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Cost of Debt: How to Calculate Cost of Debt

November 17, 2020
By Susan Guillory –

When you take out a loan (also known as debt capital), your primary focus is probably on having working capital to grow your business or steady your cash flow. But there’s something else to consider: your cost of debt.

If you’re just focusing on your loan’s monthly payment and not diving deeper to analyze the true cost you’re paying, you might be spending more than necessary on your debt financing.

What is Cost of Debt?

There are two types of capital a business can use: equity financing and debt equity. With equity financing, an investor — usually a venture capitalist or angel investor — provides working capital in exchange for a percentage of equity, or ownership in the company.

With debt equity, a company takes out financing, which could be an SBA loan, merchant cash advance, invoice financing, or any other type of financing. The loan is repaid, along with an interest expense, over months or years. The term debt equity could be confusing, but is basically referring to a loan. (more…)

New PPP Loan Forgiveness Application 3508S: Will It Help You?

October 20, 2020
By Gerri Detweiler –

If you took out a Paycheck Protection Program loan for $50,000 or less, you may be able to use a new application — Form 3508S — to obtain forgiveness. This application does not make forgiveness automatic, but it will make it easier for some borrowers to qualify for forgiveness.

The big change here is that the application does not require borrowers to calculate a reduction in forgiveness if they reduced employee salaries or wages. The SBA, in the Interim Final Rule announcing this form, notes that this change is likely to have a minimal impact on overall forgiveness:

“There are approximately 3.57 million outstanding PPP loans of $50,000 or less, totaling approximately $62 billion of the $525 billion in PPP loans. Approximately 1.71 million PPP loans of $50,000 or less were made to businesses that reported having zero employees (presumably not counting the owner as an employee) or one employee. To the extent that these businesses have no employees other than the owner… they are not affected by these exemptions.” (more…)

How to Accept Credit Card Payments

October 5, 2020
By Susan Guillory –

Accepting debit and credit card payments in your business can help you make more money. The more payment methods you offer to customers, the more likely they are to shop with you.

But if you’re new to running your own business, you may not know how to accept credit card payments or what your credit card processing options are. How do you process a transaction? What are the fees?In this article, we’ll discuss the benefits of accepting debit and credit cards, selecting a merchant account, and using different types of payment gateways, depending on whether your business is brick-and-mortar, online, or mobile. Share on X (more…)

How to Pay Back an EIDL or PPP Loan

September 22, 2020
By Gerri Detweiler –

If your business received an Economic Injury Disaster Loan (EIDL) or Paycheck Protection Program (PPP) loan, you may have determined it isn’t a good fit for your small business for any number of reasons:

• You just wanted the EIDL grant and not an EIDL loan

• You didn’t understand the loan terms when you applied

• You can’t use the EIDL funds or PPP funds the way you hoped

• You don’t think most of your PPP loan will be eligible for forgiveness

• You aren’t sure your business will survive to be able to repay a loan

(more…)

5 Simple Ways to Organize Your Small Business Finances

September 15, 2020
By Gerri Detweiler –

Credit scores are often seen as the number one obstacle that prevent small businesses from getting financing. But disorganized financials may be equally to blame.

In today’s challenging economic environment in particular, lenders want to make sure your business is viable and will be able to repay the debt. Organized and up to date finances are essential if you want to increase your chances of getting approved. Here are 5 simple ways to organize your business finances. Share on X

1. Create an Easy Filing System

“We think ignorance is bliss, but really is it filled with headaches and fear,” says Belinda Rosenblum, CPA, money strategist for business owners, and founder of OwnYourMoney.com. “Avoiding your paperwork and bills — or even a huge ‘to file pile’ — is a costly recipe for disaster,” she says. “Not opening bills often causes missed deadlines or even late fees. Opening them but then letting them pile up without filing anything can cause you to feel disorganized and out of control.” (more…)