All posts by guiltlessepic3921

Obama Proposes Expansion of Small Business Loans

The President is proposing that Congress pass two temporary expansions of critical Small Business Administration (SBA) lending programs. These are both legislative proposals designed to help small businesses through what continues to be a difficult period in credit markets.

1. Expand SBA’s existing program to temporarily support refinancing for owner-occupied commercial real estate loans:

Eligible small businesses will have commercial first mortgage loans or existing 504 first mortgage loans that are maturing in the next year. In order to qualify, businesses will have to be current on all loan payments for the previous year. Lenders that are refinancing mortgages for existing customers will make a loan for up to 70 percent of the current property value; and SBA will help finance the remaining 20 percent. For new lenders taking on a refinancing project, SBA will take on a greater share of financing, up to 40 percent. 

SBA’s proposal for a temporary, zero-subsidy CRE refinancing program would be funded through additional fees for refinancing projects, not through a Congressional appropriation. This proposal will help refinance up to $18.7 billion each year in commercial real estate that might otherwise be foreclosed and liquidated.

The President is proposing to temporarily increase the maximum SBA Express loan size to $1 million, which would expand the program’s ability to help a broad range of small businesses. Unlike traditional 7(a) loans, lenders can use their own paperwork for SBA Express loans, which can be structured as revolving lines of credit. Currently, these Express loans are capped at $350,000 and carry a 50 percent guarantee. Fees would cover virtually all of the added costs of this proposal.

These proposals complement the President’s broader small business agenda – a key part of his overall jobs plan. The other elements of the small business agenda include:

o Extending small business expensing and bonus depreciation for 2010. Eliminating capital gains for small businesses in 2010.

o A Small Business Jobs and Wages Tax Credit that would cut taxes for more than 1 million small businesses by paying up to $5,000 for every net new job and covers payroll taxes on overall wage increases in excess of inflation.

o A $30 billion Small Business Lending Fund to provide capital for community banks and an incentive to increase lending to small businesses.

o Additional SBA lending proposals, including an extension of the Recovery Act programs that eliminate fees and raise guarantees on 7(a) loans and permanent increases in the maximum loan sizes for major SBA programs.


Importance of Finance and its Imperative Role In Various Sectors

Finance plays a very important role in the day-to-day lives of each individual or corporation. It is a very wide term and it can be said to be the study of the science of managing funds. Usually finance includes the areas of public, personal and business finance. It includes things related to lending, spending and saving money. An important aspect of finance is that individuals and corporations deposit money in a financial institution, especially banks, who in turn lend out money and charge an interest for their services.

Pivotal Roles of Finance

Corporate Finance

Corporate finance deals with financial decisions which an organization makes, whether it’s investments, analysis of credit, selling of assets or products or acquiring assets. Maximizing corporate value and at the same time managing risks associated with investing in a particular product or project is the main aim of corporate finance. Moreover, corporate finance also studies the short-term and long-term implications of a decision and looks into matters related with dividends to shareholders’ debt or equity. Matters related to taxes which a corporation has to pay are also taken into consideration when dealing with corporate finance.


Finance for a business can’t be undervalued and it can be regarded as the lifeline of a business which is required for its well-being. It acts as a lubricant helping to keep the business running. Whether you have a small, medium or large business, you will always need finance, right from promoting and establishing your product, acquiring assets, employing people, encouraging them to work for the development of your product and creating a brand name. In addition to that, a current business may need finance for expansion or making changes to its products as per the Like this market requirements.

Finance Department in a Company

This department is of utmost importance as it is responsible for financial planning, thus ensuring that adequate funds are available for achieving the objectives of the organization. Moreover, it is the finance department which makes sure that the prices are controlled, besides looking after the cash flow and controlling profitability levels. One of the most important jobs of the finance department of a company is to identify the necessary financial information (like return on assets, return on capital employed or the net profitability which reveal the outcome of efforts made by the company and its employees) which should be revealed to managers so that they can make informed decisions and judgments. The department is also responsible for making financial documents and preparing the final accounts so that they can be presented in the annual general meetings of the company.

Personal Finance

Personal finance budgeting is an important part of your long-term plans to gain financial stability, especially after retirement. You need to have a clear idea of what you want in future such as the amount of money you need after retirement, the location of a place you live in, etc. You need to have a plan and goal of translating these ideas into reality. You also need to consider the things you have purchased in the past and the kind of things which you will purchase later on. This is an important step as this reflects that you will come up with a retirement plan for the future. You must be capable of identifying the good as well as bad choices you make.

While thinking of a long-term plan, budgeting your savings becomes an important part of personal finance. Savings would help you to make investments in the future so that you have a secure life. But then, having said that, you also need to take care to keep your expenses to the minimum, which is one of the most important personal finance tips which you should use. Some of the most common expenditures like those on electricity and water should be reduced.

Financial Planning in Tune with Economic Conditions

Planning involves insight into the economic condition of your country and its future. Be it a developing or developed country, finance can be used as a tool to shape a country’s economic well-being. For developed nations it can help to stabilize the growth at the maximum level, and for an underdeveloped economy it can change the face of overall financial condition by effectively applying the tools of finance. Moreover, personal finance should also be planned looking at the overall economic condition of the country. If the country is going through an inflationary phase it’s better to save more and spend less, but if the economy is in the deflationary phase it is advisable to invest and do productive expenditures.

Finance is such a thing that can’t be substituted by anything, so make sure you use your finances in the proper order, so that you can secure your future.

Small Business Lending Plummets as Loans to Big Business Soar

Even as their big competitors are awash in capital, many locally owned businesses are struggling to secure the financing they need to grow.  Since 2000, bank lending to large businesses is up 36 percent, while small business loan volume has fallen 14 percent and  “micro” business loans — those under $100,000 — have plummeted 33 percent, according to a new analysis from the Institute for Local Self-Reliance.

Graph: Change in Large vs. Small Business Loans, 2000-2012

(The largest corporations do not even need to rely on bank loans, of course, but can finance their growth through the soaring stock and corporate bond markets.)

The problem is not a lack of demand.  In our 2014 Independent Business Survey, 42 percent of business owners that needed a loan in the previous two years reported being unable to obtain one.  Startups, businesses with fewer than 20 employees, and enterprises owned by minorities and women are having an especially difficult time. Even with the same business characteristics and credit profiles, small businesses owned by African-Americans and Latinos are less likely to be approved for loans, according to one recent study.

One consequence of this credit shortage is that many small businesses are either not adequately capitalized or have been forced to rely on high-cost alternatives, such as credit cards.  Both scenarios make them more vulnerable to failing.

The broader consequences for our economy are significant.  Studies show locally owned businesses are a primary source of net new job creation, contribute to higher median household incomes, and increase social capital.  Yet independent businesses in many sectors are losing market share, while the number of new startups has steadily fallen over the last two decades.  Insufficient capital is a key culprit driving these trends.

To shed light on this problem and help inform policy discussions,  we’ve published a backgrounder on the small business lending landscape. Among the key takeaways:

Local community banks provide a disproportionate share of small business loans. Indeed, it is their decline, in both numbers and market share, that is largely to blame for the constriction in small business lending.  As local banks lose ground to big banks, there are fewer financial institutions focusing on small business lending and fewer resources devoted to it. The top four banks now control 43 percent of all banking assets, but account for only 16 percent of small business loans.  

Credit unions account for less than 7 percent of small business loans, but have significantly expanded their lending in the last decade, growing from $14 billion in business loans to over $44 billion today.  Only about one-third of credit unions currently participate in this market, however. 

Federal loan guarantees, provided through the U.S. Small Business Administration, have historically played an important role in expanding credit to small businesses that don’t quite meet conventional lending requirements.  In an alarming trend, however, the SBA has dramatically reduced its support for smaller businesses and shifted more of its loan guarantees to larger businesses (which still count as “small” under the agency’s expansive definitions).  Since the mid 2000s, the number of business loans under $150,000 guaranteed by the SBA each year has fallen from about 80,000 to 24,000.  Meanwhile, the SBA’s average loan size has more than doubled to $362,000.

Crowdfunding has garnered a lot of attention recently as a potential solution to the small business credit crunch, but crowdfunding remains a tiny drop in the bucket, compared to the resources of the banking system.  At the beginning of 2014, banks and credit unions had about $630 billion in small business loans on their books.  The total volume of business financing provided through crowdfunding amounts to less than one-fifth of 1 percent of this. Although crowdfunding will undoubtedly grow and could emerge as a valuable source of capital for local enterprises, it does not obviate the need to fix the structural problems in our banking system that are impeding the development of community-scaled enterprises. 

The backgrounder outlines several policy approaches that focus on reducing concentration in the banking system, expanding community banks, allowing credit unions to make more loans to small businesses, and reorienting the SBA’s loan programs to once again meet the needs of truly small businesses.

Stacy Mitchell is a senior researcher with the Institute for Local Self-Reliance, where she directs initiatives on independent business and community banking. Catch her TEDx Talk: Why We Can’t Shop Our Way to a Better Economy.

This Blogger’s Books and Other Items from…

New Echo Dot appears in now-deleted Amazon tweet

New Echo Dot appears in now-deleted Amazon tweet – SlashGear

If you go to Amazon’s Echo Dot page, it says that it is currently sold out. That may not be the case for long if a now-deleted tweet from Amazon itself is any indication. According to the tweet, Amazon has a new Echo Dot device in the pipeline, one that is priced at $49.99 USD — a much cheaper price than the previous iteration’s $89.99 USD rate. With the Echo Dot, any speaker you have can be used as part of the larger Amazon system or, alternatively, Echo Dot can be used on its own as a standalone device.

The tweet reportedly went live on the Amazon Echo Twitter page, where it was visible for a little while before being deleted. The tweet is said to have read the following: “Introducing the all-new Echo Dot. Add Alexa to any room — now for just $49.99.” The tweet also contained a link which is said to have taken users to the current Echo Dot’s product page.

Amazon Tap Review – Alexa’s not listening

It’s hard to imagine the tweet is anything other than a perfect confirmation that a new Echo Dot is inbound, something that would surprise no one considering the current version has been sold out for a couple of months with no signs of returning. The lower price point will be a welcomed addition and, potentially, will get Amazon’s Alexa into the homes of more potential customers.

The big question at this point is whether that price reduction is going to come with any sort of significant tradeoff in terms of functionality or features. While we’ll almost certainly see different specs, the device’s features will probably stay the same including things like voice control, compatibility with existing speakers, and Alexa Voice Service.

SOURCE: Recode

Story TimelineAmazon Tap and Echo Dot join Alexa in the connected homeBattery Base for Amazon Echo lets you take it on the goGoogle Home versus Amazon Echo: Alexa’s Prize Fight

how to get a business loan in banks to start a new business? which bank is best in business loan?

Getting a business loan is NOT easy – especially with the tough economic climate.

You just don’t go to a bank to ask for a loan with only your business idea. Banks look at other factors not just your credit score when applying for a business loan. Banks want to see:

– demonstrated ability of the business to generate revenues — businesses that are already operating and have at least 2 years’ worth of financial statements that demonstrate strong profitability. Business ideas are just ideas; not proven to generate profits

– excellent credit history

– your investment in the business: they want to see that you believe in your business enough to put down your own money into the business

If you have the above, then prepare a business plan. – The business plan is NOT the first thing banks want to see. It’s important, but banks will need to see your ability to repay the loan. Sometimes, they won’t even bother to read your business plan if they know you don’t have any money. If you have to have a business plan, you need a good executive summary (as that is what they’re most likely read, if at all) PLUS solid, realistic financial projections/plans

Incorporating Tips – Capitalization – free article courtesy of

Incorporating Tips – Capitalization

 by: Richard A. Chapo

Capitalizing a new business entity is a critical step of the formation process. Failing to take the step can lead to serious legal problems if the entity is ever sued. So, what is capitalization and what steps must be taken?

Capitalizing Your Corporation

“Capitalization” essentially refers to funding your corporation. In essence, you are providing substance to the entity in the form of money or property. Typically, the funding process works in two ways.

Corporate Stock

You must own stock in a corporation to be considered a shareholder. You are already familiar with this concept if you trade on the stock market. For instance, assume you bought stock in Sirius Radio in anticipation of Howard Stern moving to the station. You purchased stock through a brokerage or retirement vehicle by exchanging money for shares. Technically, you are a shareholder in the corporation. Your own corporation is no different.

The fact that you paid money to have a corporation formed does not make you a shareholder. You must exchange property, cash or services to obtain stock from the entity. Only then are you a shareholder in the entity. This is more easily explained with an example.

Assume I start a corporation for the purpose of providing consulting services to other businesses. The corporation is formed with 10,000 shares and I am going to be the sole shareholder. I have cash and certain assets that I am going to use as part of the business. I decide to exchange $3,000, a copier, fax machine and computer equipment for stock in the entity. This exchange should be reduced to writing, but will constitute the capitalization of the corporation.

Corporate Loan

You can also loan money to a corporate entity for start-up costs. There is no prohibition against a shareholder providing money to a corporation. The loan process should not completely replace the purchase of stock. From a tax perspective, however, dividing your initial capitalization into a partial loan can have distinct advantages.

<< Back to “Legal” Index

Planning to obtain ordinary loss treatment for worthless debts owed by partnerships to noncorporate partners.

Facts: Elmer Beans is the sole shareholder of Beans Real Estate, Inc., a C corporation. Beans Real Estate is the general partner of the Constabulary Limited Partnership, which constructed and is attempting to operate an upscale shopping center. Beans Real Estate was formed for the sole purpose of participating in this project. Norman Leer is also a limited partner in the partnership, owning a 25% interest in partnership profits and losses. * Constabulary has encountered difficult times, and is in need of $1 million to carry it through what will hopefully be temporary troubles. Norman believes in the perfect and is willing to lend the necessary funds, but he also is aware of the real risk that his loan will not be, or may only partially be, repaid. * Norman is concerned about the tax effects of any loss that might arise from the full or partial nonpayment of the loan and has approached his tax adviser for assistance in structuring the loan. Norman believes he has two alternatives. He could contribute or loan the money to Beans Real Estate, Inc., which would, in turn, loan the money to the partnership. Alternatively, Norman could loan the $1 million directly to the partnership. Issue: How should Norman structure the loan?


Sec. 166 allows taxpayers a deduction for debts that become worthless during the tax year. For noncorporate taxpayers, however, this allowance is qualified; losses attributable to nonbusiness bad debts are treated as resulting from the sale or exchange of capital assets held for not more than one year (i.e., short-term capital losses). As such, they are not fully deductible.

“Nonbusiness debts” are defined as debts other than debts “created or acquired in connection with a trade or business of the taxpayer” or “the worthlessness of which is incurred in the taxpayer’s trade or business.”

Partner Loans as Business Debts

The character of a bad debt loss attributable to a partner’s loan to a partnership appears to be governed by Butler, 36 TC 1097 (1962). Butler involved a creditor who was a limited partner of the debtor partnership. The Tax Court held that the partner’s loan to the partnership was deductible as a business bad debt. It based its decision on the aggregate theory of partnership taxation, attributing the partnership’s business to its partners, including limited partners. Under this reasoning, a loan made in furtherance of the partnership’s business is also made in furtherance of the partner’s business. The IRS acquiesced in the Butler decision.

Butler involved tax years prior to the enactment of the Internal Revenue Code of 1954. The 1954 Code may be relevant because it included a new provision — Sec. 707 — that explicitly stated that loans between a partner and a partnership are to be treated as loans between unrelated persons.

Two years after the Tax Court decided Butler, the Supreme Court decided Whipple, 373 US 293 (1963), involving the deductibility of a loss on a loan to a controlled corporation. The Court held that, even though the taxpayer devoted all his time to his several corporate enterprises, he had not established a “business” distinct from that of a shareholder attempting to increase his return on investments. As a result, the indebtedness was not a business debt (for which the bad debt loss would have been fully deductible). Instead, it was a nonbusiness debt, for which only a short-term capital loss was allowed. Later cases have indicated that an individual’s loan to a corporation is treated as a business debt only in certain limited circumstances, for example, if the loan arises as part of the business of lending money, or as part of the business of developing, promoting and selling corporate enterprises.

The effect of Whipple on the Butler decision was initially unclear, especially in light of the enactment of Sec. 707. However, in 1965, the Tax Court reaffirmed Butler in Stanchfield, TC Memo 1965-305. In Stanchfield, the taxpayer advanced cash to a construction company owned by his son-in-law. The court concluded that the taxpayer and his son-in-law had formed a general partnership and the advances were capital contributions. The taxpayer, however, had also guaranteed debt of the “partnership,” which he was later called on to pay.

In discussing the tax treatment of the payment on the guarantee, the Stanchfield court considered the loss on the guarantee to be a bad debt loss. Then, citing Butler, it held that the loss was a business bad debt because the taxpayer was a partner in the partnership. The court distinguished Whipple on the grounds that Whipple dealt with a shareholder-creditor and a corporate debtor, while the taxpayer in Stanchfield was a creditor of the partnership of which he was a partner.

Notwithstanding Stanchfield, it is questionable whether Butler continues to be reliable precedent. Under Sec. 707, a partnership’s business might not be attributed to the partner. If the partnership’s business is not attributed to the partner, the Whipple Court’s reasoning would appear to be applicable in the partnership setting, causing the debt to be characterized as a nonbusiness debt.

Notwithstanding these questions, the Service has not withdrawn or limited its acquiescence in Butler. Moreover, Butler has been applied by the Tax Court in a post-1954 Code setting. As a consequence, tax advisers should be entitled to continue relying on Butler, at least for the time being.

If Norman loans the money directly to Constabulary and the debt becomes uncollectible, he should be entitled to rely on the Butler decision and the IRS’s acquiescence to claim a business bad debt loss. As a result, his bad debt loss should be an ordinary loss, rather than a short-term capital loss. On the other hand, if he advances the funds to Beans Real Estate, which in turn advances the funds to the partnership, absent unusual circumstances (that do not appear to be present in this case), any bad debt loss realized by Norman would be a nonbusiness bad debt, giving rise to a capital loss. Because capital losses generally provide less tax benefit than ordinary losses, the tax adviser should advise Norman to loan the money directly to the partnership.


Norman should lend the money directly to Constabulary. This allows Norman to recognize an ordinary loss on the loan should it become worthless. Of course, if the corporation was an ongoing enterprise, its tax situation would have to be considered in determining the best structure. If the corporation could use the loss and would be able to repay Norman, another structure might be more advantageous.


Constabulary might also consider borrowing the money from a third-party lender, with Norman guaranteeing repayment of the loan. If the partnership later defaulted on the loan, and Norman was called on to pay on his guarantee, he would still be able to deduct his payment as an ordinary loss.

In the case of a loss on a payment pursuant to a guarantee agreement made after Dec. 31, 1975, Regs. Sec. 1.166-9(a) and (e)(2) provide that a taxpayer’s payment on the guarantee is treated as a debt, with the debt becoming worthless in the tax year in which the payment is made.

In the case of guarantee agreements, however, additional rules may limit a taxpayer’s ability to treat the payment as a worthless debt. Regs. Sec. 1. 166-9(d) provides that a payment on a guarantee agreement is treated as a worthless debt only if (1) the agreement was entered into in the course of either the taxpayer’s trade or business or a transaction for profit; (2) there was an enforceable legal duty on the part of the taxpayer to make the payment (except that legal action need not have been brought against the taxpayer); and (3) the agreement was entered into before the obligation became worthless.

Regs. Sec. 1.166-9(e)(1) further provides that the payment and satisfaction of a taxpayer’s agreement to act as a guarantor produces a worthless debt only if the taxpayer demonstrates that “reasonable consideration was received for entering into the agreement.” For this purpose, “reasonable consideration” is not limited to direct consideration, such as a payment to the partner.

If these requirements are met, the payment on the guarantee will produce a bad debt loss. For noncorporate taxpayers, the deductibility again depends on whether the debt has a business or nonbusiness character. In the case of a payment on a guarantee, this characterization is governed by the same rules that govern the character of direct indebtedness.…-a020061016