The Entrepreneurs Advocate

Archive for October, 2008

Note: “I found today’s press release from the SBA very interesting.” Chris

WASHINGTON – In response to the financial crisis, the U.S. Small Business Administration today announced it is strongly encouraging its participating 7(a) lenders and Certified Development companies to work with business borrowers to provide them with the flexibility they need to keep their businesses running during these difficult economic times.As access to credit and capital has tightened, many businesses face increased challenges in meeting their financial obligations. This is especially true of small businesses hit hard by the recent economic slowdown that are now unable to make payroll, or purchase essential inventory.

SBA is reminding participating lenders they have the authority on a case-by- case basis to extend temporary payment relief for qualifying borrowers with 7 (a) and 504 loans who are struggling to make their payments.”The SBA is here to help small businesses during these difficult economic times. We are encouraging our lending partners to follow suit by extending three-month payment deferments on their SBA guaranteed loans to qualified borrowers who need relief,” said SBA Acting Administrator Sandy K. Baruah. “We recognize that small business owners are faced with challenging decisions right now. By providing three-month deferments to qualifying borrowers who are struggling, our lending partners can help small business owners free up the capital they need to maintain their businesses.” If a deferment longer than three consecutive monthly payments is needed for a loan, borrowers can work directly with their lenders who in turn will work closely with the SBA to identify the best solution.

You can utilizing a Versatile Entrepreneur Retirement Savings Account Plan (VERSA).

The VERSA Plan structure allows you to rollover your 401(k), or other qualified plan, into the equity of a new or existing business without the burden of taxes or penalties. Frequently we are asked if the VERSA Plan is a loan. No, it is not a loan. It is equity.  In addition, it meets all of the equity requirements of commercial lenders and the SBA alike.  The capital that is rolled into the VERSA Plan is used to buy the equity of the company just as you would buy a mutual fund or a stock in your qualified plan.  That stock is then held in the plan for the benefit of the business owner. 

One caveat, your new company needs set up as a “C” corporation by the lawyer who sets up the VERSA for you. We have used the VERSA numerous times for Entering clients or Entering Buyers to access their retirement funds with no tax penalty.

“I can’t resist poking at the anti-capitalist crowd-CC”

By Craig Medred | Anchorage Daily News

Two hundred years of glacial shrinkage in Alaska, and then came the winter and summer of 2007-2008.

Unusually large amounts of winter snow were followed by unusually chill temperatures in June, July and August.

“In mid-June, I was surprised to see snow still at sea level in Prince William Sound,” said U.S. Geological Survey glaciologist Bruce Molnia. “On the Juneau Icefield, there was still 20 feet of new snow on the surface of the Taku Glacier in late July. At Bering Glacier, a landslide I am studying, located at about 1,500 feet elevation, did not become snow free until early August.

“In general, the weather this summer was the worst I have seen in at least 20 years.”

Never before in the history of a research project dating back to 1946 had the Juneau Icefield witnessed the kind of snow buildup that came this year. It was similar on a lot of other glaciers too.

“It’s been a long time on most glaciers where they’ve actually had positive mass balance,” Molnia said.

That’s the way a scientist says the glaciers got thicker in the middle. Read the complete story at adn.com

“Note: Since this was written, the prime has dropped to 4% and furthur rate cuts are possible.-Chris” 

One item not receiving a great deal of attention through the financial crisis is the fed’s action causing the prime interest rate to drop from 5% to 4.5%.

Many business loans are prime based, so this will be welcome relief for many business owners. In addition, interest rate are very low for those who qualify. Banks are hungry to make loans in their narrower preferred categories. SBA loans are still being made (albeit with tougher rules) and funding certain business acquisitions and franchise purchases are in many lender’s sweet spot.

 These are advantageous times to buy a business since multiples are down and lenders will be your willing due diligence partner to make sure their monies are safe.

The Structured Sale is a unique type of installment sale whereby specific installment payments are secured by an annuity   issued by a major, well-known life insurance company. 

The Structured Sale is established pursuant to Internal Revenue Code 453, Installment Sales. By separate agreement with the Buyer, a third party assignment company becomes the substituted obligor for the Buyer and receives the cash not taken by the Seller at closing.  Upon receipt of the funds, the assignment company purchases and becomes the owner of the annuity that secures the specified installment sale payment obligation.

Available in all fifty states, the Structured Sale can also be used in a large down payment and a Seller’s Carry Back Note sale.

Andrew Hull,

www.deferthetax.com