Square Financial Services began operations after completing a long charter approval process with the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions.

Named Square Financial Services, the bank will operate as an independently governed subsidiary of Square Inc.

The bank will be be based in Salt Lake City and will provide business loans and deposit products to sellers who use its card reader and other point-of-sale services.

Fintech companies typically partner with third-party banks to service products such as small-business loans. Moving forward, Square Financial Services will be the primary provider of financing for Square sellers across the U.S.

Photo | GettyImages

Notice: Paycheck Protection Program closed August 8, 2020

Current law dictates that the Paycheck Protection Program (PPP) closed at the end of August 8, 2020. As such, SBA is no longer accepting PPP applications from participating lenders.

A new free-to-use online calculator is designed to help simplify the forgiveness step in the small business loan Payroll Protection Program (PPP). Developed by the American Institute of Certified Public Accountants (AICPA) and fintech lender Biz2Credit, the platform automates the forgiveness stage of the PPP. The tool incorporates an earlier PPP forgiveness calculator developed by the AICPA.

The developers estimate the calculator, PPPForgivenessTool.com, will save several hours of manual work for any applicant going through the PPP loan forgiveness process.

Any business with a PPP loan, regardless of the lender, can use the tool. The only requirement is that the small business is approved for the loan program.

NOTE | There are areas where additional guidance from the Treasury and SBA is needed to calculate PPP forgiveness. Borrowers can still get their applications started while waiting on additional guidance. Once additional guidance is released, PPPForgivenessTool.com will be updated to reflect the new rules and we will contact borrowers who have started applications on the tool. The AICPA recommends borrowers begin an application and wait for additional guidance before generating the final signed SBA Form 3508.

“The objective for the calculator was to create a simple, effective forgiveness process,” said Erik Asgeirsson, president and CEO of CPA.com.

More information about the tool is available at PPPForgivenessTool.com. In addition, videos are available providing a brief overview of the tool for borrowers and how CPA firms can use the platform.

A brief overview of the tool is available in this video,

Amazon Lending launched in 2011. It had $863 million in small business loans on its balance sheet at the end of 2019 according to FT. 

Goldman Sachs is in discussions with Amazon to offer small-business loans through the online retail and tech firm’s existing lending platform. According to Financial Times, Goldman Sachs is seeking new lines of business to boost revenue outside its traditional strengths in trading and investment banking.

If the deal goes through, Goldman will be adding itself to Amazon’s existing lending platform, in place for several years. Since 2011, the online retailer has offered financing solutions for small businesses through a lending program that focuses on providing working capital to small merchants who sell products in Amazon’s marketplace.

It’s the second time in the past year Goldman has sought out a tech giant to assist in its Main Street banking campaign. Goldman partnered with Apple to launch its first-ever credit card last March, Apple Card. And in 2018, Amazon partnered with Bank of America.

According to several reports, loans could begin as early as March, and the project will be branded as a partnership between Goldman Sachs and the Amazon Lending platform, the Financial Times reported on Monday (2.3.2020).

(Note: Do not make any financial or borrowing decision without consulting with your personal, trusted advisors.)

Various funding sources are using their insight into your previous purchasing and financial patterns to, in turn, provide more insight into their lending decision process. For example, using anonymized data from more than 3.9 million subscribers to QuickBooks Online, the company has insight into small business trends and performance indicators that will help improve the borrowing worthiness of a small business — positive indicators that other lenders may not have.

Examples of thousands of such indicators that QuickBooks Capital may include:

• Cash flow: QuickBooks provides a comprehensive picture of cash flow because the subscriber ties in their bank accounts and credit cards, as well as other third-party apps, to get a complete picture of their business.
• Future income: QuickBooks data allows small businesses to get credit for open invoices, work in progress, total inventory, and ongoing projects.
• Relative performance: Because there are more than 3.9M QuickBooks users, QuickBooks makes it easy to understand how a small business stacks up against others like them.
  

Launched by Intuit in late 2017, QuickBooks Capital has loaned $277 million in loans to small businesses for working capital.

Is it working? Intuit and thousands of it customers think so.

60%| Percentage of QuickBooks Capital customers who would likely not get a loan elsewhere
46% | Percentage of QuickBooks Capital customers who had never applied or a loan before.  
$277 million | Loans (cumulative) that have been funded by QuickBooks Capital (during its first year-and-a-half).

Correction: QuickBooks Capital was launched in 2017. An earlier version had the wrong date.

Each year, the Federal Reserve’s Small Business Credit Survey (SBCS) asks small business owners to detail their current business climate, financial needs, and recent credit experiences. Based on this research, the Fed developed the 2019 Report on Employer Firms that provides an in-depth look (PDF) at the business performance and credit outcomes of small businesses.

Highlights of 2019 Federal Reserve’s Small Business Credit Survey

57% | Percentage of small business respondents who reported a strong end to 2018.
57% | Percentage of firms that reported revenue growth.
33% | Percentage of firms that added employees to their payrolls.

Loan applications to online lenders (instead of to traditional banks) continued to trend upward

32% | Percentage of loan applicants who turned to online lenders in 2018 (up from 24% in 2017, 19% in 2016).

Caution Among the Optimistic

The percentage of firms that anticipate adding payroll jobs in 2019 dipped to 38% from 43% in the prior year’s survey.

On the financing front, credit demand held steady in 2018

43% | Percentage of firms seeking external funds for their businesses.
53% | Percentage that experienced a financing shortfall (they obtained less funding than they sought).

Additional survey highlights

35% | Percentage of firms reporting revenue growth and employment growth in 2018. (Comparison: 28% in 2017)

72% | Percentage of firms expressing optimism for revenue growth in 2019 — the same share as in the prior year.

73% | Percentage that reported their input costs (overhead) had increased in the prior 12 months. More than half of these firms raised the prices they charge. Firms that raised their prices were twice as likely to see profitability growth than firms that did not pass on cost increases.

33% | Percentage of firms that added payroll employees in the prior 12 months.

44% | Percentage of firms that expects to hire workers in 2019. (Comparison: 48% in 2018.)

43% | Percentage of firms applying for new capital in 2018 (Comparison: 40% in 2017)

47% | Percentage of borrowers who received the full amount of funding they sought (Of those that did not apply, roughly half reported they had sufficient financing)

Federal Reserve | GettyImages

When you’re moving into a new space, it can be tempting to go on a shopping spree to furnish your entire office. Before you buy – especially if you are strapped for cash – you may want to think about a different option: leasing your furniture.

When to Buy

Buying your furniture can be a benefit to your business. For example, there are tax incentives associated with investing in equipment and furniture.

And you plan to be in your new location for several years, then buying your furniture will likely make the most sense. After all, you can lease furniture for years and never own it, and you may end up spending more than you would have if you had just bought it originally.

Tip: Always seek advice from your trusted financial advisor
when considering major purchases.

When to Lease

Leasing can be a good idea if your workspace is temporary or if you are especially tight on capital. Unlike buying furniture, there is often little or no down payment on leased furniture.

Bottom line

• If you have a flexible budget or there tax incentives that make purchasing feasible, you’ll likely want to buy — or, perhaps, finance.
• Over the long run, you’ll probably pay more by leasing–and own nothing after spending that money.
• If you’re not sure about your location or need more cash on hand, you should consider leasing until you feel more stable.

Every situation is unique, however. This is something you should talk over with your accountant or other tax or financial advisor.

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26% | Percentage of business owners who have gone two to six months without paying themselves
25% | Have gone over six months without a paycheck.

The stress and strain of cash flow concerns

63% | Percentage of owners who regularly stressed or have anxiety due to cash flow concerns
35% | Often lose sleep or have difficulty sleeping
42% | Have sacrificed much of their social life and personal hobbies
32% | Say their family life suffers
91% | Spend as much as 20 hours per week on cash flow management (payroll, invoicing and purchasing inventory).

What would small business owners do if all cash-flow tasks were eliminated?

51% | Invest more time in sales and marketing to drive new business
35% | Further develop their products and services, saying they have new ideas but no time to focus on them.
32% | Spend more time with family, friends and community
30% | Focus more time on customer service
22% | Use the time on hiring and mentoring their employees
22% | Investigate new technologies and business systems to make their company more efficient

Source: Kabbage, Inc.

GettyImages

Some small business owners may be a little more confident in their financial practices than they should be, according to a recent survey from Clutch, a business-to-business research and reviews company. Here are two examples of risky financial practices and some financial advice you should follow instead.

Advice #1 | Use professional tax help

The decision to prepare and pay taxes without the help of a professional tax preparer or accountant may be a practice that seems to save money but could lead to a greater loss (especially for 30 percent of the survey respondents).

30% | Percentage of small business owners who believe they overpay their taxes and could claim more deductions and credits.
93% | Percentage of small business owners who rate themselves as “very” or “somewhat confident” in their ability to accurately file taxes.

Or, in other words, 30 percent of survey respondents simultaneously believe they can accurately file taxes while think they overpay.

Advice #2 | Keep personal and business banking in two separate accounts

Here’s another financial practice small businesses should follow, but many don’t.

27% | Percentage of small businesses who do not keep their personal and business finances in separate bank accounts.
23% | Percentage of small businesses who have experienced challenges with mixing business and personal finances in the past year.

Or, in other words, nearly the same percentage of small business owners who co-mingle their business and personal bank accounts have experienced a financial challenge due to the practice.

Bottom line | Do the math. Get help doing your taxes and have two separate bank accounts.

GettyImages

Business expenses are the cost of running a business. These expenses are usually deductible (not subject to federal taxes) if the business operates to make a profit.* But what exactly are these expenses? Below, we’ve listed information provided by the Internal Revenue Service (IRS) and have included links to their website locations where you can find more about the specific topic. Also, as we typically do when addressing a topic like this, always be sure to follow the advice of your trusted legal and financial advisor when it comes to accounting, finance or legal matters. Every industry or business location can have different laws and regulations, so your situation is unique. Topics covered below are:

• What can I deduct?
• Cost of goods sold
• Capital expenses
• Personal versus business expenses
• Business use of your home
• Business use of your car
• Other types of business expenses

What can I deduct?

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

It is important to separate business expenses from the following expenses:

1. The expenses used to figure the cost of goods sold
2. Capital expenses
3. Personal expenses

1. Cost of Goods Sold

If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in figuring the cost of goods sold. The cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.

The following are types of expenses that go into figuring the cost of goods sold

• The cost of products or raw materials, including freight
• Storage
• Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products
• Factory overhead

Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs.

This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million.

For additional information, refer to the following IRS publications: 

Publication 334, Tax Guide for Small Businesses
Chapter on Cost of Goods Sold

Publication 538, Accounting Periods and Methods.
The chapter on Inventories

2. Capital expenses

You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. In general, there are three types of costs you capitalize.

1. Business start-up costs (See the note below)
2. Business assets
3. Improvements

Note: You can elect to deduct or amortize certain business start-up costs.

See the following for more details:

Publication 535, Business Expenses
Chapters 7 and 8

3. Business expenses (vs. personal expenses)

Generally, you cannot deduct personal, living, or family expenses.

However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost of the business and personal parts. You can deduct the business part.

For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible. Refer to chapter 4 of Publication 535, Business Expenses, for information on deducting interest and the allocation rules.

Business Use of Your Home

If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation.

See also:

1. Home Office Deduction
2. Publication 587, Business Use of Your Home

Business use of  your car

If you use your car for your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage.

• Publication 463, Travel, Entertainment, Gift, and Car Expenses
  For a list of current and prior year mileage rates see the Standard Mileage Rates
• For 2018 milage rates, see this post on SmallBusiness.com

Other Types of Business Expenses

Employees’ pay | You can generally deduct the pay you give your employees for the services they perform for your business.

Retirement Plans | Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees’ retirement.

Rent Expense | Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for the property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.

Interest | Business interest expense is an amount charged for the use of money you borrowed for business activities.

Taxes| You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.

Insurance| Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.

This list is not all inclusive of the types of business expenses that you can deduct. For additional information, refer to Publication 535, Business Expenses.

*Note:  If you do not carry on the activity to make a profit, you must report all of the gross income (without deductions) from the activity on Form 1040, line 21. Special limits apply to what expenses for a not-for-profit activity are deductible; for detailed information, refer to Publication 535, Business Expenses.

You’ve probably heard the joke about the scariest words in the English language, “I’m from the IRS and I’m here to help you.” In some cases, it’s true, they can help. (And yes, we know: it’s not the IRS who pass the tax laws, it’s lawmakers.) While we suggest that trusted financial, legal or tax advisors be the resources you turn to whenever making important decisions about money and taxes, if you want to do some quick preliminary research about small business taxes, the IRS continues to add more and more resources that, yes, may help you. Here are seven resources to help small businesses owners with common tax-related topics that the IRS would like you to know about.

A Federal Tax Hub for Small Business owners and Self-Employed

The Small Business and Self-Employed Tax Center brings information on IRS.gov to one common place. Includes resources for taxpayers who file Form 1040, Schedules C, E, F or Form 2106, as well as small businesses with assets under $10 million.

Resources for Organizing Tax-related Information

The IRS Tax Calendar for Businesses and Self-Employed helps owners stay organized. It includes tax due dates and actions for each month. Users can subscribe to calendar reminders or import the calendar to their desktop or calendar on their mobile device.

Search for Tax-Related Information by Topic

The A-to-Z Index for Business helps people easily find small business topics on IRS.gov.

Watch Videos

The IRS Video Portal  offers learning events and informational videos on many business topics.

Find Forms

The Small Business Forms and Publications page (there’s a version on SmallBusiness.com, also) helps business owners find the documents they need for the type of business they own. It lists tax forms, instructions, desk guides and more. (These can also be found on SmallBusiness.com.

Meet Someone from the IRS in Person or Online

Small business workshops, seminars, and meetings are held throughout the country. They’re sponsored by IRS partners that specialize in federal tax topics. Topics vary from overviews to more specific topics such as retirement plans and recordkeeping.

Also on SmallBusiness.com

Small Business IRS Tax Forms and Guide | 2017

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