daily routine be like? Do you have a Plan B? Do you have a strong support system in place? Once you decide on a course of action, write a funding plan. Contact SHEDCO for examples and templates. Write a business plan. Contact SHEDCO for free publications and templates. Find a business mentor through a free mentoring service such as SCORE or Micro-Mentor. Take advantage of business assistance and training. Contact SHEDCO for a list of organizations who offer free or low-cost education. Do your research check out the competition and local economic statistics. Contact SHEDCO for a copy of our retail market study.

4 Check out SHEDCO s free publications: Retail Market Study Small Business Resources How to Start a Business in St. Helens Social Media and Website Creation for Small Businesses Resourceful Marketing for Small Businesses Quarterly Vacancy Reports a listing of the available commercial properties within St. Helens We also provide publications by outside organizations, including: Facebook Pages Overview How to Write a Business Plan Business Plan Templates How to Write a Funding Plan for Your Business Funding Plan Templates Facebook Timelines Building Your Business with Facebook Pages Best Practices Guide: Marketing on Facebook How to Write a Business Plan Business Plan template The Beginners Guide to Search Engine Optimization Introduction to Lead Generation 25 Website Must-Haves Internet Marketing Marketing Content Facebook Page Insights Facebook Ads Optimization Guide Facebook Page Publishing: Best Practices Facebook Deals Guide for Businesses Facebook Ads: Getting Started Guide Contact us for free copies of these materials.

5 FUNDING SOURCES SBA-GUARANTEED BANK LOANS Term loans from a financial institution of up to 10 years. The SBA will guarantee as much as 80% of the loan principal. Come prepared; make sure you have a concrete business plan and are ready to demonstrate your idea. You will need to convince them that your idea is viable. An SBA guarantee means they will assist the lending bank if you don t repay the loan, not a guarantee that the SBA will cover your loan obligation if your business doesn t succeed. To apply for an SBA guarantee bank loan, contact the local SBA district office. SBA Oregon District Office 601 SW Second Avenue Suite 950 Portland, OR (503) sba.gov MICROLOANS The SBA provides funds to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance. These intermediaries administer the microloan program. They are usually comparatively small loans with reasonable rates and flexible terms. Many will lend to those without perfect credit. There are national programs as well as local. Cascades West Financial Services 494 State St. SE, Suite 270 Salem, OR info@cwfsi.net Columbia County Economic Team 230 Strand Street (503) columbiacountyoregon.com Oregon Microenterprise Network (OMEN) 1220 SW Morrison Street Suite 805 Portland, OR (503) capital@oregon-microbiz.org Microenterprise Services of Oregon (MESO) 4008 NE MLK Jr. Blvd. Portland OR (503) mesopdx.org Oregon Association of Minority Entrepreneurs Credit Corporation 4134 N. Vancouver Avenue Portland, OR (503) matt@oame.org Accion 56 Roland Street Suite 300 Boston, MA (866) loans@accionusa.org MercyCorps NW 43 SW Naito Parkway Portland, OR (503) Mholfert@mercycorpsnw.org mercycorpsnw.org Business Oregon 775 Summer St. NE Suite 200 Salem, OR (866) Oregon4biz.com Social lending sites utilize a social media approach by directly connecting potential borrowers with lenders. Check out: and

6 BANK TERM LOANS Generally have fixed interest rates, monthly or quarterly repayment schedules, and a set maturity date. There are two typical categories of loan terms: Intermediate-term loans: Usually less than three years, repaid in monthly installments from business cash flow. Repayment is generally determined by the useful life of the asset being financed. Long-term loans: Usually more than three years, collateralized by business assets, repaid in monthly or quarterly installments from business cash flow or profits, often limit the amount of financial commitment taken on by business, and sometimes require businesses to set aside a certain amount of profit for repayment. Try to use a bank with which you already have a long or close relationship, but also make appointments with several institutions. Some cater to businesses rather than individual customers. Wauna Federal Credit Union 500 N Columbia River Hwy Suite inquiry@waunafcu.org waunafcu.org Chase Bank 1934 Columbia Blvd (503) St. Helens Credit Union 1720 St. Helens Street (503) shcu.org U.S. Bank Columbia River Hwy (503) Bank of the West 465 S Columbia River Hwy (503) Wells Fargo 795 S. Columbia River Hwy (503) CREDIT UNIONS Credit unions are essentially cooperative nonprofit financial institutions owned by their members. They often offer more attractive rates, better returns, low minimum balance requirements, less restrictive eligibility requirements, and more one-on-one assistance. Wauna Federal Credit Union 500 N Columbia River Hwy Suite inquiry@waunafcu.org waunafcu.org St. Helens Credit Union 1720 St. Helens Street (503) shcu.org GRANTS There are several government departments and units that can help businesses within certain development areas. Check out the official site for government grants. These are usually just for nonprofits or existing companies that fit very specific guidelines. LEASE YOUR EQUIPMENT To keep initial costs lower, consider renting equipment at a flat monthly rate. Look for the option to purchase the equipment for its fair market value (or a fixed amount) at the end of the lease. This might also save you money with installation and training costs.

7 INDIVIDUAL DEVELOPMENT ACCOUNTS Individual development accounts are essentially matched-savings accounts usually offered to working class adults who are working towards purchasing a home, pursuing post-secondary education, and small business ownership. The ratio of matched funds varies, but goes up to 3:1. There are some requirements depending on the non-profit, such as income limits. They often require funds to go towards fixed assets, such as machinery, equipment, business/professional training, land, sustainable marketing, or land. MercyCorps NW 43 SW Naito Parkway Portland, OR (5z03) mercycorpsnw.org scastagnola@mercycorpsnw.org Columbia County Economic Team (CCET) 230 Strand Street (503) columbiacountyoregon.com Microenterprise Services of Oregon (MESO) 4008 NE MLK Jr. Blvd. Portland OR (503) mesopdx.org COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS (CDFIS) CDFIs are mission-drive financial institutions that offer financial services and products to areas underserved by traditional financial institutions. They provide loans and investments to a variety of clients, including businesses, as well as technical business assistance. They will often make loans generally considered to be unbankable by traditional financial institutions, due to poor credit history, a large loan amount, or limited collateral. The cost of most CDFI loans is determined by risk, rather than the cost of funds. The goal of CDFIs is to facilitate community development, so make sure to determine how your loan will result in job creation, provide a service to the community, or help stabilize the economy. CDFIs are usually more than willing to discuss your loan proposal as well as offer assistance to attaining financing through other institutions. MercyCorps NW 43 SW Naito Parkway Portland, OR (5z03) mercycorpsnw.org scastagnola@mercycorpsnw.org Oregon Microenterprise Network (OMEN) 1220 SW Morrison Street Suite 805 Portland, OR (503) capital@oregon-microbiz.org Albina Community Bank St. Johns Office 8040 N. Lombard Street Portland, OR (503) customercare@albinabank.com CREDIT CARDS Easy and quick access to funds. However, many have high interest rates, and you may be putting your credit score at risk. 401(k) A 401(k) is a tax-deferred savings account established by an employer for its employees. Even if the employees leaves the company, the 401(k) is left intact. The savings can be used for almost any investment. There may be substantial tax penalties and administrative fees, as several professionals are required to process the transaction, but the company s founder will not incur any cost of equity.

8 REVOLVING LINE OF CREDIT It can be easier to get a revolving line of credit rather than a traditional loan. Facilitated by banks and credit unions, money is paid back as it becomes available for borrowing again. Wauna Federal Credit Union 500 N Columbia River Hwy Suite inquiry@waunafcu.org waunafcu.org Chase Bank 1934 Columbia Blvd (503) St. Helens Credit Union 1720 St. Helens Street (503) shcu.org U.S. Bank Columbia River Hwy (503) Bank of the West 465 S Columbia River Hwy (503) Wells Fargo 795 S. Columbia River Hwy (503) CDC/504 LOANS Long-term, fixed-rate financing for major fixed assets, including land, existing buildings, improvements, utilities, parking lots, landscaping, modernization, renovation, or the conversion of existing facilities. It may not be used for working capital, working inventory, consolidating or refinancing debt, repaying debt, or speculation or investment in rental real estate. They are made through Certified Development Companies, which limit their funding to businesses within their communities or region. Contact a CDC for more information and for assistance determining your eligibility. Oregon Business Development Corporation 334 NE Hawthorne Avenue Bend, OR CDC Manager: Jim MacKinnon jmackinnon@coic.org (541) Loan Officer: Lisa Kyle (541) lkyle@coic.org Loan Closing/Servicing Officer: Cherie Folkens (541) cfolkens@coic.org Portland/Vancouver Representative: Joe Martinez (503) joe@sbaaskjoe.com Northwest Small Business Finance Corporation NW Greenbrier Pkwy Beaverton, OR (503) Cascades West Financial Services 494 State St. SE, Suite 270 Salem, OR info@cwfsi.net LIQUIDATE ASSETS Think about liquidating any extra assets you own, such as boats, vacation homes, or stocks. You won t need to worry about interest payments if you can fund your business with your own assets. FRIENDS AND FAMILY Friends and family may be the most confident lenders. No lawyer fees, likely low cost and low interest. Make sure to develop a contract and carefully track payments you want your business to succeed with your relationships intact. Check out virginmoneyus.com or zimplemoney.com for a formal way to manage the loan.

9 PEER LOANS Beyond friends and family, there are peer-to-peer lending sites available as well. The site checks your credit and determines your credit score. Lenders peruse the site and select the businesses they believe will be successful. If enough lenders commit, the site will administer the loan. This may be an option for quick cash, but the interest rates will probably be high. Check out or BORROW AGAINST YOUR HOME This is the oldest trick in the book. It's also one of the best because you can exert almost total control over the process. Here's how it works: Say you need $50,000, your home is worth $250,000 and you owe the bank $100,000 on your mortgage. You can borrow against the equity, in this case $150,000. Of course, once the loan kicks in, you'll have monthly payments. If you're starting a new business, it's a wise idea to set aside some of the proceeds from the home equity loan to help make these payments until the business can pay you a steady salary. YOUR RETIREMENT ACCOUNTS Though not necessarily advised, you can use the money from your 401(k). Under select circumstances, you may be able to borrow money and repay it without penalty, but be sure to consult a tax professional. BORROW AGAINST INSURANCE POLICIES You probably pay for health insurance, life insurance, disability insurance, auto insurance and perhaps homeowner's insurance. Unfortunately, you can only borrow against whole life policies, but most have some cash value after three years. Contact your agent about a policy loan. Most companies will lend up to 90 percent of the cash value, and your policy stays intact as long as you continue to pay premiums by their due date. However, if you die with a policy loan outstanding, the benefits may be diminished. Loans against your insurance policy are usually reasonable, since the rates are determined by the key money-market rate. BORROW AGAINST YOUR INVESTMENTS If you're starting your business part time while keeping your full-time job, a potentially stable investment is borrowing against your employer's 401(k) retirement plan. It's common for such plans to let you borrow a percentage of your money that doesn't exceed $50,000. The interest rate is usually about 6 percent, with a specified repayment schedule. The downside of borrowing from your 401(k) is that if you lose your job, the loan must be repaid quickly, often within 30 days. Consult your plan's documentation.

10 TAX INCENTIVES AND DEDUCTIONS The tax structure in St. Helens is very favorable for businesses. There are NO business/occupation taxes, sales taxes, local business income taxes, local payroll taxes, revenue taxes, inventory taxes or state capital tax on asset value. St. Helens is also a Certified Local Government. A variety of tax incentives and credits are also available to qualifying businesses. Work Opportunity Tax Credit Federal tax credit incentive that the Congress provides to private-sector businesses for hiring individuals from nine target groups who have consistently faced significant barriers to employment. The main objective of this program is to enable the targeted employees to gradually move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers, while the participating employers are compensated by being able to reduce their federal income tax liability. Business Energy Tax Credits Contact Information Oregon Employment Department WOTC Unit, Room Union Street NE Salem, OR ext oregon.gov/employ A variety of renewable energy and related incentives are available. Buildings that save 50% or more of projected costs, on-site renewable, combined heat and power systems, hybrid and gasoline-electric vehicles are all eligible for incentives. The Energy Trust of Oregon also offers incentives for the installation of certain energy efficient equipment. Contact Business Oregon for more details. Contact Information oregon4biz.com energytrust.org/business energytaxincentives.org irs.gov/businesses/smallbusinesses-&-self-employed Historic Preservation Tax Credits There are several tax incentives available to historic preservation efforts, including a 20% tax credit for the certified rehabilitation of certified historic structures and a 10% tax credit for the rehabilitation of nonhistoric, non-residential buildings built before SHEDCO distributes a National Park Service guide to historic preservation tax incentives, which provides detailed information about the topic; contact us for a copy or more information. The Oregon State Historic Preservation Office also offers a Special Assessment of Historic Properties program, which offers a 10-year freeze of a property s value for buildings that will be significantly rehabilitated. Furthermore, St. Helens is a Certified Local Government, and matching grant funds are periodically available for the preservation of historic buildings. Contact SHEDCO for more information on the Certified Local Government program. Health Care Tax Credits Contact Information National Park Service nps.gov/tps/tax-incentives.htm State Historic Preservation Office 725 Summer St. NE Ste. C Salem, OR (503) oregon.gov/oprd/hcd/shpo/ Pages/tax_assessment.aspx The Affordable Care Act provides tax credits to small businesses for starting or continuing to provide health insurance coverage for employees.

11 TAX INCENTIVES AND DEDUCTIONS Oregon Investment Advantage Tax Exemption A multi-year taxable income exemption for a certified business within an eligible county (Columbia County is eligible). Other criteria is required, such as hiring five or more new employees, the business does not operate another facility, the business will not compete with others in the area, and others. HIRE Act For hiring previously unemployed employees, the Hire Act provides exemption from the employer s share of social security tax; for each employee retained for at least 52 weeks, the act provides a retention credit of up to $1,000. Business Automobile Deduction Offers deductions on the purchase and maintenance of an automobile used for business purposes. Books, Legal, and Professional Fee Deduction Legal and tax books and professionals can all be deducted. Bad Debts Deduction Retail stores (not service-providers) can deduct the cost of goods that were sold but not paid for. Business Entertaining Deduction Half of the cost of entertaining current or prospective customers, such as a catered lunch, may be deducted. Travel Deduction Travel expenses may be deducted, including plane fare, taxis, meals, lodging, and tips. Interest on Credit and Loans Deduction The interest and carrying charges for credit and loans may be deducted. Contact Information See Business Oregon listing. Moving Deduction If you move because of your business and your new workplace is at least 50 miles from your old home, you may be able to deduct part of your moving expenses. Education Deduction Expenses for educational opportunities can be deducted if they are related to your business and your current occupation. Promotion and Advertising Deduction Business cards, newspaper ads, sponsorship with a clear connection to your business may all be deducted.

12 CONTACT US If you are thinking about starting or relocating a business to St. Helens, let us help! Contact us with your questions, and we will provide clear, helpful, and comprehensive answers. The St. Helens Economic Development Corporation (SHEDCO) aims to provide the leadership and coordination necessary to enhance the economic viability of St. Helens. We provide small business support and resources, organize community and business events, promote St. Helens and our small businesses, and implement beautification and streetscape projects. We are always looking for new members to join our effort in revitalizing our local economy and improving our community. Contact us if you are interested in joining our team! Contact Melissa Serafin, Main Street Program Coordinator Melissas@ci.st-helens.or.us, (503) Visit us at shedc.org