Greetings from the Director
I just wanted to take a few moments to wish you a happy and prosperous new year, and to keep you abreast of some important and exciting developments for our local business community.
From the very outset, 2013 has been a year of important change. The National Defense Authorization Act of 2013 removes the dollar amount caps that had previously restricted the size of contracts that could be set aside for Women-Owned Small Businesses (WOSBs), which in turn seriously limited the number of contracts eligible for the program. Removing this limitation should dramatically increase the contract available under the WOSB program. In addition, the law mandates SBA to conduct a new study to determine if a greater number of industries should be included in the set-aside program. In our area, where women business owners and government contracting are so very important to our prosperity, these changes should soon begin to reap dividends for our local economy.
In addition, 2013 will be the year that most businesses will begin implementing the changes called for in the Affordable Care Act, which will take full effect next year. There are many incentives available for small businesses to expand their health care offerings to employees, and we at SBA stand ready to help you navigate this process in the coming months. See below for information resources we've prepared to get you started.
I’d also like to encourage you to mark your calendars for 9:00-10:00 a.m. on the 4th Tuesday of each month, when your District Office will be presenting an ongoing series of small business seminars. We’ve had such a positive response from our recent educational events that we are setting aside time each month to bring you up to date information on the resources available to help your business reach its highest potential. We’re kicking off this February 26 with an introduction to the HUBZone contracting program. Subsequent months will tackle exporting, proposal writing, and other key business topics. We look forward to many interesting and productive mornings to come.
As we travel together through 2013, I hope you’ll remember that my staff and I at your Washington Metro Area District Office are here to help you start, build, and grow your business.
Happy New Year,
Bridget Bean, District Director
Ready for Tax Season? 6 Small Business Tax Prep Tips
by Natalia Olson-Urtecho, SBA Administrator, Region III
As you settle down after the busy holiday season, you will soon face another season – tax season! Small business owners need to understand how taxes may affect their business.
It is important to file properly, avoid audits and claim the right tax deductions, so here are six tips to help ease the burden of tax preparation and help you get ready for the April 15 deadline.
1. Keep Good Records:
Proper record-keeping year-round is the first step to ensuring your taxes are filed accurately and that you have the paperwork you need to back up your deduction claims just in case you’re audited.
2. Understand Your Deductions:
What small business deductions can you take? Do you have the documentation and original receipts to back them up? Remember, tax credits and deductions change each year.
3. Utilize the Small Business Jobs Act Tax Provisions:
The Small Business Jobs Act of 2010 President Obama signed into law has more than 17 tax provisions to decrease the tax burden for small businesses. Several of the law’s provisions may be taken advantage of during this year’s tax season to provide great savings for your business.
4. Remember the tax credits in the Affordable Care Act:
These tax credits will allow small businesses to cover up to 35 percent of the premiums a small business pays to cover its workers. In 2014, the rate will increase to 50 percent.
5. Avoid Common Audit Traps:
It is very important to be aware of potential red flags and act on them before the IRS does.
Classifying Employees as Independent Contractors – Independent contractors and employees are not the same and it's important to understand the difference. To the IRS, misclassification can be seen as an attempt to avoid payroll taxes and non-compliance can bring penalties and back taxes.
Home Office Deduction – This deduction is very specific and not all home-based businesses qualify. Likewise, if you run your business from a commercial location and claim the home office deduction, you might trigger some interest from the IRS. Know how to determine if you are eligible to claim it and what specific expenses you can write off.
Large Sum Miscellaneous Deductions – If you claim a large amount of itemized deductions relative to your income, the IRS may get suspicious. Likewise, if you bucket a large amount of miscellaneous expenses, you may raise eyebrows. Be specific and label every deduction.
6. Keep Business and Personal Expenses Separate:
The IRS scrutinizes personal expenses that may have been claimed as a business expense, such as the use of a business vehicle for personal use. Be diligent about keeping good records and maintain separate bank and credit card accounts for your business.
For additional information on these tax tips and current year tax deductions visit the SBA Small Business Tax Guide or contact the IRS at www.irs.gov.
CONTRACTING UPDATE: 2013 Defense Authorization Act Expands Opportunities for Women-Owned Small Business Contractors
Under the National Defense Authorization Act of 2013 (NDAA) the SBA will make changes to its Women-Owned Small Business Federal Contract Program to help women-owned small businesses get more federal contracts and help the federal government meet and exceed its statutory five percent women’s contracting goal.
Prior to the new law, the anticipated award price of a contract for women-owned (WOSB) and economically disadvantaged women-owned small businesses (EDWOSB) could not exceed $6.5 million for manufacturing contracts and $4 million for all other contracts. The new law removes these thresholds for WOSBs and EDWOSBs allowing them greater access to federal contracting opportunities without limitations or restrictions to the value of a contract.
The NDAA also requires the SBA to conduct another study to identify and report industries underrepresented by women-owned small businesses. As a result, more eligible women-owned businesses may be able to participate in SBA’s Women’s Federal Contract Program and compete for and win federal contracts.
To be eligible for the program, you must meet the following criteria:
1. Your business must be 51 percent owned and controlled by one or more women, and primarily managed by one or more women.
2. You must be a U.S. citizen.
3. Your business must be considered to be a “small” business according to SBA’s size standards. To view the various size standards for individual industries, take a look at SBA's Table of Small Business Size Standards by North American Industry Classifications Systems (NAICS).
4. In order to participate in contracts set aside for EDWOSBs, there are specific additional requirements for your business to be certified as "economically disadvantaged".
Every firm that wishes to participate in the WOSB program must meet the eligibility requirements and either self-certify or obtain third party certification. There are four approved third-party certifiers that perform eligibility exams: El Paso Hispanic Chamber of Commerce, National Women Business Owners Corporation, U.S. Women’s Chamber of Commerce, and the Women’s Business Enterprise National Council.
The WOSB Program identifies eighty-three four-digit North American Industry Classification Systems (NAICS) codes where WOSBs are underrepresented or substantially underrepresented. Contracting officers may set aside contracts in these industries if the contract can be awarded at a fair and reasonable price and the contracting officer has a reasonable expectation that two or more WOSBs or EDWOSBs will submit offers for the contract.
Small Business Spotlight:
Becky’s Pet Care - A Tail of Success
Becky’s Pet Care, Inc. is a professional dog walking and pet sitting company serving the communities of Northern Virginia. The explosive growth in population in Northern Virginia has been accompanied by growth in the number of companion animals. This created a tremendous unmet demand among working professionals for pet care and a tremendous opportunity for someone ready to fulfill this role. In response to the growing need for professional pet sitting services in her community, President and Founder Becky O’Neil started a pet care company in 1998 in the basement of her townhouse.
Becky's Pet Care, Inc. now has commercial office space in two locations, has served over 3500 clients, and employs 90 bonded and insured pet care professionals and 7 full time administrative staff. As her business grew, Becky recognized the need to develop her expertise in small business ownership to include personnel management, systemization, marketing, business planning and development, and human resources.
The Community Business Partnership (CBP) is an initiative of the George Mason University School of Public Policy and the Mason Enterprise Center. The CBP facility in Springfield, Virginia brings a wide range of economic development services under one roof, including the Women’s Business Center (WBC) of Northern Virginia and the Small Business Development Center (SBDC). These SBA-sponsored resource partners were instrumental in helping Becky O’Neil begin and grow her business. She attended classes offered by the WBC and the SBDC, wrote her first business plan with their help, secured financing from a CBP affiliate, and met frequently with WBC and SBDC counselors as she grew her business and sharpened her management skills. “The Community Business Partnership has been the single most valuable recourse that I have found as a small business owner”, Becky said of her experiences.
Becky O’Neil is committed to helping other business owners find the help that was so important to her own development. She is a regular presenter at WBC and SBDC workshops. In January 2012 Becky was elected to serve on CBP’s Board of Directors. Becky’s Pet Care also works with and supports Northern Virginia charitable organizations and animal welfare groups.
SBA In the Community
On Thursday, January 24, Washington Metro Area District Director Bridget Bean greeted the attendees at the Greater McLean Chamber of Commerce Monthly Small Business Education Series in McLean, Virginia. The breakfast meeting featured a presentation by the Washington Business Journal on lead generation, followed by a networking breakfast.
Keep an eye out for Washington Metro Area District Office staff throughout our community, and be sure to say “Hi!”
SBA District Director Bridget Bean (L) with Greater McLean Chamber President Marcia Twomey (R)
SBA's Certified Development Company Lending Program (504 Loans) explained:
Created by Congress in Section 504 of the Small Business Investment Act of 1958, Certified Development Companies (CDCs) are private, not-for-profit institutions that are chartered to contribute to the economic development of its community or region. CDCs are certified and licensed by SBA, and work the agency and private-sector lenders to provide financing for small businesses for capital investment. There are over 260 CDCs nationwide each having a defined Area of Operations covering a specific geographic area. There are 5 CDCs which serve the Washington DC Metropolitan Area, including Northern Virginia.
An SBA 504 loan is a partnership between a Certified Development Company (CDC), the Small Business Administration and a lender. Working with a lender, the CDC provides up to 40% of the financing for commercial real estate purchase, new construction, or purchase of equipment. A lender partners with the CDC and typically provides 50% of the financing, while the entrepreneur ends up paying as little as 10% down. Under certain circumstances, the borrower’s contribution may be a few points higher but is always substantially less than would be the case without CDC financing.
The CDC works closely with the small business borrower to process, approve, close and service the SBA 504 loan. Funding is provided by the CDC issuing a 10- or 20-year debenture bond that is sold to investors on Wall Street giving entrepreneurs access to capital at low, fixed interest rates - usually only available to large corporations. Debenture bonds are especially attractive to investors since they are backed by the SBA and fully guaranteed by the U.S. Treasury.
When a business receives 504 financing, the required down-payment is dramatically reduced, the loan is secured at a below-market, fixed rate, at terms of up to 20 years, and the loan can be used to finance “soft costs” (such as design, appraisal, environmental, and closing costs) that in the case of a conventional loan the borrower would usually have to finance from cash on hand. As a result, business owners can keep a lot more cash on-hand for operating and building their businesses. Current rates for 504 loans are very low - 4.038% (fixed for 20 years) for debentures closing in January 2013 according to Business Finance Group, a CDC that serves the Washington Metropolitan Area.
Bridget Bean, SBA District Director for the Washington Metro Area, offers this assessment of the program, “The 504 lending program is a proven success. Best of all, it’s a win-win-win situation, a win for the small business, for the participating lender, and for Northern Virginia.” A National Economic Impact Study done by the National Association of Development Companies (NADCO) demonstrated that for every dollar invested in 504 loans through SBA participation, $94 in federal, state and local tax revenues are returned.
“In our area alone, 504 loans have supported more than $1.1 billion in investment over the past 4 fiscal years,” reports Bridget Bean. “This program is one of the most effective tools we have to develop our local economy by supporting the small businesses that make up the fabric of our communities.”
Top Ten Lenders in the DC Metro Area, FY13 Year-to-Date (10/1-12/31/2012)
1. M&T Bank (PLP) | 25 loans | $3,607,600 total
2. Business Finance Group (CDC) | 14 loans | $11,852,000 total
3. Wells Fargo Bank (PLP) | 13 loans | $5,211,000 total
4. BB&T Bank (PLP) | 9 loans | $1,550,000 total
5. Suntrust Bank (PLP) | 6 loans | $4,037,500 total
6. Wilshire Bank (PLP) | 6 loans | $2,706,000 total
7. Eaglebank (PLP) | 5 loans | $5,300,000 total
8. Capital Bank, NA (7A) | 5 loans | $1,150,000 total
9. Sonabank (PLP) | 5 loans | $1,142,900 total
10. Access National Bank (PLP) | 4 loans | $6,396,000 total
Preferred Lender (PLP): SBA provides 24 hour expedited loan processing
Regular Lender (7A): Non-PLP lenders, Regular Loan Processing
Certified Development Company (CDC): Non-Profit Lenders for fixed asset loans (504 Loan Program)