Study shows business borrowers generate more company revenue
Researchers studying 5,000 companies discovered that those using a business bank loan to finance their start reported nearly twice as much revenue during the first three years compared to a startup of similar size that took on no debt.
Also of note—companies that financed their start by personal debt (home equity loan or personal credit card) averaged 57 percent less revenue than companies that hadn’t borrowed at all.
Chance of business survival beyond the first three years favored business borrowers as well, with a survival rate 19 percent higher than that of non-borrowers.
Researchers suggest companies that invest the time and resources required to apply for a business loan may be more serious contenders and therefore more likely to be successful in business. Also, companies that are successful in securing a business loan have been vetted by the bank, eliminating those with the least viable business plans. And finally, successful business loan applicants generally have a mentor inside the bank who can provide financial information and advice that may contribute to positive practices.
Clatsop Community Bank specializes in SBA lending. We’re (one of/the) most active SBA lenders in the county, and we understand the unique dynamics of the North Coast economy.
Please contact us to find out how your company could benefit from business lending.
Complete article at Forbes
Two quick tax tips and a new free banking service
Check your withholding in light of new tax law
Many Americans have already seen an increase in their paycheck due to the new withholding tables issued by the IRS for the 2018 tax year. Before you get used to the extra cash, however, it’s a good idea to review the W-4 you have on file with your employer. Changes in the way exemptions are tabulated for the 2018 tax year could result in withholding too little (resulting in a penalty) or withholding too much (resulting in what equates to an interest-free loan to the goverment). The IRS has an updated withholding calculator to help estimate the right amount to have withheld from each paycheck.
For more information, read the full article at CNBC or consult your tax advisor.
Contribute to IRA by April 17 to take 2017 deduction
Customer data from Fidelity Investments shows that more than one-third of IRA contributions are made during the three weeks leading up to the tax filing deadline. With this year’s filing deadline less than a week away (April 17), it’s not too late to add to your nest egg while reducing your taxable income. It could mean writing a smaller check to the government on April 17, or receiving a larger refund after you file.
For more information on eligibility and deductibility, read the full article at Forbes or consult your tax advisor.
Clatsop Community Bank now offers customers the ability to turn their debit cards on and off with the free CardValet service that is built in to our mobile banking app. CardValet allows you to set customizable alerts, turn debit cards on and off, control and monitor spending, and (for businesses) ensure spending policy compliance. Find out more or access CardValet features by selecting “Manage My Cards” from the home screen of our mobile banking app.
CardValet is a registered trademark of Fiserv, Inc.
Bogus tax refunds point to fraudulent returns
Exciting as it may be to receive a cash windfall around this time of year, beware of tax refunds that show up in your bank account unexpectedly.
Last month, the IRS issued a warning about the latest tax refund scam. It involves thieves stealing taxpayer data, often from tax professionals, and using the data to file fraudulent returns. The refunds generated by the returns are then deposited into the taxpayer’s bank account. Shortly after, the thief, posing as an IRS representative or collection agent acting on behalf of the IRS, will contact the taxpayer requesting that the funds be turned over to them. Victims are often convinced the request is legitimate because there will actually be an unexpected tax refund in their bank account.
Taxpayers may also realize a fraudulent return has been filed in their name if they are unable to file an electronic return because one has already been filed using their Social Security number.
This article from Forbes details the steps to take if you find yourself in possession of a bogus tax refund. Also note that if you do find such a refund in your bank account, you should notify your tax preparer as well as your financial institution, as identity and account information has likely been compromised.
“The IRS warns that versions of the scam may continue to evolve. The number of potential taxpayer victims has already jumped from a few hundred to several thousand in just days.”
And remember, “the IRS will not initiate contact by phone or email to discuss your account. When in doubt, assume it’s a scam.”
How and when the new tax bill will affect you
The new tax bill signed into law in December will affect paychecks as early as February of this year, though most changes will not be realized until you file taxes in April 2019.
Here’s a quick rundown of the major points…
- Changes to tax brackets: The IRS is issuing new withholding tables in January, and any resulting changes may appear in your paycheck as soon as February 2018.
|Old Rate||Old Bracket||New Rate||New Bracket|
Married, Joint Filer
|Old Rate||Old Bracket||New Rate||New Bracket|
- Increases in standard deductions: Standard deduction increases are for the 2018 tax year, so you won’t realize the benefit until you file taxes in April 2019. The standard deduction for individuals increased from $6,350 to $12,000, and the standard deduction for married couples filing jointly increased from $12,700 to $24,000.
- Elimination of the healthcare mandate: The Affordable Care Act’s (ACA) mandate for individual coverage does not end until 2019, so if you were required to have coverage under the ACA, you should continue coverage through 2018 to avoid the penalty.
- Increase in deduction for high out-of-pocket medical expenses: The deduction is expanded for tax years 2017 and 2018, allowing deductions for expenses that exceed 7.5% of income (the deduction was previously allowed for expenses in excess of 10%).
- Changes to expensing of capital investments: Full, immediate expensing of business capital investments applies to purchases made after September 27, 2017, and continues for five years before being phased out.
- Elimination of alimony deduction: For people entering into divorce agreements after December 31, 2018, alimony payments will no longer be tax deductible.
- Elimination of home equity debt deduction: Beginning in 2018 (and continuing to 2026, barring new legislation), the deduction for interest paid on home equity debt is eliminated, even for pre-existing home equity loans.
- Reduction of mortgage interest deduction: For homes purchased after December 14, 2017 and before the year 2026, mortgage interest deductions are applicable only to mortgage debt of up to $750,000.
- Cap on state and local tax deductions: Previous law allowed all property taxes paid to state and local governments, as well as state and local income taxes, to be deducted. The new law bundles these taxes together and limits the total “SALT” tax deduction to $10,000 for individuals as well as married couples.
Since Oregon’s tax law is based largely on federal tax law, changes at the federal level could be amplified for Oregon taxpayers. To learn more about how the tax bill will impact you specifically, please consult your accountant or tax professional.
Make the most of year-end charitable giving
Here are a few tips on making the most of your giving:
- Do your homework. Confirm your charity’s 501(c)(3) status at Guidestar.org. For larger organizations, you can take your research a step further by checking the charity’s efficiency, transparency and accountability ratings at CharityNavigator.org.
- Be sure to vet unsolicited donation requests that you receive by phone, email or social media before you give.
- Set a budget for charitable giving, including funds for unexpected emergency or disaster events whose relief funds you may want to contribute to throughout the year.
- Focus your giving toward organizations whose missions align with what is most important to you.
- Maximize your contribution by watching for opportunities to have your gift matched by an employer or another donor or sponsor.
- Double your tax break by giving appreciating assets such as stock or real estate. You can receive a charitable deduction for the current value and eliminate capital gains tax on the appreciation (consult your tax advisor for details and eligibility).
- Check the results of organizations you’ve supported in the past as you make new gift decisions.
And remember, you can make a difference right here at home. There are many reputable organizations in Clatsop County that are focused on social causes (food, clothing, shelter), education, recreation, the arts and more. Guidestar.org lists over 300 of them!
We’re grateful that you’re part of our community.
Six ways to make business budgeting easier
Fall is the time many businesses and organizations are setting their budgets for the next fiscal year. It’s something we don’t necessarily look forward to, and may even put off (ahem), but it’s essential in order to make sure your business is adequately funded and can reach the goals you set for it.
Investopedia has a great nuts-and-bolts article to make the process easier. The highlights:
- Check industry standards (using your local library, industry peers, and the IRS website) to get an idea of what percentage of revenue to allocate to different cost categories.
- Make a spreadsheet allocating estimated dollar amounts and percentages of revenue to your various cost categories (rent, taxes, insurance, payroll, inventory, etc.).
- Factor in some slack, knowing that revenue and growth rates will likely fluctuate. Build in enough cushion to cover your recurring expenses as well as unexpected costs (as much as that’s possible). If growth is in your plans, you’ll want to allocate funds for that as well.
- Look for opportunities to cut costs. Start by focusing on the items you can control. You can also delay certain purchases to a future billing cycle if possible, and take advantage of any favorable payment terms offered by suppliers or creditors.
- Review the budget regularly. Most established organizations prepare an annual budget. Small businesses or those that are just starting up may need to budget on a shorter cycle because of revenue volatility or other unknowns.
- Shop around for services and suppliers. Whether purchasing an existing business, starting a new business, or as part of your annual budgeting process, it’s always a good idea to ensure you are still getting the best value possible from your suppliers and service providers.
Speaking of shopping around…
If you have a business account with another bank, please contact us for a free fee analysis. We’ve been able to help businesses add real savings to their bottom line with lower fees for everyday banking services. You might be surprised by what you could save.
How to stop ransomeware dead in its tracks
We all know to treat unsolicited emails containing links or attachments as suspect, and to avoid visiting websites that may contain malicious code. In May, however, a cyberattack was launched that required no user interaction for a computer to become infected.
The ransomware attack dubbed WannaCry infected hundreds of thousands of computers worldwide. This attack spread quickly and easily by exploiting a vulnerability in the Windows operating system. Computers using Windows 7, 8, 10 and XP, as well as Windows Server software were potentially at risk.
The vulnerability was remedied by a Microsoft update that was released two months prior to the attack. Anyone who updated their software was protected from exposure.
Attacks of this kind will undoubtedly continue. You can protect your computer and its contents by following these best practices:
- Keep your security software up to date.
- Keep your operating system and other software updated.
- Be wary of unexpected emails that contain links or attachments.
- Be wary of any Microsoft Office email attachment that advises you to enable macros to view its content.
- Cloud backup services may retain previous versions of files, but you should also backup your files for offline storage as well.
Many software products include settings to check for and install updates automatically. Check your software or ask your IT professional for assistance.
Lower Your Upcoming Tax Bill with an IRA Contribution by April 18, 2017
Just a quick reminder that you still have an opportunity to lower your 2016 income tax bill (or increase your refund) by making a qualifying contribution to an individual retirement account (IRA) by April 18, 2017.
Depending on your tax bracket, the savings equate to the government funding your retirement contribution at 15, 25 or 35 percent!
An individual in the 35 percent tax bracket, for example, who makes the maximum IRA contribution of $5,500 for the 2016 tax year will reduce his or her tax bill by $1925 (or increase their refund by the same amount).
Workers who are 50 and older can contribute up to $1,000 more, for a total contribution of $6,500, and a savings of up to $2275.
Note that maximum income levels apply unless you (and your spouse if married filing jointly) are not eligible for retirement contributions through an employer.
For more details, read the article at U.S. News & World Report or consult your tax professional.
Your Unsecured IoT Devices Leave Doors Open to Attack
The largest DDoS attack in history occurred on October 21 of last year. It brought down much of America’s internet, including sites like Twitter, The New York Times, The Guardian, Netflix, Reddit, PayPal, Verizon, Comcast and CNN for an extended period of time. Aside from being a major inconvenience to users, outages like these cost businesses enormous amounts of money.
What was new about this attack is how it was executed. Rather than relying on a botnet made up of computers, this botnet was made up of “internet of things” (IoT) devices—in this case, a large number of unsecured cameras. As we bring more and more IoT devices (think smart home devices, wearables, connected cars, printers, routers, etc.) into our lives, we provide open doors for malicious hackers to attack devices, networks, and the internet at large.
You can help stop attacks like these by changing the default (manufacturer’s) passwords on your IoT devices. Graham Cluley published a list of the 60 default username/password combinations that contributed to the massive October attack, and writes, “Not changing a default password on an internet-enabled device is as good as having no password at all.”
Just another reminder to be safe out there.
Sources: TheGuardian.com, BusinessInsider.com, TheAtlantic.com, GrahamCluley.com
Applying for an SBA loan—What you’ll need
The 7(a) is the SBA’s most popular loan program, and is typically used for working capital, asset purchases and leasehold improvements.
As a small-business owner, you may apply for up to $750,000 in SBA funds through Clatsop Community Bank. Note that all owners with a stake in the business of 20 percent or more are required to personally guarantee this type of loan.
What you’ll need to complete your application package:
- SBA Loan Application
- Personal background and financial statement
- Business financial statements, including:
- Profit and loss statement (current within 180 days of application)
- Projected financial statements
- Ownership and affiliations
- Business certificate/license
- Loan application history
- Income tax returns, including personal and business federal income tax returns for your business’ principals for the previous three years
- Resumes for each principal
- Business overview and history
- Business lease
- If purchasing an existing business:
- Current balance sheet and profit and loss statement
- Previous two years of federal income tax returns for the business
- Proposed bill of sale including terms of sale
- Asking price, with schedule of inventory, machinery, equipment, furniture and fixtures