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27 Dec
4 Small Business Tips for Success in 2018

small businessman preparing for 2018Business Tips for Success

Owning and operating a small business takes dedication and hard work.

As 2017 comes to a close, it’s a good time to take a look back at the business practices that worked well, and which ones need to be improved on.

Here are four tips to help you make the most of 2018.

Focus on the most important thing(s)

One of the biggest challenges with running a small business is distraction. This often stems from the need to wear many hats. Since you may not have the financial muscle to employ top talent, you’ll often find yourself being the accountant, lawyer, and marketer of your business at the same time. Read More “4 Small Business Tips for Success in 2018”

23 Dec
Pros and Cons of Buying and Leasing Business Equipment

business equipmentPros and Cons of Buying and Leasing Business Equipment

You need new business equipment. But, you’re wondering whether it makes more sense to lease or buy the equipment. Which is the better option and why?  It all depends on circumstances. Sometimes it makes more sense to lease while on other occasions, you’d be much better off buying.

Below is a brief summary of the pros and cons of each option to help you make an informed decision.

Leasing Business Equipment

Advantages of Leasing

  • Lower initial expenses: This option allows you to acquire assets with minimal initial expenses.
  • Flexible terms: Leases are also easier to obtain and have more flexible terms compared to outright purchases.
  • Upgrade equipment more easily: Leasing is one of the best ways to deal with the problem of obsolescence because updating equipment is solely the responsibility of the lessor.
  • Leases are tax deductible: You’re allowed to deduct your lease payments on your tax returns as business expenses, effectively reducing the net cost of the lease.

Disadvantages of Leasing

  • You don’t own the equipment: Unlike with purchases, leased equipment has to be returned at the end of the lease term.
  • Obligation to pay for the entire term of the lease: You’re under obligation to make payments for the lease period even if you stop using the equipment.
  • Higher cost: In general, leasing costs more. Monthly payments are always higher than if you were purchasing the equipment.

Buying Business Equipment

Advantages of Buying

  • Ownership: When you buy office equipment,  it belongs to you. This can be a major advantage if the equipment has a long life.
  • Tax advantages: Section 179 of the IRA Code allows you to deduct the cost of certain newly purchased items in the first year.
  • Depreciation deduction: Some types of equipment can also be depreciated to reduce your taxes.

Disadvantages of Buying

  • High initial costs: Buying brand new equipment requires a lot of money. And, even if you plan to borrow the money, the bank will demand a 20% down payment. Couple this with the many financial restrictions that come with bank loans and you may find yourself in a dilemma.
  • Getting stuck with obsolete equipment: This is especially common with high-tech equipment. With technology changing every second, you risk getting stuck with out-of-date equipment just months or years after purchase.

To arrive at the best decision, consider the cost-effectiveness and tax implications of each option, and proceed with the option that best fits your needs and budget.

Are cash flow problems keeping you from upgrading your business equipment?  Invoice factoring provides an unlimited source of working capital without increasing your debt position. Call American Receivable at 1-800-297-6652 to learn more.

05 Dec
Choosing the Right Factoring Company for Your Business

Choosing the Right Factoring Company for Your Business

Choosing the right factoring company is an important decision for you and your business. The right factoring company will help you maintain cash flow and grow your business while the wrong choice can leave you with a bigger financial gap than when you started.

Factoring has been around for centuries but has really only come to light as a legitimate source of cash flow for businesses in the last couple of decades. While bank loans are the most common form of financing for businesses, not every business qualifies for a loan large enough to cover their overhead. With invoice factoring, companies are able to maintain a steady cash flow without waiting the extended time for payment. Sounds great, right? But how do you know which company is the right fit for you and your business?

With factoring becoming a popular means of cash flow, there are many companies to choose from. Websites like Top Ten Reviews allow you to search for companies specifically in your industry. So, you’ve found a few that sound like what you need, what’s next?

The most important part of choosing the right company is understanding what they are offering and how their services will benefit you. In the age of technology, most companies have online chat services on their website for quick information, but to receive the quickest quotes and to get a more comprehensive understanding of the business and the employees there, it is always best to call. It’s critical that you are not only boosting your cash flow but are also comfortable with the staff to ensure a strong relationship.

Here are some questions to ask when speaking with factoring companies. Remember, you are interviewing them just as they are interviewing you.

What is the factoring companies application process?

Typically, most companies will have an online application form for you to fill in your information and attach any documents requested. Most common types of information required are: name and age of business, owner information, amount of receivables to be factored, Articles of Incorporation, accounts receivable and payables agings, and profit and loss statements.

As my business grows, does the factoring company have the resources to grow with us?

The purpose factoring your invoices is to allow your business to have the cash to continue to grow. It’s important to find an established factoring company that has the means to support your current and future funding needs.

What are your advance rates and fees?

Depending on your industry, advance rates and fees can vary among factors. Factoring companies make their money off of fees which is a percentage of the face value of the invoice. These fees can range from 0.8%-3.0%. The advance rate is the percentage of the invoice that the factoring company gives you upfront as they await payment from your customer. These advances can range from 75%-90%. It’s important to understand and compare across factoring companies specializing in your industry and the services they offer.

Are there any hidden fees?

Some factoring companies may charge a small fee for an array of different services. Hidden fees to look for include but are not limited to: application and due diligence fees, origination fee, annual fee, chargeback and wire fees and early termination fee. Be sure to also discuss if there is a monthly minimum amount you must factor and if so, is there a fee associated with not meeting that minimum.

Understanding the factoring industry and asking the right questions can lead you in the right direction to finding the right company for your factoring needs and ensuring success and growth for you and your business.

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