Advice on Small Business Finance

With guidance on anything from when to take an owner’s draw to how to acquire capital to build your business, our small business mentors step in.

Our objective is to assist you in increasing your bottom line without making you feel as though you must start from scratch. Continue reading for insider tips from business professionals who can make your firm successful.

Advice on Owner’s Draw Finances:

Q. If your business fluctuates from season to season, when should you feel confident taking an Owner’s Draw?
A. Owner’s Draw, or Member’s Draw, has the advantage that you can choose when to use it and when not to. Assuming you are a sole entrepreneur, you may choose to keep the money in the company during leaner times and reserve withdrawals for when the business is more prosperous.

When performing an Owner’s Draw, there are a few factors to keep in mind.

Make sure you are processing the draw in accordance with your business structure by getting in touch with your accountant. According to Internal Revenue Service default regulations, sole proprietors and LLCs taxed as sole proprietorship typically have more freedom than other business arrangements.

Subtract the draw’s sum from any equity. There will be a credit to cash (reducing the amount of cash) and a debit to the owner’s draw account for bookkeepers (increasing the amount withdrawn by the owner for the year).

As long as the transfer is identified as an Owner’s Draw, the Owner’s Draws can be paid by a business check or a bank transfer from the corporate account to your personal account.

Keep in mind that Owner’s Draws are taxable income for sole proprietors because they are not regarded as company costs. A suitable percentage of your draw should be set aside to cover the tax bill.

– Tretta Bush, business accounting expert, president, Tretta Bush & Associates, Norfolk, Virginia.

 Hiring a COO

Q. When should a chief operating officer (COO) be hired? What benefit does a COO bring to a small, service-based company?

A. There are two circumstances in which hiring for this role would be appropriate if it were assumed that the COO oversees the everyday operations of the company.

First, the owner wants to focus on a certain area while stepping back from daily operations of the company. Second, either the firm has changed significantly or the owner wishes to go in a different route and lacks the capability or skill set required.

Bringing in someone with these skills can be crucial in any scenario, but the company must be able to pay both the additional remuneration and the owner’s salary.

– Doug and Polly White, small business experts, and principals, Whitestone Partners Inc., Richmond, Virginia.

The Benefits of Trademarking

Q. What are the procedures for registering your brand or product as a trademark or patent, and what protection do these actions provide for small business owners?

A. Having a trademark has two advantages. You can first legally and publicly safeguard your identity and stop other businesses from exploiting your brand. Second, owning a trademark promotes your brand while assisting customers in quickly recognizing the products and services your company offers in the marketplace.

These are the three actions required to register a trademark:

You may confirm that your company’s name and logo are distinctive and make sure your organization is the only one operating under that name by doing an extensive search through already registered and pending trademark applications.

In order to claim your name and safeguard your company’s identity, register your trademark and submit a trademark application to the United States Patent and Trademark Office (USPTO).

You may want to carry out a trademark watch even though your trademark application has already been submitted. This “watches” for any applications that might be registering their company’s name, logo, or other design elements. These services offer you a thorough report of any pending applications that might be confusingly similar to your trademark as well as monitoring and protecting your brand against infringement.

– Deborah Sweeney, small business incorporation expert, CEO, MyCorporation.com, Calabasas, California.

Seeking Investors, Angels Too

Q. How can I raise money for my firm to grow and recruit staff? How can I locate silent investors?

A. Real investors don’t stay quiet too often. Real investors invest in companies with enormous growth potential, such as those in the high-tech, biotech, and clean energy [sectors], which they can see themselves exiting for 100 times their current value in three to five years. Additionally, they nearly invariably add provisions to the legal documents that give them [a] say in the management and [take] seats on boards of directors. Angel groups may give high-growth potential startups seed money without exerting much oversight, but this is the exception, not the rule.

If you’re working on one of those high-growth, high-potential companies, sign up for the free platforms at gust.com and angellist.co, research local startup events (check with your chamber of commerce or neighborhood business school), and learn about seed investment and angel investment, which are frequently interchangeable.

If not, contact your local Small Business Development Center (SBDC) to inquire about business loans from the Small Business Administration, regional small business banks, and, if applicable, special low-interest loans for minority business owners, special development areas, and other factors.

– Tim Berry, small business strategist, author of “Lean Business Planning,” Eugene, Oregon.

Boosting Your Business Credit Score

Q. How do I build a D&B credit score without leveraging my own personal credit?

A. The Dun & Bradstreet score (also known as D & B) is a company credit score that works very similarly to a personal credit score by keeping track of when you pay your suppliers and creditors. The score spans from 0 to 100; companies scoring 80 or higher are thought to be a good risk. Applying for a free DUNS number is the first step in building your business credit profile, which tracks your payment history.

Without a company credit history, you will need to rely on your personal credit because creditors and suppliers will be unable to assess your ability to manage debt and make on-time payments. By making on-time payments after obtaining a credit card, company loan, or vendor payment arrangement, you can start to establish a strong business credit score. There is no set period of time in which to get an 80 or above; simply keep an eye on the progress occasionally.

– Dorethia Kelly, financial expert , founder of #MoneyChat, Detroit.

Making the perfect choice at the ideal moment might sometimes be all it takes to take your company to the next level. At these crucial times, consulting experts and working with mentors can make all the difference for your company. And as you’re pondering the next significant financial step for your company, take a minute to preserve the investment you’ve worked so hard to make by getting in touch with an American Family Insurance representative. Our specialists will work with you to design a plan that will accommodate your company’s demands both now and in the future.

This informational piece is accessible from a variety of sources and is provided for informational purposes only. Legal advice is neither intended nor provided by this information. For legal counsel tailored to your case, you should speak with your lawyer.

Source: American Family Insurance