I want to start my own business but don’t want to use loans. What types of grants are available?

Posts Tagged ‘Entrepreneurship’

I want to start my own business but don’t want to use loans. What types of grants are available?

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Q: I am interested in trying to own my own business but don’t want to use loans. What types of grants are out there and how do I get my hands on them?

A: We asked small business expert Melinda Emerson, author of Become Your Own Boss in 12 Months to answer this question:

“It’s a good thing you don’t want to use loans to get your business started because banks do not lend money typically to start-up businesses. You need to be in business for two to three years to qualify for even a line of credit. Unless you win a business plan contest or inventors competition for the most part there’s no such thing as finding a grant to start a business.

The money to start your business will come from your right or left pocket. In fact, there’s three pools of money you should have before your start a business

a) an emergency savings account

b) enough budget to go from 12-24 months without a paycheck

c) the first year of operating capital to run your business..

Now there are some franchises that provide funding, but 20-30% of the loan must come from your resources.”

Good Luck,

Melinda Emerson

Author, Become Your Own Boss in 12 Months

@Smallbizlady

www.succeedasyourownboss.com

Why Startups Surged During the Recession (usnews.com)

Should I sell some of my investments to pay off my debt

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Author: The Money Coach

Q: I am a 53-Year-Old Single Woman Who is Medically Retired. Between Disability and Retirement Income, I’m Living on About $24,000 a Year. I Have a Little Over $90,000 in Retirement Accounts. This is My Only Savings. I Have a Balance on a Business Credit Card of Close to $14,000. The Business Has Been Dissolved and I Want to Clear Up the Debt and Close the Account. My Only Way of Doing This is Selling Some Investments. Do You Recommend Doing This?

A: No, I don’t recommend taking $14,000 from your retirement accounts in order to pay off that business credit card. I would be wary of doing so for three reasons. First, you are medically retired, so you will not likely have any source of earned income for the rest of your life. Frankly, $90,000 is not a lot of retirement income to live on until death. You could live another 30 or 40 years. Also, if you sell some of those retirement assets, you’ll have to be capital gains taxes on them. Sure that’s just 15% (and possibly as low as 5% for people in the two lowest income tax brackets). But I want you to realize that your money will be taxed, meaning you may have to give over to Uncle Sam as much as $2,100 of the $14,000 you’re considering cashing in. Lastly, I’m not convinced that you can’t pay off this debt over time by making some adjustments to your budget. I know that $24,000 a year is not a lot to live on. But have you considered if you can cut any of your existing expenses (namely any luxuries you may be spending money on) and using that money instead to knock out the business credit card debt? I just don’t want you to tap into an already modest retirement nest egg and later regret not having that money to fall back on if times get even tougher or if you need the money for other purposes later in your retirement.

I am a Self-Employed Massage Therapist in Colorado. I Have Made Over $50,000 a Year, But This Year is Different. My Income is Down by Half, and I Owe $9,000 in Credit Card Debt. I Eat Only When I Have the Money to Eat. But I Spend Nothing More Than Gas and Dog Food as Extras Other Than Bills. What Should I Do Next?

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Author: The Money Coach

Anytime you have a substantially reduced income, or an outright elimination of income, it means you have to completely overhaul your budget. A few tweaks, changes and minor pullbacks here and there just won’t do. You’ve indicated that your income is off by 50%. As a result, you must drastically slash your current or previous spending, and also think about creative ways to raise cash. Otherwise, you risk falling deeper into debt.

How to Overhaul Your Budget

Before you look at “extras,” and any “luxuries” you may be spending money on, start by examining the very basics: like your phones, housing and car. Often, the things that we think are “necessities” have to be sacrificed just temporarily when there is a major shift in income. Since you are a self-employed as a massage therapist, it may be the case, for example, that you have multiple phones. Perhaps a cell phone, a business phone and a personal home phone. If so, consider which one – or maybe even two – of those phones you can live without on a temporary basis until you restore your income. This is the kind of thinking that will help you figure out how to get through this economic rough patch. This advice is also applicable to anyone who:

•   Has been laid off recently, for a long time, or expects to be unemployed soon
•   Has seen a big decline in self-employment income
•   Has had has their hours on the job cut
•   Has had their hourly salary or regular pay slashed
•   Has found a new job that is substantially less than the income previously earned

Lifestyle Choices

Overhauling your budget also means making tough choices about your lifestyle. An example of a major lifestyle change might be considering where you live. Do you rent or own? Can you find cheaper housing, a less expensive neighborhood, or is bringing in a roommate an option? Also, what about the car you mentioned? You said you drive only when you must. Can you sell the car and use public transportation? If you have car payments, is getting a friend or relative to take over those car payments at all feasible? I recognize that these are big shifts. But sometimes you have to dig deep when things are far more challenging than the norm. That’s why I usually recommend these strategies for people who are extremely deep in debt, or for those who have had major reductions in their income.

Negotiating and Bartering

As you consider your options, don’t forget about one of the best budget-saving strategies of all: negotiating. Whenever you are about to buy something, ask for a discount. Ask for a discount for paying for goods and services, like medical care, in cash instead of with credit. Ask for a discount if you’re at a store and you’re buying two or three of an item, instead of just one. You can even ask for, and negotiate, to receive products and services free of charge – if you’re willing to exchange your time, talents and services as well. For instance, you said you are a massage therapist. I imagine this is a stressful period for accountants. Instead of paying a CPA to do your business tax returns, maybe you can offer to provide a one-hour massage or treatment to your accountant. The idea is to think creatively about how you can both exchange value – without exchanging dollars. That’s a win-win situation for both parties and one that will help you to more quickly bounce back from your economic slump.

How did Lynnette Khalfani-Cox erase $100,000 in debt in 3 years? (askamoneyexpert.com)
How Debt Can Ruin Your Relationship (askthemoneycoach.com)
Best Careers 2011: Massage Therapist (money.usnews.com)

How long do I need to keep my business tax records?

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Author: The Money Coach

Q: In the May 2008 Issue of Health Magazine, Your Article Said You Only Need to Keep Your Tax Records Three years After Filing a Tax Return. My Understanding Was That the IRS Could File Up to Six Years Later. I Have a Small Business and Have Been Keeping My Records Six Years. What is the Current Ruling for This?

A: Under section 6501(a) of the Internal Revenue Code, the IRS is required to assess tax within three years after a tax return is filed. Therefore, most people need only keep tax records for three years after filing a tax return, because that is the time period during which:
a) a taxpayer can amend a tax return to claim a credit or refund; or
b) the IRS can assess additional tax

As you are self-employed, however, there are a few circumstances in which you should keep records longer. Keep employment-related tax records for at least 4 years. Also, if you ever under-report income by 25% or more of the gross amount shown on your tax return, then you should keep records for at least six years after you file a return. In such as case, the IRS has six years to assess taxes – not just three. What’s more you should keep tax records indefinitely if you file a fraudulent return, or if you do not file a return at all. But I assume that these last two scenarios don’t apply to you.

According to the IRS, “the exact length of time you should keep a document depends on the action, expense or event the document records.”

The IRS further offers this guidance:

1.   You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.
2.   You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for 6 years.
3.   You file a fraudulent return; keep records indefinitely.
4.   You do not file a return; keep records indefinitely.
5.   You file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.
6.   You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.
7.   Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

Here’s the direct link to exact page on the IRS’s website that answers the question: How long should I keep records? http://www.irs.gov/businesses/small/article/0,,id=98513,00.html

Ask The Money Coach

Posts Tagged ‘Entrepreneurship’