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Settle Your Small Business Taxes With a Peer-To-Peer Loan

Like the saying goes, “The only things certain in life are death and taxes.” Unfortunately, small businesses know this saying all too well.

Unlike employees who look forward to their refund every April, small businesses loath the approaching spring, knowing they will have to pay Uncle Sam its share of their profits. Each year, small businesses struggling to turn a profit in an increasingly competitive business environment must pay taxes in order to keep their doors open.

With dwindling profit margins and tightened lending restrictions, however, many small business owners find themselves between a rock and a hard place when it comes time to pay the tax man. Although a business may have steady sales and revenue or thousands of dollars in inventory, banks and traditional lending institutions simply aren’t handing out small business loans like they were in year’s past, leaving small business owners with few funding options to pay their tax bill.

Thankfully, peer-to-peer lending, or social lending, has solved this growing dilemma. These modern social lending marketplaces have connected millions of borrowers with individual investors. Borrowers receive low-interest, fixed-rate loans that can be paid off in two to five years, while investors are able to benefit from decent returns in an economy with sinking bond and savings rates.

Thus, it’s a win-win situation for both small business owners in need of immediate funding and investors looking to make a small profit while helping others.

From Desperation to Exultation: One Man’s Venture into Peer-to-Peer Lending

John Mitchell is an Ohio-based small business owner who found himself in such a predicament just last year. As the owner of the only hardware store in a small town, John’s store flourished the first few years it was open.

After getting his inventory levels, pricing models, and management just right, he decided to expand his business by opening a second location in a neighboring town. John sunk all of his profits into opening his new store, which meant he was short on funds come tax time. However, knowing the success of his business, he thought he would simply get a small loan from the bank that housed his accounts and provided him with the initial loan he used to launch his business four years earlier.

Unfortunately, he witnessed first-hand the effect the recession has had on lending regulations as the banker he’s known for years denied his loan application. If he couldn’t get a loan there, where could he?

On the brink of despair, John took to the Internet to research loan options. After digging through forums and trying a few different searches, he ran across peer-to-peer lending. In less than a week after going through the quick and easy application process, he received a personal loan at a low rate for the amount he needed. A week later, John sent a check for the full amount to the IRS, and less than eight months later, he was able to pay off the loan with the profits from his new store!

If you are a small business owner who has found yourself in a similar circumstance, peer-to-peer lending can do the same for you as well, but how does peer-to-peer lending work?

How Peer-to-Peer Lending Works

A breakthrough product or service emerges every generation, and in the early 2000′s, the emerging breakthrough was social networking. From helping in the organization of overthrowing political regimes to staying in touch with friends and family members, social networking has had a profound effect on our daily lives. Now, it’s changing the small business financing landscape as well.

Peer-to-peer lending is a modern social networking solution for small businesses in search of a way of securing alternative funding. The goal of peer-to-peer lending sites, such as Prosper and Lending Club, is simply to connect individual investors with those in need of funding, and these sites are becoming an increasingly useful tool for small business owners who are unable to secure funding from traditional lenders.

Rather than jumping through endless hoops only to be denied by a bank, small businesses can receive funding via peer-to-peer lending in no time at all by following three simple steps:

Step 1: Create a Profile and Loan Listing

There are a myriad of peer-to-peer lending networks to choose from, so your first step is to research the best ones and create a profile and loan listing on the site you choose. The loan listing is essentially a cost-free ad that indicates the amount of money you need and your desired interest rate.

Step 2: Let the Bidding Process Begin

After your listing goes live, investors have the opportunity to begin bidding on your listing, providing you with the interest rate and loan amount they are willing to offer you. A major advantage of this bidding process is the fact that it can intensify as more and more lenders begin competing for your business.

When this happens, interest rates will begin dropping, potentially allowing you to obtain a much lower interest rate than you expected. It’s important to note, however, that your credit score, income, and debt-to-income ratio plays a role in the lending decision process.

Step 3: Funding and Paying Back the Loan

Another benefit of borrowing from peer-to-peer lenders is that you can accept several bids to receive your requested loan amount. For instance, if you ask for $10,000 in your loan listing to pay your business taxes, you can acquire the amount from collecting $2,000 from five different borrowers.

This makes it much easier for borrowers to receive the money they need. However, instead of making five separate payments, you would only make one payment, because the peer-to-peer lending site is responsible for dispersing the money to lenders until loans are repaid in full. They simply charge a small fee for this service.

With increased lending regulations, banks are tightening their purse strings more than ever before, making it much more difficult for small businesses to receive the funding they need to expand their business or even pay their taxes. Thankfully, peer-to-peer lending has proven to be a worthy competitor in the small business lending marketplace. If you are a small business owner and find yourself unable to pay your taxes as April approaches, or backed taxes for that matter, a peer-to-peer loan is an ideal option.

Starting A Small Business? Choose The Right Mode Of Finance

A small business is like a budding plant– it needs to be nurtured in order to flourish. Just as a budding plant needs to be watered and manured well enough to facilitate its growth process, a small business needs to have an adequate financial back up for it to grow and become a larger concern in the coming years. Proper financing at the grass root level is essential for a business to prosper.

Starting a new business venture needs proper capital planning. To get the requisite start-up capital, entrepreneurs often depend on the general loan schemes offered by various banks and financial institutions. These institutions evaluate the credibility of a loan seeker on the basis of their credit score, available collateral and their financial standing. These loans would also come with a host of strict terms and conditions. Small business entrepreneurs often find it difficult to meet the qualifying requirements for a loan and abide by the stringent terms and conditions. In most cases they will either have to settle for a loan with very high interest rate that results in higher financial burden in the future or will have to look for other cash sources to fund their business. Choosing the right financing solution is one of the prime determinants of the success of a small business.

Finance in the form of loans is of two types – Secured and unsecured. A secured loan is essentially backed up by a collateral or a security on the condition that in the event of the applicant failing to repay the loan, the financial institution has the right to seize the collateral and sell it off to get their money back. An unsecured loan, unlike that of a secured loan does not demand a security or a collateral from the borrower. Due to a lesser degree of risk associated with the lender, a secured loan charges a lower interest rate than that of an unsecured loan. The borrower nevertheless has to make repayments on a monthly basis under both the types.

Of all the available financing options, an entrepreneur should ideally look for a scheme that offers quick processing of the loan, is flexible and more importantly has a less burdensome repayment plan. Besides the various loan offers available in the market, business cash advance satisfies all these conditions to the maximum advantage of small business owners. A business cash advance is one such scheme that makes the very word “business” seem comfortable to the budding entrepreneurs. Unlike loans, a business cash advance neither demands a security or a collateral and at times they are offered even to borrowers with not so good credit ratings. The characteristic that works very well in the favor of the borrower in case of a cash advance is its repayment plan. Unlike other forms of loans, a business cash advance does not have a fixed monthly repayment plan. In this case the repayment is directly related to the frequency of sales through Visa or Master card i.e. the lender gets their money back through the future credit card receivables of the borrower.

Powered by the above benefits, a business cash advance [] provides a strong financial foundation to a small business. Opting for a business cash advance surely helps the budding entrepreneurs to grow and take their enterprises to the next level of prosperity.

Small Business Finance – How To Spot The Truth About Merchant Account Processing

Knowledge is the best service a company can provide you. Only by having the knowledge to understand the fees you pay in this industry and the understanding of what fees you can get rid of are you truly protecting your profits.

For new merchants, some typical misunderstandings about this industry include:

Small merchants have to pay a minimum amount each month ($25, 30, 40 or more) to maintain the ability to accept credit cards.

Everyone charges the same so why switch providers?

As a merchant I have to process a lot of transactions to make accepting credit cards worthwhile.

Here is a guideline to help you through the confusion:

Annual Fee (this should be zero)-This is a fee charged annually by many processors. It’s often referred to as an annual membership fee.

Application Fees (this should be zero)- Often times an application fee will be charged when submitting an application for accepting credit cards. A fee charged to a Merchant that covers processing costs of their Merchant Application. Applies to New Merchant’s that are just starting to take credit cards.

Batch Fee (this should be zero)- This is the accumulation of captured credit card transactions in the merchant’s terminal or POS awaiting settlement. This is a time-sensitive process and must be completed within the stated timelines of the processor in order to avoid additional surcharges. Many processors charge a batch fee of $0.25 or more; which adds up quickly!

Cancellation or Deconversion Fee (this should be zero if the processor is not providing the promised service)-Cancellation fees are commonly assessed if you cancel your service prior to the binding term found within the merchant agreement.

Chargeback Fee (this should be no more than $15)- A credit card transaction that is billed back to the merchant after the sale has been settled. Chargebacks are initiated by the card issuer on behalf of the cardholder. Typical cardholder disputes involve product delivery failure or product/service dissatisfaction. Cardholders are urged to try to obtain satisfaction from the merchant before disputing the bill with the credit card issuer. It is a flat fee charged to the Merchant in the event a chargeback is incurred. Proper and timely chargeback management is an important responsibility of the Acquirer/Processor. Chargebacks can be costly to the Acquirer and Merchant, which is why they should be managed so precisely.

Discount Rate- The amount charged to a merchant for processing daily credit or debit card transactions. Some processors charge this fee based upon the merchant’s credit card volume.

Encryption Fee (this should be zero)- A fee charged to a Merchant that is changing processors having an existing Pin Pad for debit card transactions. Each Pin Pad must be physically handled for conversion.

Monthly Minimum Fee (this should be zero)- This is the amount of Visa/MasterCard fees you must meet each and every month, usually $25. If a month worth of fees do not total the monthly minimum, the merchant account provider will make up the difference with additional fees. The minimum that a processor dictates a merchant must incur on a monthly basis in Discount Fees and Transaction Fees (in other words, a minimum usage fee for accepting credit cards).

Statement Fee (this should be no more than $6.00)- This fee includes unlimited 24-hour a day, seven days a week, customer support. The purpose of the monthly statement is to give you an itemized list of your daily Visa/MasterCard totals as well as your monthly totals of the credit cards accepted. It will also indicate the total amount of fees you have incurred for the month.

Transaction or Inquiry Fee- A fee charged by a merchant account provider for each credit card authorization completed. It is assessed on the number of credit card transactions a merchant has processed.

It is not necessary for processing companies to charge annual fees, membership fees, monthly minimum fees, customer service fees, supplies fees, application fees, reprogramming fees, licensing fees, etc. These fees are extraneous, improper and more times than not, hidden from the merchant’s view.