If you are seeking a small business loan you can apply here or if you would like to explore joining the Fundation partner program, you can find more information here.

More Questions? Ask your small business loan questions or find a cpa online.

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Tags: small business loans, accountants, small business financing questions, Ryan Himmel

If handled the right way, debt can be a small business owner’s financial friend, and one aspect of that friendship is using the right business credit card. To get you off on the right foot, check out five of the best credit cards for businesses with less than $1M in revenue.

1. Chase Ink Cash Business
The Chase Ink Cash Business Card gets you a $200 bonus when you spend $3,000 in your first three months of membership. You also earn 5% cash back on the first $25,000 spent each year on office supplies, mobile and landline telephone services, and cable TV and Internet services (excluding equipment). In addition, you get 2% cash back on the first $25,000 spent each year on restaurants and gas stations, and 1% on everything else. There’s a 0% introductory APR for the first year on purchases and balance transfers, and no annual fee is charged. Plus, your rewards never expire.

2. Capital One Spark Miles for Business
The Capital One Spark Miles for Business Card gets you 25,000 bonus miles (good for $250 worth of travel) when you spend $5,000 in the first three months. You also earn double miles on all purchases. You can get an additional 5,000 miles when signing up for at least one employee credit card. There is a $59 annual fee after the first year but your ability to earn miles is unlimited.

3. Bank of America Cash Rewards for Business MasterCard
The Bank of America Cash Rewards for Business MasterCard gives you 3% cash back on gas and office supplies (capped at $250,000 in purchases each year), 2% at restaurants, and 1% on everything else. Cash back is unlimited. The card has a 0% introductory APR for the first nine months on purchases, and there’s no annual fee.

4. CitiBusiness Thank You Card
The CitiBusiness Thank You Card comes with a 15,000 point bonus when you spend $3,000 in the first three months (good for $150 in gift cards) and you get triple points on a rotating set of business purchase categories such as computer equipment, hotels, and advertising services. It has a 0% introductory APR for the first six months on purchases, and no annual fee. Your ability to earn points is unlimited.

5. U.S. Bank FlexPerks Business Travel Rewards Visa Signature Card
If travel is a big part of your business regimen, try the U.S. Bank FlexPerks Business Travel Rewards Visa Signature Card. Make $3,500 in purchases in the first four months of membership and you receive 20,000 bonus FlexPoints, good for $400 worth of travel. You get double points on airline tickets, gas, many cell phone purchases, and office supplies, and triple points for charitable contributions. And there’s no cap on the rewards you can earn. You also receive a $25 travel voucher every time you book a reward flight, good for baggage fees or in-flight food. There’s no annual fee for the first year, and it is also waived every year you spend $24,000. When you don’t, it’s $55 per year plus $10 if you have employee cards. There’s a 0% introductory APR for the first 12 months on purchases and balance transfers.

Conclusion
One thing to remember – business credit cards are not subject to the Credit CARD Act of 2009. That means that the terms of a business credit card could change at any time and your payments could be applied to lower interest rate balances first. This shouldn’t dissuade your from applying for a business credit card, just be sure you know what you’re getting into before signing on the dotted line.

Do you know of any other good credit cards for business with less than $1M in revenue?

More Questions? Ask your business questions or find a bookkeeper online.

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Spielman Bagels is based out of Portland, Oregon. However, their story begins in a suburban town called Hillsboro, where the company was based out of for 17 years. It was not until December 2011, that the owner, Rick Spielman, decided to move to a small 720 square foot space on SE Division Street in Portland, Oregon, with sights on the big city foot traffic. At the time, coffee was the core product and the goal was only to make a dozen bagels a day.

When they first moved to Portland, Kettleman’s was the major bagel shop in the area. They were producing over 12,000 bagels a day or a thousand times as many as Spielman Bagels. However, that didn’t last. The Einstein bagel chain stepped in and purchased Kettleman’s and changed their prized recipe. That ended up being a big mistake as customer demand dropped significantly. The result was that bagel lovers in the area and the local Press began looking for the, “best new bagel shop.” Soon, Spielman’s became the go to bagel shop in town. They received an explosion of interest and the business soon expanded from producing 12 bagels a day to now 500 bagels per day.

The company has not looked back and has expanded their product offering. Specifically, they’ve initiated a program to purchase unsold bagels from other producers to create their famous bagel chips. The acclaimed bagel chip product has garnered the attention of Kroger, who recently placed an order for over 4,000 bags of bagel chips to be sold in 65 different stores.

What was the biggest challenge the company faced?
They needed to have the right infrastructure to manage their growth, which started with expanding beyond the 720 square feet store. The only problem was that they needed funding to finance this expansion quickly. As Rick Spielman had commented, “Banks are often too slow and I needed the funding immediately. Luckily, I stumbled upon a New York Times article that featured Fundation. I was able to get the funding I needed very quickly. We have now expanded our operations in terms of space, equipment and I expect to increase headcount.”

Advice for other small business owners
When we asked Rick if he had any words of wisdom that he could share with other small business owners, he replied, “Take full advantage of the opportunities in front of you. If you can expand with financing, then by all means go ahead. However, be cautious and careful to ensure that you’re working with the right lender.” In short, even with the right intentions and good business planning, the type of financing product you choose can be equally as important. If you are a business looking to expand, choose a product that is designed for that purpose (one that has a longer repayment period) and make sure you have clear plans on how you intend to spend the cash.

Tags: business loans, alternative financing, small business, Ryan Himmel

Can you provide some background on your business?
Our company, Whitesboro Frame & Body, is based out of Utica, New York and we service the local community here. We are an auto-collision and repair shop.

What was the purpose for the loan?
The primary purpose was to expand our product offering. We wanted to be able to offer our customers the ability to repair their cars with aluminum parts. Many newer vehicles, such as the 2015 Ford F-150, are aluminum-based as opposed to the less expensive steel-bodied predecessor. As customers adopt these newer vehicles, I wanted to make sure our shop is equipped with the capability to service them.

How does the loan provide your business with an advantage over other shops in the area?
I did my homework and reviewed what the other two auto-repair shops are doing in the area. One of them is not going to offer aluminum-based parts to their clients and the other shop is on the fence as to what they want to do. I view this as a great opportunity to grow my business and take market-share from my competitors through outside financing.

How has this impacted your business?
I believe this will have a great impact on our business as we will be the only game in town certified to provide aluminum-based repair parts to clients. Not only do I expect our customer base to increase, but we will probably increase headcount over time.

Why did you select Fundation for financing and what are the terms of the loan?
I met the management team at an auto-trade show in New Jersey and found them to be very insightful as to ways in which I can improve my business. They told me I could obtain funding, if approved, within a few days and the process was very easy. Sure enough, I obtained a $90,000, 4 year term loan very soon after applying. I was also intrigued because the company provides a lot of flexibility in that I could prepay the loan at any time without incurring any fees.

Do you have any advice for other small business owners considering a loan?
I would recommend that you put together a game-plan to determine if financing can help you expand your business. I recognized a great opportunity and knew in my heart that the loan will expand our business. Do your homework, but don’t be afraid to take out a loan if you know it will expand your business.

How did you apply for the loan through Fundation?
I went to their website and applied there and then their staff followed up with me right away to understand my particular circumstances. It genuinely was a great experience.

Tags: business loans, alternative financing, small business, Ryan Himmel

Traditional Bank Lending
Most businesses immediately think that their bank should be the first avenue they pursue. There is no question that banks can lend money at the lowest rates. So, if you are convinced you will qualify and have the time, then this is definitely a worthwhile option.

Unfortunately, the vast majority of banks are simply not structured to service small business customers. Branch personnel are not trained to analyze and offer credit, and commercial loan officers are busy chasing “bigger fish.” Case in point, almost half of the small businesses with annual revenues of $250,000 to $1 million do not have access to bank credit (source: Federal Reserve Bank of New York – May 2011 Small Business Borrowers Poll).

More importantly, banks lend to only the lowest risk small businesses that have adequate collateral. Banks put a heavy emphasis on collateral that they can access should a loan cease to perform. Unfortunately, most service-based businesses have little or no collateral to offer.

The final factor to consider with bank loans is time. You should expect the average time from application to approval to take at least 30 days. In addition, it is very likely that you will need to react to a series of questions and requests for more information or documentation during the process. So, before proceeding, it’s best to have your “house in order.”

Non-Bank Lending Options
Recently, many non-bank financing platforms have come to market offering a wide variety of products that traditional bank lenders simply do not. These platforms have been referred to as “Alternative Lenders.” Each offers a different value proposition and serves different types of customers for different purposes. We view the market in terms of two distinct sets of product categories. There are short-term financing options that allow businesses to satisfy a short-term cash flow need that require daily payments. We call these “Daily Payment Contracts.” Then, there are longer-term lenders (2-5 year loans) offering customers the opportunity to invest in their businesses for more “productive” purposes.

Daily Payment Contracts
These providers such as OnDeck Capital, CAN Capital and Kabbage offer short-term financing options that are typically below $50,000 in size and require daily payments. These financing products are typically best suited for businesses that need cash quickly and have less-than-desirable credit (FICO scores below 650) or businesses that have very high inventory turns (restaurants for example). Given the duration (length of time to repay these contracts) and their fees, the effective Annual Percentage Rate on these loans are very high. For example, if a daily payment lender offers a borrower $1.15 repayment for every $1.00 they advance, then that results in an effective APR in excess of 50% given the duration of the loan. What’s more, these contracts are not technically loans. Meaning if they advance you $1.00 for a $1.15 in return, then no matter when you pay them back, you still owe them $1.15. So, when you take money from these firms you are really agreeing to a fixed amount of payment.

Longer Term Lenders:
These providers offer small businesses with longer-term loans (2-5 years) and their product structure is most similar to a bank loan. The key difference is that they have the willingness to lend to a broader spectrum of customers. They utilize a concept called risk-based pricing to issue loans which means the price of the loan (interest rate) is determined by the predicted likelihood of non-repayment. Risk based pricing allows these lenders to focus on stability of business borrowers rather than collateral and therefore they can serve many more customers.

Because these loans permit a 2–5 year repayment period, the payments are very manageable and they permit thriving businesses to invest in their businesses and see a return on that investment.

In addition, like many of the alternative lenders in the market, you can complete the entire application and funding process within 72 hours. The key player to focus on in this category is Fundation. When Fundation approves a loan, they typically provide customers with options on their repayment period. The goal is to find the product structure that makes the most sense for each individual borrower.

If you would like to learn more about Fundation and how they can help you expand your small business, you can visit their website directly here to apply for a loan or you can call them for more information at (888) 498-4597.

Tags: business loans, alternative financing, small business, Ryan Himmel

How does Fundation help small businesses?
Fundation provides small businesses with a true financing solution that until recently did not exist in the marketplace. Previously, small businesses only had two principal options to obtain debt financing – either through a traditional bank lender or a daily payment product like a cash advance company. The two key reasons that banks de-emphasize small business loans is that 1) the manual intensive process they employ to screen loan applications is incredibly inefficient and, 2) their tolerance for risk only permits them to serve only the highest quality (lowest risk) customers. On the other side of the spectrum (what Fundation calls the “barbell”), you have short-term, daily payment products that literally draw payments from your account on a daily basis. When you factor in the duration (length of time to repay) of these products, the annual percentage rates are typically north of 40%, sometimes over 100%. We came to the market to fill what we believe was a major product gap – a product with terms that are similar to a bank loan (2, 3 and 4 year term loans), but with a willingness to lend to a broader spectrum of customers.

How is this different from what banks offer?
Fundation provides a similar product to traditional bank lenders but with a streamlined approach in terms of the length of the process and the requirements from customers. We look at many of the same characteristics of customers that banks do, but do it in a much faster and different way. For instance, we use a system that integrates with third party data sources to streamline the collection of information that can, in part, be used to review a loan application.

The other critical difference is the speed in which we work. We appreciate that small business owners are extremely busy people. So we do our very best to limit how much time they would need to commit to a loan application and provide them with decisions as quickly as we can. Typically, within 24 hours of providing us a completed application, a business owner should expect to have one or more offers from us. Moreover, you can complete the entire process within 48 hours — from applying to obtaining the funds in your bank account. In comparison, it may take an efficient bank 30 days to fund a loan application and an average bank 45 to 60 days. The other main distinction to note is that we lend to many small businesses that a bank will not because we have a different tolerance for risk.

What about the other alternative lending platforms like OnDeck Capital, CAN, & Kabbage?
The small business market is incredibly diverse. Therefore, there is a need for a variety of different loan products. We believe that our loan product category, customer profile and lending process is fundamentally different from the other “alternative lenders” in the marketplace. Many of these products are really “payment contracts” that serve a short-term cash flow need; meaning if they advance you $1.00, then you owe them $1.15 no matter when you pay it back. In addition, the loan sizes are typically below $50,000 and the repayment periods are so short that these products are really not designed for business expansion; they are designed for meeting cash flow needs on a short-term basis. This is not a slight on these lenders at all. We fundamentally believe that there is a need for different products for different types of customers and many of us will have successful lending businesses over the long-term. We just think that customers need to understand the products they use and what the implications are.

What criteria do you look at when offering financing?
When we are reviewing a loan application, we review four primary characteristics of the borrower: stability, character, ability to pay and use of proceeds. Each of these characteristics are determined by our analysis of various data sources as well as application data and our “due diligence” phone calls with customers. We want to lend to stable businesses that are dedicated to building a viable business over the long-term.

As a matter of basic pre-qualification criteria, most of our borrowers must have revenue of at least $250,000, have 3 or more employees, been in business for at least 2 years, is in an industry that does not have a historically high rate of loan defaults, and doesn’t have large long-standing tax liens or other material derogatory actions against them. Having said that, we take into account the entire story of the business. No one characteristic of a business tells the whole story. You have to look at it in totality. For example, a clear, concise plan for using our capital will compensate for other potentially negative factors.

What are the interest rates and how long does it take to get funding?
The terms of our loans vary by borrower, but can range from 7.99% to 24.99%. Our offers are based on a concept called “risk based pricing” meaning the loan offer will reflect what we believe to be the statistical and judged likelihood of losing our money in a loan. We encourage customers to think about the convenience factor in our loans and the overall return on the investment they make in their business with the capital we lend. It’s not all about price.

Are there any prepayment penalties or other “hidden fees”?
No, there are no hidden fees. There’s an origination fee to cover our data source costs, but it is simply deducted from the funds we disburse at closing. For instance, if you apply for a $100,000 loan, we’ll provide $98,000 in financing and you’ll be paying that origination fee off over time. We take great pride in being very transparent with our clients. We do not have prepayment fees. If our borrowers circumstances change and they no longer need our capital then they can pay us off for the outstanding balance along with any accrued interest.

Do you have any examples of clients that have used Fundation?
Yes, we’ve helped many clients across many geographies and industries. One that comes to mind is a 25 year old auto repair shop from Georgia that had been working with a traditional bank lender for almost 90 days in an effort to extract equity from his home to invest in his business. The auto-repair shop owner was referred to our service and applied for the loan with the objective of expanding his service to higher-end vehicles and using the loan proceeds for technology improvements, parts and hiring more staff. He applied and was approved within 24 hours and then had the $150,000 from us within 48 hours. We’ve kept in close contact with him and he’s already hiring more employees and increasing revenue.

To that point, we’ve recently rolled out a job creation initiative called “JobFunding” because it was clear that our loans were permitting business expansion initiatives. We have the capacity to offer over $100 million in loans this year to small businesses, which we believe can create over 1,000 new jobs. Based on a survey of our borrowers, we recently learned that we helped create over 100 new jobs already as a result of issuing $10 million in loans to small businesses in this initiative.

How should small business owners that are interested in Fundation get in touch with you?
You can visit our website directly here to apply for a loan or you can call us for more information at (888) 498-4597.

Tags: business loans, alternative financing, small business, Ryan Himmel

How can I use my retirement assets to start a business?
Any of your retirement assets can technically be used to start a business. However, most retirement accounts put restrictions on when the account holder can begin withdrawing funds without incurring penalties and tax liabilities. These rules are in place in part to encourage people to save money for retirement. However, that doesn’t necessarily mean that there aren’t reasons in which you may consider allocating a portion of your retirement account towards starting a business. There are even certain ways to structure the withdrawal to ensure that you aren’t subject to early withdrawal penalties or taxes on any pre-tax contributions or gains.

How much should you consider withdrawing?
This largely depends on the size of your retirement portfolio, asset allocation, your age, projected retirement expenses and many other factors. As most seasoned investors know, the common investment practice to follow is to allocate 120 minus your age in stocks and then the balance should be invested in bonds. For instance, if you are 50 years old, the textbook practice is to invest 70% of your retirement funds in stocks and 30% in bonds. If you are married, then your age would be the average of both spouses. However, that school of thought has changed with life expectancy rates rising and equity performance being less risky than previously thought. Having said that, it may not necessarily be a very risky proposition to invest 5-15% of your retirement portfolio in starting a new business venture. We would point out that this asset allocation doesn’t include the emergency cash you should always have on hand.

What are the best types of businesses to start with retirement funds?
You’ll want to reduce the risk as much as possible and only invest in established and proven business models with positive cash flow. For instance, investing in a franchised business in which the franchiser provides resources and administrative support would be ideal. Stay away from businesses that are high-risk and capital intensive. The margin of error for the amount of capital necessary to reach profitability should also be fairly low.

Is there a way to withdraw funds tax-free to fund your business?
Yes, there are ways to do it through investment vehicles such as a self-directed IRA. You can transfer money from retirement accounts to a new business tax-free because you are essentially setting up a new corporation and then purchasing stock as an investment in that new corporation via your new 401(k) plan. The Employment Retirement Income Security Act of 1974 (ERISA) made this arrangement possible and strict guidelines must be met to remain in compliance with the IRS.

Do I have to withdraw everything or can I do a partial withdrawal?
You do not have to withdraw 100% of your funds from the retirement account to use this structure. In fact, you can choose any portion of the funds to invest, and even have the flexibility of combining this option with other funding sources to make up the necessary capital to start your business.

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Angel Networks
Have you reached out to accredited investors in the angel community? Nowadays, there are many online angel communities such as AngelList and Gust that provide early stage companies with immediate access to accredited investors and vice versa.

Incubators and accelerator programs
Incubators and accelerator programs can also be very helpful. The notable ones of late include Y Combinator and Techstars, but there are many popping up across the country. They typically provide only a limited amount of capital, up to $25,000, but you’ll have access to very sophisticated investors that are itching to invest in start-ups. In many cases, being accepted into one of these programs, gives prospective investors comfort that you’re working on a “big idea” concept or “game-changer” in the market.

Venture capital
Another option is to seek an introduction to venture capital firms (VC). Please note that the market has dried up recently and VCs are becoming more and more selective with their funding approach. It’s best to try to get a warm introduction to the fund as they are often overloaded with pitches. You’ll also want to pursue a VC that has invested in companies in your industry before and have the experience to help your company grow. Do some due diligence, don’t just pitch every VC you can get an introduction to from someone in your network.

More Questions? Ask your startup questions or find an accountant online.

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The costs and risks of raising venture capital
The costs and risks to seeking venture capital are fairly clear. As a founder, you will be giving up a portion of your company to the VC for capital and resources. However, if you find the right VC, this may only be an upfront cost as the capital accelerates the company’s growth. Another cost to consider is the time you need to dedicate towards seeking the best VC for your company. Raising capital is not a quick and easy process. It takes many months, usually 3 at the minimum. Also, you’ll have less time to focus on growing your company organically as you’ll be busy meeting with potential investors and drafting presentations.

Finding the right VC for your business
The other caveat to seeking a VC investor is being able to find the right one for your business. You’ll want to work with a financial partner that shares the same vision as you. You will be giving away some control of the business, so you should be very cautious as to who will be helping you grow your business. You don’t want just capital, you want a VC that has deep-rooted relationships with the key players in your industry. We also believe that former entrepreneurs are generally the best VCs to work with as they’ve walked in your shoes before.

The benefits of raising venture capital
There are many benefits to raising venture capital. The obvious one is that you’ll have more capital to fund the highest growth areas of your business. You’ll also be able to add more resources and headcount to your business. A VC is also often a rubber-stamp for credibility. If you’re seeking a strategic partner with a large company, one of the questions they’ll often ask is if you have any investors backing your company. The best VCs also provide entrepreneurs with experience and relationships, which isn’t available for many entrepreneurs working alone.

Your business and personal goals
Then, you need to consider your business and personal preferences. What exactly are your goals for the business? Do you want to try to build a company on your own? Or do you want to try to build the next large brand in your industry? You may be able to do it on your own, but it’s typically easier when you have an outside financial partner on your side. On a personal level, are you going to be able to mentally handle reporting to a VC and conducting board of director meetings? Are you going to be okay if in the future, the board decides that you are no longer the best person to lead the company? These are all questions you need to ask yourself in advance.

Will a venture capitalist invest in your business?
The last factor to consider is whether or not your company is a “fundable” business. If you don’t have the ingredients that most VCs require when reviewing companies, then this whole exercise is a waste of your time. Sure, sometimes you need to speak to a few VCs to determine where your company stands in the market, but you’ll find out quickly if it is “fundable.” Most VCs will want to invest in a company with a large market opportunity, an experienced management team, with a clear way to monetize on the investment. If you’re missing any of these key ingredients, then seeking venture capital can be a waste of your time.

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