Money

Last year,  during the 2008 financial crisis, the FDIC insurance coverage limits were hastily raised from $100,000 to $250,000 per depositor.

At the time, those higher FDIC limits were intended to be temporary, just through December 31, 2009.  The good news for consumers and small business owners alike is, the $250,000 FDIC insurance coverage has been extended through December 31, 2013.

In other words, you do not need to worry about that coverage going away at the end of this year.  Coverage was also extended to $250,000 through December 2013 for federally-insured credit union deposits through the National Credit Union Administration (NCUA).

The increased limit is large enough that with just a little advance planning, there’s no reason whatsoever for middle-class Americans to lose a dime from putting money into FDIC-insured banks or NCUA-insured credit unions.

In fact, by intelligently combining accounts having different types of ownership, you and your family and your business combined can effectively get a lot more than $250,000 in insurance coverage.

But — there are some gotchas that consumers and small business owners should watch out for — because under certain circumstances, you may have LESS coverage than you think you have.  Before I get into those gotchas, let’s take a look at how FDIC insurance works and the critical role it plays.

FDIC Insurance in Practice

From the typical consumer or small business owner perspective, FDIC insurance is pretty simple.  As long as your deposits are under the FDIC insurance limits, there’s zilch chance of losing any money you have in the bank.  The Federal government, which stands behind the Federal Deposit Insurance Corporation (FDIC), will repay your money in the event your bank fails.

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An old golf motivational story goes something like this: one golfer steps up to the tee, looks at the water trap just before the green, lines up the shot and thinks - must not put the ball in the water trap. He takes the shot and, sure enough, the ball heads straight into the water. The second player steps up, lines up the shot and she says - put the ball onto the green. She takes the shot, and the ball lands on the green. The moral is - be careful what you aim for, that’s what you are going to hit.

We all hear about how bad the economy is. The news, the meetings, and the numbers on the reports show us that things are pretty grim. Discussions with suppliers and partners are beginning to focus on how to reduce the fall in numbers rather than growth. Some people are in meetings with HR to discuss coming rounds of layoffs and redundancies, and some of the people affected are friends, and they may have families that depend on their jobs.

Because the bad news about the economy is at the top of our minds, we need to be consider what that does to our outlook. Are we starting to think about the “water trap” ? Am I thinking about how to protect my job ? Are you worrying about how far the numbers can slide before it becomes ‘termination’ ?

It when this happens that you start saying ‘no’ to ideas that can make a difference. When the only thing in your mind is the “water trap”, then that is where you are going to go.

Here is suggestion to help you find some joy, that might let you focus on “the green”. Write a fairy tale. Find a bit of time, focus, start with ‘Once upon a time’ and then write the fairy tale that you would love to see happen to your company. read more

Markets got a boost in recent months when economic data showed that consumer spending had not continued to decline as rapidly in the first quarter of this year as it had at the end of last year. Those looking for bullish signals took it as a sign that we may have seen the worst of the economic downturn. The hope was that consumer spending—a key driver of the economy over the past decade—might rebound thanks to government stimulus and renewed perceptions of economic strength.

Unfortunately, this view may be too optimistic. The data about personal wealth in the US suggests that consumer spending may be settling in at a permanently reduced level and personal savings rates permanently increasing.  In the short to medium term, this could be a recipe for a protracted economic slowdown. In the long run, however, we could be looking at an economy built on a far healthier base.

Perhaps the most dramatic change in the financial habits of the American people was the dramatic decline in savings rates that began in 1995. From 1980 through 1994, the U.S. saving rate averaged 8%. In the mid-1990s, however, it began to fall steeply. By 2000, the personal savings rate averaged approximately 1%. A few years later, the savings rate actually went negative, with Americans consuming more than they were earning.

This was often discussed as the resiliency of the American consumer. Indeed, the failure of savings to increase even in the face of the financial downturn following the dot-com crash convinced many observers that the US consumer was somehow super-powered and immune to adjustments that, in the past, had caused economic pullbacks. Even though the stock market’s value shrank dramatically in the early part of this decade, consumers kept right on spending. The size of their investment portfolios did not seem to give American spenders pause. read more

The reports of diving revenues and continued economic downturn have many businesses rethinking any visions of growth projections. The hot phrase these days is, “flat is the new up.”

And that may indeed be your most prudent short-term strategy – focus on ways that allow you to hang on and retain the business you currently enjoy rather than flitter about looking for new markets to save the day.

There are a handful of tactical moves that you should consider in this vein if you have not already.

Focus on customer service

Sure, you should always do this, but now’s the time to revisit this entire category and start looking at everything your business does, with regard to a customer, as customer service.

Map out every current and potential contact with prospects and customers and ask yourself how you could turn each one into a marketing opportunity. Now, I don’t mean a sales opportunity so much as I mean an opportunity to enrich the relationship and enhance the experience.

Then, go about putting your energy into building processes that allow you to take full advantage of the touches created by marketing and sales, as well as finance, delivery, support and service functions.
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The SBA announced an  emergency loan program for small businesses this week, called ARC loans.  An ARC loan is sort of like a bridge loan, although not exactly.  The loans are designed to help struggling businesses that are having trouble meeting their existing obligations.  The loans can be used to meet those other obligations.

I’m not big on writing about SBA loans, for one simple reason:  they apply to so few small businesses.  The numbers of small businesses that get SBA loans each year is a drop in the bucket compared to other financing sources.  Fewer than 100,000 out of the 27+ Million small businesses in the United States get SBA loans each year.  I’m not saying SBA loans do not serve a good purpose — of course they do.  It’s  just that their impact is limited — they touch a relatively small number of businesses.

However, the recently announced ARC Loan program caught my eye because it potentially casts a wider net to touch businesses that ordinarily would not seek out or get an SBA loan.  Plus it is designed to help those struggling the most.  If this program can get started and out from under bureaucracy in time, it could be a useful program.

But, will it actually get off the ground fast enough?  And will lenders buy into it?

Let’s take a look at what the ARC loan program is — and is not: read more

The lag between delivery and payment has never been ideal. But in tough times, it can get worse, as the domino effect of cash flow hits your supplier – and then you. No doubt you have some reserves on hand (right?) for rainy days like this. But credit options are always available for those who qualify.

It’s up to you to decide if and when you want to opt for credit over cash, but don’t forget, use of credit can help keep your credit history in good standing, even if you’d rather keep the debt to a minimum in these times. Here are three tips for using credit to help you manage your cash flow and get back to the work of delivering great products and services.

1. Buy everything on credit. Sound radical in a period that was being called a “credit crunch”? If you can get it – and most can (Obama’s relief and recovery plan is favorable to small businesses, and the regional Fed boards report there’s been a steady issuance of commercial loans by banks) – use it.
2. New lines of business. Considering a new product line or expansion? That’s great news in this recession. But it’s recommended that you lay out with credit in the beginning since you will generally not be bringing in cash on your new line immediately after rollout.
3. New partnerships. Don’t wait for the cash to come around when a hot business opportunity comes up. That’s what your credit line is there for. Seize the day.
4. All business-personal expenses. Credit cards often come with perks – miles, points, cash back, etc. Therefore, use of these cards can help you put cash back in the company, whether it’s to use miles for business travel, points toward gifts for employees and customers or cash to drop into your business’s bank account.

Ultimately, strategic use of credit will not just keep your business humming in the short term. It could help you save money later by putting you in good standing with your suppliers.

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For related content, take a look at OPEN Forum’s “Building And Protecting Your Business Credit.”

In a recent paper conducted on behalf of the Office of Advocacy of the U.S. Small Business Administration entitled, What do we Know about the Capital Structure of Privately Held Firms? Evidence from the Surveys of Small Business Finances, Rebel Cole examines Federal Reserve data to figure out why some small businesses rely more on leverage than others.

Leverage is the amount of debt that a company uses to finance its assets.   According to the pecking order theory of finance, companies first use internally-generated capital, then borrow money, and finally obtain outside equity.

Professor Cole’s study confirms that the pecking order theory applies to the financing of small businesses.  Leverage decreases as firms get older, larger, and more profitable, and increase their liquidity and credit quality.

Stated differently, new, small, unprofitable start-ups are more reliant on debt than older, larger, more profitable established companies.   Once they have exhausted their own funds, entrepreneurs are more likely to turn to lenders than to equity providers.  

This pattern is consistent with the evidence that banks and trade creditors are the number one and number two source of non-founder capital for young companies, but it is inconsistent with the efforts of many entrepreneurs to seed outside equity when they found their companies. read more

I don’t know about you, but I’m sick and tired of people complaining about our economy. Yes. We’re in a recession. Unemployment is rising. People are out of work. Money is tight, and banks are making it tough to get a loan.

Enough already!

Are you worried about money? Sick with concern about how you’re going to make ends meet? Fearful that you’ll suddenly get laid off? If so, it’s time to do something about it.

It’s time for you to do something about it. Not the government. It’s time for you to take control of your money and get out of the recession mindset that’s plaguing our country.

How?

By becoming a freelancer.

What’s a Freelancer?

According to the Merriam-Webster Dictionary, a freelancer is “a person who acts independently without being affiliated with or organized by an organization; who pursues a profession without a long-term commitment to any one employer.”

A freelancer is a part-time or full-time independent contractor who:

• Works for multiple clients.

• Is her own boss.

• Enjoys working for herself.

• Enjoys a variety of assignments.

• Charges by the hour or by the project.

• Likes setting her own hours.

• Usually works from home.

• Revels in being independent.

• Offers a deliverable (something concrete and tangible that she does for a client or customer).

How Does Freelancing Help You Take Control of Your Money?

If you’ve recently lost your job, freelancing is a great way to keep money flowing in while looking for a new job. Not only does it keep you from looking “unemployed” on your resume, it also provides valuable workplace skills that you can take with you to your new job.

If, on the other hand, you’d just like to bring in some extra cash to supplement your regular income, boost your savings, retirement, or college accounts, or pad your emergency fund, part-time freelancing gives you the opportunity to do just that.

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