Category Archives: Business Economy

The NFIB Will “Certify” Candidates As Small Business-Friendly this Election

NFIBThe National Federation of Independent Business (NFIB), has been quite publicly announcing that it will play an active role in the upcoming congressional elections, and this will likely be a warm up for the 2016 presidential vote. According to the NFIB on it’s new website Vote for Main Street, “The 2014 elections are set to serve as a critical referendum on Washington’s ability to restore trust with Main Street businesses and workers.”

In order to determine which candidates really fit the bill as small business advocates, the NFIB has developed a “test” based on the candidates support of the following five key issues:

  1. Requiring Congress to pass a balanced federal budget each fiscal year
  2. Repealing the annual fee on health insurance providers enacted by the Patient Protection and Affordable Care Act (ACA)
  3. Returning to the original definition of a full-time work week to 40 hours, instead of the recently recognized 30 hour work week in the Save American Workers Act
  4. Requiring the federal government to certify that the ACA is not having a negative economic impact on the nation’s small businesses
  5. Enacting “reasonable” limits on the Environmental Protection Agency’s ability to regulate utility plant emissions

Though all of these measures have been introduced in Congress, none of them have made it into law. The NFIB believes that voting these five bills into law will create a significant positive impact on U.S. small businesses and result in the creation of millions of jobs. The organization has stated that it will begin listing a roster of ”Small Business Certified” candidates on it’s website as the elections draw closer.

The NFIB has further promised to put some political muscle behind the candidates who pass the test. According to Kent Hoover, Washington Bureau Chief, at The Business Journals, “NFIB will be putting money and manpower behind candidates who pass this test, and telling voters about candidates who fail it. The organization plans to spend more than $1 million on political ads in its “Vote for Main Street” campaign, and some staff and NFIB members will directly work on campaigns as volunteers…”

What do you think? Do you consider the five issues above to be the most pressing for small business owners heading into the 2014 congressional elections?

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Surprising Small Business Tax Facts

When it comes to recording and managing their finances and reporting tax obligations, many small businesses owners are surprisingly ill-equipped and unprepared, and this oversight can end up costing them thousands of dollars.

Surprising Small Business Tax FactsIn a recent survey conducted by internet domain registrar and web hosting company,, 600 small business owners were asked to describe how they manage their finances and how those habits are effecting their tax reporting. The survey revealed that over half of respondents still use manual processes, such as a spreadsheet or paper files, to record their income and expenses, and close to 40% set aside several days in order to complete their tax return.

Here are a few other interesting small business tax facts from that study:

  • Almost half (46 percent) of small business owners reported they do not work with an accountant.
  • Of those small business owners who do work with an accountant, 47 percent see their accountant once a year at tax time or only when they have a question or need help.
  • 32 percent of small business owners do not set aside money throughout the year to pay income taxes.
  • 12 percent of small business owners have no idea how much they will owe in income taxes, while 74 percent reported that they usually know the “ballpark” of what they owe, while just 15 percent know exactly how much they owe.

These are some pretty shocking statistics, and it seems to corroborate reports that have come from a variety of other sources, including the IRS and the National Small Business Association. Here are a few eye-opening statistics about small business tax habits from around the web:

  • According to the 2014 Small Business Taxation Survey from The National Small Business Association (NSBA), some business owners spend up to three weeks a year dealing with payroll taxes. Eleven percent of those surveyed spend over 10 hours every month working on payroll taxes, while 43 percent spend between three and 10 hours a month. The survey also found that forty percent of small business owners spend 80 hours preparing their Federal income taxes.
  • According to the IRS, 106,776 small businesses were audited last year. These were these were non-farm businesses that reported less than $25,000 in gross receipts and didn’t claim the earned income tax credit. Auditors demanded on average $5,500 from these businesses
  • There are more than 15,000 tax codes in the United States and from 2001 to 2012, there was an average of one change a day to the tax code.
  • A third of small businesses get fined for doing payroll incorrectly, typically do to unintentional mistakes.

If you are running a small business, take these numbers to heart. As we head into the middle of the summer, you have a lot of time to make some changes to the way you manage your finances that can potentially save your business a lot of money down the road. If you can, hire an accountant or a bookkeeper, or at the very least use accounting software, such as Turbocash, GnuCash, or Quickbooks, to keep track of your cash flow. You’ll be glad you did come tax time.

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5 Signs That The US Recession Isn’t Over Just Yet

For the past few years, there have been plenty of signals from Washington supported by an assortment of economic experts, that the economic recovery within the U.S. is moving along. But completely detached from the optimistic headlines the media keeps feeding us, the story on the street is totally different.

graphOn the surface, the contradiction seems puzzling. Several recent reports seem to give us a lot to feel optimistic about. The unemployment rate is now below 7%, its lowest level in five years. The housing sector seemed to be rebounding. Home sales and prices in December 2013 were their highest since 2006. Auto sales are up, gas prices have gone down, and Wall Street is roaring with stocks up more than 26%.

But, there are several, pretty poignant signs that our recovery is not all it’s cracked up to be:

1. Many people just don’t feel it. According to a recent CNN poll, only 24% of respondents believe economic conditions are improving, while almost 40% believe that the economy is actually getting worse. Meanwhile, the Consumer Confidence Index has been on the decline.

2. The number of people on food stamps is on the rise. As of March of this year, 47.7 million Americans are now on some form of food stamps. From the year 2000 till 2012, this number has increased more than 171%.

3. The housing market is starting to crumble. While the media is already drawing attention to a recent slow down in the housing sector, many industry experts point out that home prices are actually being driven upward by institutional investors. Big financial institutions like The Blackstone Group have become major home buyers. So far, Blackstone has spent more than $4.0 billion for 24,000 homes in the U.S. that it plans to rent out. But, the same rising home prices that seem to have created a rebound last year, are now accounting for a decline among individual buyers who can no longer afford to buy.

4. The rich are getting richer, the poor are getting poorer. According to a recent report by the Pew Research Center, the bottom 93% of households in the U.S. economy saw their net worth drop by 4% between 2009 and 2011, the richest 7% of U.S. saw their wealth increase by 28% in that time.

5. The recovery is a whole lot of hot air. Many people point to the fact that the rosy numbers Washington keeps promoting are nothing more than smoke and mirrors once you consider things like: how much money the U.S. government borrowed versus produced, the Fed’s obsession with printing money, as well as how key indicators, such as the unemployment rate, are calculated.

In short, though the economy does show some signs of rejuvenation, much of it is due to a thick layer of makeup. Wash it all away, and the picture we are left with ain’t so pretty.

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Big Banks Are Lending More: Is It a Real Sign of Economic Recovery?

According to the most recent results of the Biz2Credit Small Business Lending Index, small business loan approval rates at the nation’s biggest banks rose to 19.4% in April 2014. This is up from 18.8% in March, and it represents a record high since the start of the recession.

ID-10015674While this is certainly good news, is it a telltale sign that the economy is steadily improving? If more established businesses are starting to seek out loans which presumably would be used for hiring, expansion, and capital purchases, it would seem so. The truth is that banks generally look at three years worth of sales history. This year marks three years after the recession officially “ended” in 2011. To qualify for bank financing, these businesses had to have performed well post recession.

But, a closer look at the results of the survey may reveal that the recovery may not be so great after all. Small business loan approval rates at small banks actually decreased to 51.1% in April 2014, down from 51.6% last month, and the same pattern was seen with credit unions (43.5% down from 43.6%). Perhaps most telling is that lending approval rates at alternative lenders dropped for the fourth consecutive month to 63.5% in April from 63.6% in March 2014.

What does this all mean? It may mean that there is a growing schism among America’s small businesses. Big banks tend to attract and approve only the most credit-worthy businesses. These businesses usually have more assets and are more established and… they tend to be bigger as well. The definition of a “small business” among the nation’s biggest banks is a company with less than $20 million dollars in sales!

On the other hand, small banks, credit unions, and alternative lenders, in particular, get more requests from newer, less asset-rich businesses as well as those struggling with bad credit. If these institutions are approving fewer loans, chances are good that the pool of applicants are more risky and worse off than they were even a few months ago.

Changes the whole picture, doesn’t it?

What do you think? Do you feel there has been some real recovery since the recession or is it mostly smoke and mirrors?

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Senate Rejects Minimum Wage Increase: A Good Move or Political Posturing?

Last week, a bill that would have raised the federal minimum wage from $7.25 to $10.10 failed to pass in the Senate. While many small business groups were quick to applaud the move, the question remains: does this really help the economy or are we once again witnesses to the greatest political show on earth?

SenateMany small business leaders were vocal about their disapproval of the proposed wage increase. In an official statement published shortly before the vote, NFIB Manager of Legislative Affairs Ashley Fingarson claimed that “…lawmakers are targeting the nation’s economic engine – small business owners – with an anti-employer agenda. With increases to health care costs, higher taxes, more costly regulations, and now a dramatic minimum wage increase, small business owners simply can’t afford another excessive government mandate.”

Shortly after the bill was defeated in the Senate, International Franchise Association President and CEO, Steve Caldeira, had this to say:

“We commend the Senate’s decision to reject legislation to drastically raise the minimum wage, and thank the Senators who took a stand to protect our nation’s small business franchise owners. Congress’ own economists at the Congressional Budget Office have said that an increase in the minimum wage would reduce employment, and thankfully enough Senators heeded this dire warning in a sluggish and still fragile economy.”

They make it sound like a catastrophe was averted. But, the reality is that the minimum wage has failed to keep up with inflation for the last four decades. Instead of completely shutting the initiative down, why not make a counter proposal for a more digestible increase to the minimum wage? The Democrats’ proposal may have just been too large in too short a period of time. On the other hand, the Democrats gained massive brownie points by showing Republicans as greedy and out of touch with the people. So, maybe real change wasn’t the goal here. At the end of the day, we’re left with nothing but a few good headlines.

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New Legislation Makes Getting an SBA Loan Easier

Aside from the opportunities that they offer, SBA backed loans are known for their challenging approval process which includes long waits, lots of paper work, and strict requirements. But, recent legislation has made that application process a bit easier for small business borrowers while giving banks more flexibility in the way they structure their loans.

sbaThe new legislation will primarily affect the SBA’s flagship 7(a) and 504 loan programs. The 7(a) loan is typically used to establish a new business or to assist in the acquisition, operation, or expansion of an existing business. In this case a bank provides all of the financing, while the SBA guarantees to pay a portion of the loan should the borrower default. The 504 loans are intended for the purchase of land, including existing buildings, renovations and improvements to the property, the construction of new facilities, and the purchase of long-term machinery and equipment. They typically involve financing split between a bank and a Certified Development Company (CDC).

So what exactly got changed? Here is a brief rundown:

Good bye wealth test. Up until now, the SBA required loan applicants to report their personal wealth and assets, so that lenders could avoid financing those who have plenty of financial resources at their disposal. But since many technically wealthy business owners still have difficulty securing financing, it’s being pushed aside. In short, it means a little less paper work for small business applicants.

The removal of collateral limits. Under the 504 program, lending banks could only use the financed equipment or property as collateral on the loan. Now, business owners can tap into other forms of collateral, such as physical assets or future revenues, to secure a 504 loan. This change could help business borrowers secure better terms and lower interest rates.

More leeway with project expenses. With the 504 program, borrowers could only include project expenses that were incurred no more than nine months before they sent their loan application to the SBA. So, for example, if you purchased permits to build or renovate a new property a year before securing a 504 loan, the money could not be used to cover that expense. Now, if an expense is tied to the project for which a company secured the 504 loan, the funds can be used to cover it, regardless of when it was incurred.

In short, the SBA loan approval process will continue to be lengthy and cumbersome, but these changes will at least lighten the load a bit.

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Big Banks Tap New Revenue Streams with Prepaid Debit Cards

Just because the bank thinks you are too risky to be provided with a checking account doesn’t mean you’re not good enough for them to take money from do business with you. The prepaid debit card industry has been growing rapidly over the past few years, and several big banks and even credit card companies want in on the action.

ID-100108399Prepaid debit cards aren’t attached to a bank account. You can load and withdraw as much money as you want onto them from ATMs, pay your bills, use the card to make payments anywhere that debit or credit cards are accepted, and make peer-to-peer payments. Some cards even allow you to deposit paper checks (via a photo from your mobile phone), write paper checks, and even have your tax return directly deposited.

It’s easily to see the appeal of prepaid debit cards. According to a recent survey by the Pew Research Center, the majority (59%) of prepaid debit card holders also have checking accounts. But, these cards allow them to better stick to a budget, avoid overdraft fees, and make purchases online without worrying that their account information will be compromised.

Another large population of debit card users are those who cannot qualify for a checking account at the bank (or who don’t want one). For such people, these prepaid cards are the best alternative to a checking account in that it allows them to make credit card purchases, and they don’t have to walk around with large sums of money in their wallets.

When they first came out, prepaid debit cards were pretty expensive. Users could expect to be hit with an assortment fees for practically any transaction or service. But today, as these cards have become more popular with consumers many of them are shifting their fee models to look more like… well, checking accounts. Instead of a litany of fees, users are charged a consistent monthly fee.

But guess what? Many of the most popular prepaid debit cards are issued by big banks and credit card companies, such as Chase, Us Bank, American Express, and Visa. So, whether you are not using a standard checking account by choice or by consequence, chances are you’ll still be doing business with the same big names.

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Where Have All the U.S. Workers Gone?

The Bureau of Labor Statistics (BLS) recently reported that the U.S. labor force has dropped by six million people since the Great Recession, and there has been little sign in recent years of this changing even as the economy has improved.

ID-100111821According to the BLS, those considered to have dropped out of the workforce are people who are experiencing long-term unemployment, yet are currently not seeking work. So, the million dollar question is: where did all these people go? Are there really millions of people out there who have despaired from ever finding employment?

A closer look at the situation reveals that the high unemployment rate may in part be due to the increase of those taking on contingent or freelance work. The two largest groups of the unemployed population are those age 25 to 35, and those over 55.

While it’s hard to get exact numbers on who is freelancing these days, according to the latest Freelance Industry Report, 75% of freelancers are between the ages of 30 and 59, and 12% of respondents were 60 or older. The largest group in the survey (26%) was the 30 to 39 segment.

Unless these freelance workers have officially started their own micro business, and/or are reporting every cent they make, it’s quite possible that the majority of them are just being labeled as “unemployed” by the BLS. If that’s true, then we can expect to see this same “unemployment” trend for years to come.

The economy has been quickly shifting to a more contingent workforce. This is largely due to a challenging job market paired with, advancements in mobile technology, the ubiquity of the internet, and a strong cultural push (among Millennials in particular) for the recognition that there is more to life than work. According to a study conducted by MBO Partners a couple of years ago, the number of freelance workers may surpass full-time workers by 2020, and the Freelancers Union estimates that there are approximately 42 million independent workers currently in America.

In short, as everyone chews over the latest labor report, just keep in mind that those statistics may not be telling the whole story. Not everyone there is much more to the labor market story.

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December 16, 2013

Three Interesting Facts About the U.S. Minimum Wage

Over the past few weeks, Congressional Democrats with support from the White House, having been pushing a bill to gradually raise the federal minimum wage to $10.10/hour from the current $7.25 and index it to the Consumer Price Index. Though most analysts agree that the bill has little chance of passing the Republican-controlled House of Representatives, there has nevertheless been much debate over the consequences of raising the Federal minimum wage- especially among smaller businesses where the increase in employment costs can have the greatest impact.

french-waiter-2-332033-mWhat is interesting, however, is that there a lot of misconceptions floating around about the Federal minimum wage that, when considered, dramatically change the whole picture.

For starters, here are three facts about the minimum wage that you may not know about:

1. Almost half of the states in the U.S. have their own minimum wage rates that are in many cases significantly higher than the current Federal minimum wage. Nineteen states (plus D.C.) have set their own, higher minimums, ranging from $7.35 in Missouri to $9.19 in Washington State. (Some cities and counties have gone even higher — San Francisco’s minimum wage, for example, is set to rise 19 cents to$10.74 next month.) Those states collectively include 45% of the nation’s working-age (16 and over), meaning the federal demographic data don’t capture a significant share of the nation’s lowest-paid workers.

2. According to the Pew Research Center, when the Federal minimum wage is adjusted for inflation, it actually was the highest in 1968.  Minimum wage earners received the equivalent of $8.56 (in 2012 dollars) in 1968. Since the minimum wage was last increased in 2009, to the current $7.25/hour federal minimum has lost about 5.8% of its purchasing power due to inflation.

3. The most common worker to earn minimum wage is… a young, white woman working part-time. According to an earlier report by the Pew Research Center, most of the nation’s minimum wage workers are young: 50.6% are between the ages 16 to 24. They are also mostly white (78%), mostly women (half of the total minimum wage earners are white women), and a total of 64% are part-time workers.

In short, a raise in the Federal minimum wage may not be as dramatic as some critics are claiming since many states already have their own increases in place. It would also make sense given the current rate of inflation. Finally, the groups most affected may not be what most people are picturing. As more people are educated about the realities of minimum wage, it could dramatically change the nature of the debate.

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The Rise of the Independent Worker

Independent contractors, freelancers, consultants and micropreneurs have become an increasingly significant part of the workforce, and based on the findings of the Third Annual Independent Workforce Report from MBO Partners, it’s a trend that doesn’t look like it’s going away any time soon.

Why The Independent Work Force is Growing

home officeBefore I get to the findings of that report, I think it’s important to understand some of the reasons behind this trend, because it’s really the result of several factors:

Advances in technology enable and enhance remote working. Over the past 5 years in particular, there has been a renaissance in mobile technology and cloud computing tools and services. User interfaces across devices and platforms are becoming more streamlined, more intuitive, and more interconnected with relevant outside tools and networks. What this means is that there has been a major enhancement to the creation, exchange, and consumption of both data and media. This allows independent workers to produce quality results without being tied to a particular location.

Attitude shift regarding employment among employees. Job mobility is gaining in importance- especially among millennials. Many workers today are comfortable changing jobs every few years to advance their careers, and are using the skills they’ve gotten in an employment or intern situation to start up their own businesses.

Economic conditions are making job stability less likely. Going hand in hand with the above trend, over the past six years many big employers have been slashing benefits on things like healthcare, and retirement plans as well as cutting hours. Even though economic pundits have been calling these past few years a “recovery,” albeit a sluggish one, the fact is jobs in general have become less stable and often less attractive benefit-wise to employees. Given this, many workers may see running their own businesses as a more attractive alternative.

The independent worker lifestyle is being glamourized. Ever since the The 4-Hour Workweek began to enter the public conversation, it has become a defacto icon of the ideal work-life balance. This has been supported by the fact that tremendous media attention is being placed on a rolling roster of young, suddenly rich entrepreneurs who seem to have this elusive carefree lifestyle. The ironic thing is that in the majority of cases, it takes a significant amount of time and hard work to get a new micro business to profitability, and that fact is not getting the amount of attention it should. Driven by these ideals and by ideas that often sport low barriers to entry, it’s little wonder why more people are staking it out an independent workers.

The Current State of Independent Workers

Now, on to the study… Here are some interesting highlights about the state of the independent workforce today:

Independent workers are satisfied with their career choice.

“Independent workers’ satisfaction remains strong, with 64% reporting that they are highly satisfied with their work style… The vast majority plans to continue as independent workers, with 77% saying they will either continue as solopreneurs (63%) or build a larger business (14%).”

The rise of the independent worker represents a structural economic shift.

“The 2013 MBO Partners Independent Workforce Index, a measure created to track growth of the sector, rose yet again: up 2.7% over 2012 and 8.2% over the base year 2011.”

40% of adult Americans are either currently working or have worked on their own.

“Almost one third of adult Americans currently not working as independent have done so during their work lives and about 8% of Americans do so today. Many of the former independents indicate an interest in returning to independent work…”

Independents are positively and increasingly effecting the US economy.

“Close to $1.2 trillion in total income was generated by independents in 2013, up 20% from 2012. They also spent over $150 billion on non-payroll/contractor expenses. Independents earn income both globally and locally: $43 billion came from overseas while a robust $700 billion came from their metro areas. Nearly 10 million households receive at least half of their income from independents.”

Independents employ other independent workers.

“Although the vast majority of independent workers are solopreneurs and don’t have traditional employees, they don’t work alone. Over the past year, 26% of independent workers spent a total of $96 billion hiring the equivalent of 2.3 million full-time workers via contract hiring.”

One in seven independents plan on building their businesses.

“Close to 2.5 million independent workers plan to launch larger businesses.”

Independent workers come from all walks of life.

“For the 3rd consecutive year, the 2013 MBO Partners State of Independence study shows that independents represent all ages, professions, educational levels and geography.”

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