Content about Finance

WASHINGTON — Borrowers and lenders of U.S. Small Business Association-backed loans will have greater access to capital and less paperwork as a result of a proposed regulation aimed at streamlining the application process while strengthening oversight and program integrity.

“Streamlining and simplifying has been a key focus of our agency over the last few years,” says SBA Administrator Karen Mills. “The changes are the latest steps to reduce paperwork burden, with our eye on the larger goal of expanding access to capital and giving entrepreneurs and small-business owners the financial resources to grow and create jobs.”

The SBA proposes the new measures after extensive consultations with lenders and borrowers to identify the greatest challenges they face and find ways to reduce barriers to making and accessing loans, while still maintaining strict oversight.

Among the proposed changes are:

CHICAGO — The growing number of options for the right approach to retirement planning is making the right choice quite difficult. Among the choices is a relatively new kind of mutual fund that has enjoyed strong growth over the past few years. Known as target date retirement funds, their assets have jumped from $183 billion in 2007 to $436 billion as of mid-2012, according to the Investment Company Institute. The allure of these funds is easy to understand.

A target date retirement fund is simply a mutual fund designed to alter its investment strategy as the holder nears retirement. For example, the Vanguard Target Retirement 2025 Fund is designed to appeal to someone who plans to retire in 2025 or around that time.

Following conventional wisdom, these funds generally alter their portfolios to include increasingly conservative investments as the target retirement date approaches, thus relieving the owners from rebalancing portfolios on their own. The objective is to reduce risk as retirement approaches, generally by decreasing the proportion of securities and increasing the proportion of bonds.

ARDMORE, Pa. — Sooner or later, every dry cleaner thinks about retirement. For those who own a closely held or family business, retirement is more than just a matter of deciding not to go to work anymore. In addition to ensuring there will be enough money to retire, dry cleaning business owners, shareholders and partners must decide what will happen to the business when they are no longer in control.

An effectively developed succession plan can involve selling the business to provide a retirement nest egg, or continuation of the dry cleaning business, with gradual changes in management and/or control, to ensure a source of retirement income or any combination thereof.

One of the more important aspects of business succession planning is working out the financial pitfalls following the death of the business owner. That requires answering questions such as where the money to pay taxes will come from, or, if the business is a partnership, where the money to buy out the deceased partner’s share will come from.

SAN FRANCISCO — Owners often ask how to prepare their dry cleaning business for an optimum-priced sale. Generally, the answer is the same as the answer to an entirely different question: “How can I improve my business?”

To optimize the value of a business, make it the best it can be. Is that an oversimplification? Yes. Is it true? Yes.

IF YOU’RE NOT SELLING, YOU’RE BUYING

Whether you are preparing your business for an arm’s length sale, for a transfer to the next generation that you hope will be as passionate about dry cleaning as you are, or you have no sale planned, you are still preparing the company for a “sale” at some value.

If you are not actively selling your business, you are actively re-buying it yourself every day. You are making a conscious or subconscious decision to continue to exchange your capital investment, time, effort and equity (whatever the current value) for ongoing ownership of your company.

Optimized value benefits you whether you sell or not because the business is more valuable as a profit generator over the long and short terms.

CHICAGO — Whether you’re just getting started in your dry cleaning business or you’ve been around for years, you can’t afford to let your hard-earned dollars get eaten up at tax time. It’s tough enough to earn a decent income these days, and it can be even harder to keep what you earn. That’s why it’s so important to take advantage of every legitimate way to minimize the tax bite on your earned income.

Worrying about your retirement today when the business demands on you are so high may not be at the top of your priority list, but it’s important to understand that retirement savings plans have the double benefit of reducing today’s tax load, thus effectively increasing today’s income, while helping to build that all-important retirement nest egg.

ARDMORE, Pa. — Things go a lot easier when potential lenders, suppliers and partners can decide to take a risk based on a dry cleaning business’ credit history and capability of repaying obligations. With strong business credit, a business can borrow at a lower cost, with more favorable terms. In fact, many small dry cleaners with good business credit have discovered it is possible get loans without an onerous and often embarassing personal guarantee.

Obviously, business credit is quite difficult to get. For any small dry cleaning business owner, navigating the credit and lending world can feel like a vicious Catch-22. Most commercial banks and traditional lenders are reluctant to loosen their purse strings until would-be borrowers have proven themselves with a strong credit history. But it’s difficult to develop that good record when no one will lend in the first place.

IN THE BEGINNING

When a business issues or extends credit to another business, it’s referred to as “trade” credit. Trade, or business, credit is the single largest source of lending in the world.

WASHINGTON — Cash flow issues continue to plague a significant number of America’s small businesses, according to the results of a new survey by the National Small Business Association (NSBA).

Access to Capital Survey findings show that nearly half (43%) of small-business owners report that they needed funds at one point in the last four years and were unable to find any willing sources.

“Not only have small-business owners been unable to find new credit over the last four years, nearly a third had their existing credit slashed and one in 10 had their loans called in early,” says NSBA President and CEO Todd McCracken.

Among the small-business owners who reported some change to their credit, 60% stated that the reason given was the bank’s internal risk assessment. Fifteen percent said they were given no explanation for changes to their credit.

Only small community banks and credit unions received a majority overall positive rating among small businesses asked to rate various lending institutions.

CHICAGO — In all of the animal kingdom, only we humans have the ability to employ reasoning in a way that allows us to reach rational decisions. Why is it, then, that we seem to misuse that ability so often, especially in important areas such as money matters?

In coining the phrase “irrational exuberance” more than 15 years ago, former Federal Reserve Board Chairman Alan Greenspan was thought to be warning us that the stock market was irrationally overvalued. As it turns out, his comment may have presaged a new field of study called behavioral economics—a new science that makes an effort to determine why supposedly rational humans make so many irrational decisions.

When it comes to how we handle our money, there’s no shortage of irrational decisions. Consider the person who drives five miles to save three cents per gallon of gasoline, or the investor who consistently buys stocks at their highs and then panics when the market goes down and sells them at their lows.

CHICAGO — If there is one investment philosophy that approaches universal agreement among financial advisers, it’s the need for careful diversification in every portfolio in order to minimize risk, but exactly what does diversification mean, and how can you tell if your investments are truly diversified?

One popular TV show on finances features a segment called “Am I Diversified?” in which viewers call in, give the host their top five holdings and the host lets them know if they are properly diversified. According to Jason Whitby, MBA, CFA®, CFP®, AIFA®, senior financial adviser with Miami-based Investor Solutions, it’s not that simple. “The idea of five-stock diversification is mostly refuted by the financial community,” he says, “which tends to agree that the number of individual stocks needed for diversification is actually closer to 30.”

SAN FRANCISCO — Dry cleaning consulting firm Methods for Management (MfM) has established the Smart Women’s Network as a forum for focused networking to help build profit and sales in their businesses.

The group covers major issues affecting industry management, including sales and marketing, customer engagement, finance, human resources, production, site selection and environmental impact.

Through Peer Management Bureaus and independent project assignments, MfM bureaus provide a non-competitive environment where members receive profit-enhancing tools while sharing information, issues and concerns with peers they trust and respect.

BERKLEY, Mich. — The Certified Restoration Drycleaning Network (CRDN), an international organization of textile restoration specialists serving the insurance industry, has named Robert Murray its national sales and operations manager.

Murray spent four years as select customer sales executive with The Hartford. His background includes advanced marketing and business development skills, as well as operational expertise.

“To this position, Rob brings diverse experience with finance and environmental services in addition to his strategically important insurance expertise,” says CRDN CEO Wayne Wudyka. “He also provides hands-on knowledge of franchise ownership and multi-location business management, which will be particularly relevant for the CRDN operations he will guide and direct.”

CHICAGO — A new report from NYSE Euronext provides some economic encouragement. Top executives for 62% of public companies and 71% of private firms expect to expand their businesses and add jobs in 2012, a move counter to growing uncertainty of the economy and political instability. This is the first report from NYSE Euronext to include private or emerging companies and MBA students that the NYSE dubs “aspiring corporate leaders.”

On the other end of the spectrum, the congressional so-called Super Committee failed to come to an agreement on a deficit reduction plan, leading to a drop on the stock market and continued debate as to the cause of the committee’s inaction. The main stumbling block appeared to be the continued tax cuts, rather than higher tax rates, for the upper tier of income earners.