Running a business is all about making a profit. After all, if it’s not profitable, it won’t be long before a business is closing up shop. The main source of profit is sales but there are other ways to boost small business capital that are often overlooked. It’s not uncommon for a business owner to be so focused on increasing sales that they don’t even know they’re missing out on some extra cash that could help cover expenses and grow their business.
Tax Planning
More than 2.4 million small businesses in the United States are set up as an LLC or limited liability company. It is an increasingly popular choice among small business owners and for good reason. With an LLC, personal liability is limited and the owner’s personal assets are protected should the business fail.
On the downside, this puts the business into a higher tax bracket adding to the drain on small business capital. Distributions from an LLC are taxed as ordinary income. Currently, for 2018, those rates could be as high as 37 percent for federal tax and 13.3 percent state tax. That’s a combined tax rate of over 50 percent.
There may be an opportunity to reduce that rate and increase your small business capital. In some cases, an LLC can elect to be taxed as a corporation and make the S-corp election. This will allow for a portion of your earnings to be considered long-term capital gains. In 2018, long-term capital gains are being taxed according to your tax bracket. This can significantly reduce your tax rate and boost your small business capital. A business generating $300,000.00 per year could potentially save up to $10,000.00.
With an LLC or a corporation, it is important to understand that your entity structure has tax-planning opportunities and it is always prudent to seek the advice of a tax lawyer or accountant on the best way to pay the lowest legal tax.
Risk Management
When it comes to risk management and insurance, you could be leaving money on the table and leaving your company open to a claim that results in bankruptcy or business failure. Small business owners, especially those with a newer business, tend to purchase the minimum amount of insurance the law requires to save money. This can leave the business owner vulnerable in the event of a claim. Any losses not covered will be paid out of pocket and could potentially deplete small business capital.
It’s important for a business to have coverage such as workers compensation insurance or general liability insurance. It may also be necessary to have EPLI or employment practices liability insurance which protects against workplace litigation.
You should consult with an insurance professional who has expertise in your specific industry and understands the unique risks you face. They should have risk-management expertise and internal resources that can help identify potential coverage gaps and key exposures. An experienced professional will also be aware of any discounts on coverage cost available for your business. For example, some companies offer reduced premiums for businesses that are claim-free for an extended period of time, typically three years or more.
Human Resources
Another area where a business owner can save money is by evaluating how effective their staff is and how their workforce could be improved. A growing business can change rapidly. The staffing model that worked well a year ago may no longer be efficient or cost-effective. Is the money invested in payroll producing the desired results?
A small business owner wears many hats. In trying to juggle a variety of responsibilities, it can be easy to overlook inefficient staffing and workplace practices. While there are many ways to make your workforce more efficient, outsourcing certain tasks can often be beneficial in boosting small business capital. For example, why waste time and payroll trying to amateurly handle IT issues? An IT management company can solve problems more efficiently, prevent workflow interruptions and let you focus on business. In the long run, outsourcing specific tasks can reap big savings. To help you clearly identify opportunities to streamline your workforce and grow your business, it can be helpful to utilize the services of a business consulting company.
Generating Small Business Capital
Sometimes, even the savviest business owner can use a little extra capital and funding from an alternative finance company can be the perfect solution. CFG Merchant Solutions offers multiple working capital funding options to keep your business moving forward and avoid missed opportunities.
Whether it’s a merchant cash advance, equipment financing or any of our other funding options, we will guide you in choosing the perfect solution for your individual business needs. Our team brings to the table more than 60 years of institutional investment banking experience in the credit, commercial finance, and capital markets.
We are a privately-owned and operated specialty finance and alternative funding platform. We focus on providing capital access to small and mid-sized businesses (Merchants) in the U.S. that have historically been underserved by traditional financial institutions and may have experienced challenges obtaining timely financing. Contact us or apply online today!