Regardless of the type of company you operate, you are in the money management business. Small business owners should check out their cash flow before deciding to take on debt for their company. Business owners must be savvy with financing from start-up money through loans, credit cards, savings and assets to understanding the bottom line. Tighten your cash flow and narrow cash gaps prior to looking for outside financing.

 

Business financing may come in the form of debt, like commercial loans or equity by selling a piece of the business as stock or partnerships. Owners must determine what the additional money will be used for, whether the owner or the business will assume the debt, term of the loan, what to give up for capital in the equity or management of the company and what the rate of return will be from the success of the business. More than half of all small businesses are started with funds from the owner’s personal savings or from family and friends.

 

The following will give you financing information to help in your decision making process:

 

Small Business Loan Sources Getting a bigger loan is normally a lot easier than getting a small loan because they are more profitable for lenders and there is generally more industry information on the business requesting the money.

Peer Lending/Micro-loan Programs: Peer lending programs are typically set up by community development agencies targeting specific areas or minority and “disadvantaged” groups. The programs usually require business or technical training. Peer lending derived from India’s Grameen Bank program in which women would take turns borrowing, paying back and lending to others in the group—a revolving loan program. Central Harlem Local Development Corporation is one of the groups in Harlem that have this type of revolving loan program. For information on their requirements call 212. 283.0055. 

Special Bank Programs: Due to the Federal Community Reinvestment Act, many banks have started making more small business loans, ranging from $5,000 to $50,000. Banks are able to make profits on these loans by eliminating manpower on the evaluation process. Rather than giving a business plan it’s “due diligence” through extensive evaluation they have incorporated a process called credit scoring. Credit scoring is much like securing an individual loan. Points are accumulated for years of experience in business, income, number of employees and other non-disclosed characteristics. Many times these loan processes are not flexible and if the criteria is not met, the loan is not made. A financial statement is required with the application. Chase Manhattan Bank offers small business financial services. 

Private Lenders: Private lenders are usually referred to small businesses through contacts and special connections. They are professionals with extra money for investments and charge an interest rate up to 15% for the use of their money. A business plan and financial statements are normally required. 

Credit Cards: A large majority of small businesses use credit cards to finance purchases for equipment and supplies. This can be a good way of record keeping. Financial advisors suggest singling out one credit card for business purposes only. If possible, pay off balances in full each month to avoid the interest charges which can be 18-22% plus other fees. The debt from these fees can become enormous and overwhelming for fledgling enterprises. 

Venture Capital—Equity Financing 

Most venture capitalists demand a higher return on their investments than can be met by small businesses. All equity financing involves relinquishing some degree of ownership and control in exchange for money. For business owners who take pride in ownership and can’t give up control of the business you’ve spent money, time and sweat to build, this may not be the right funding source. There is that possibility that 20% ownership of a BIG business is better than 100% of a small business. The following is a brief, generalized overview of VC arrangements:

Angels 

Angel pools are groups of successful entrepreneurs who are willing to invest money in companies they recognize for having potential. These investors may invest between $100,000 to $1 million in businesses that are of interest to them or because they believe in an individual. These high-net-worth individuals normally prefer start-ups and want high returns on their money. Most often they expect to get their money back after a certain period of time through acquisition or public offering. Angels may take more than half of your company’s ownership and serve on the board, but won’t participate in day to day operations. Angels often bring expertise, good contacts and flow of capital. 

Partnerships 

Typical partnership structures usually involve a new investor that works in your company and invests a small amount of money, about $5,000 to $50,000. Other arrangements include investor relationships and strategic partnerships. If you take in a partner you must also be willing to give up control and develop good communication within the partnership. 

Warrants 

Warrants are arrangements made where the lender receives an option to buy shares of the company, common or preferred stock at a guaranteed price. The business owner pays back the loan with interest and if the company prospers the lender has an option for a piece of the company. Warrants may also be part of a licensing deal with the company receiving the right to distribute products from a larger company in return for the larger company receiving the right to own stock in the smaller company. 

Private Placements 

Private placements are when a company sells stocks, bonds or other securities directly to an institutional investor, such as an insurance company, other individuals or entities, privately. These types of placements can be debt or equity and are not registered with the Securities and Exchange Commission or publicly traded on Wall Street. These investors usually agree to hold the securities for a specific amount of time. 

Direct Public Offerings 

A Direct Public Offering is technically a public offering with fewer documents to prepare. There are other limitations including the number of owners and qualified investors with specific net assets and income. The SEC has other categories of small stock offerings that don’t require normal registration. Small Corporate Offering Registration allows a company to register with the state to raise up to $1 million. Other federal programs have different requirements and larger sums to be raised. 

Venture Capital 

Venture capital pools raise large sums of money to invest in early stage, fast growing companies. The money is invested for institutions, pension funds and wealthy individuals. Venture capitalists focus on high-risk, high-return transactions with 25% to 40% compounded annual returns in companies having an ROI in five to seven years. 

Initial Public Offerings 

IPO’s are for companies offering stock to public investors for the first time. “Going public” means significant changes for the business with all information available to the public. This requires registration with SEC which can be costly and extensive. Business owners must meet the demands and specs of investment analysts. Investors are paid back with dividends on their shares as the company thrives. Initial public offerings are normally intense but have been extremely advantageous to many businesses. 

Traditional Lending Bank money is the least expensive way to finance but can be harder because they take fewer risks. Banks make loans with other people’s checking and savings account and loan at about 2% above prime rate. There are other agencies like the Small Business Administration and economic development corporations that may be a good route for small business financing. 

Bank Financing 

Banks evaluate loan candidates on their capacity to repay the loan from company earnings, capital, conditions within the particular industry, collateral and your credit records. Banks also consider your relationship with them. 

Non Bank Lenders 

Finance companies, thrifts and other non-bank lenders charge higher interest rates and fees with other conditions, but require the same documents required by banks. These lenders are able to take higher risks than banks and collateral is a major factor. These lenders include savings and loan associations, finance companies such as GE Capital, accounting firms, insurance companies and credit unions. 

Small Business Administration 

SBA is a federal agency that guarantees loans with commercial banks up to 90%. They do not lend directly, but with the guarantee, lenders are willing to provide loans. 

Alternative Loan Programs 

These are the best sources for funding and involve capital sources from public and private sectors. Programs like the Empowerment Zone, Economic Development Corporation and other government backed entities typically target specific neighborhoods and look for a social return such as development for low income neighborhoods and job creation. Businesses must meet program goals and provide a solid loan package. For more information contact the Upper Manhattan Empowerment Zone at 212.410.0030

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STARTING A BUSINESS IN NEW YORK

 The information provided on these pages is not intended to offer financial or legal advice, but designed to simplify your process for starting a business in New York City. This reference guide may assist in speeding up the organizing process by compiling the general requirements for quick reference. 

Small businesses are the mainstay of most communities. The reality of running a small business can be modest and a difficult task. Entrepreneurship is about finding creative solutions to everyday circumstances. 

In every case, researching your particular business and locale is important to ensure feasibility as much as possible. This may include cost of goods sold, overhead expenses, income potential. A business plan is vital and will assist in evaluating your business concept objectively. Four key steps to a successful business plan are: 1) evaluating the feasibility of your business concept; 2) determining how you will promote and sell your product or service to effectively compete in the marketplace; 3) describing in detail how you will organize and operate your company and 4) developing key financial information that will be used to manage your business and to meet the requirements of investors and lenders. 

It is also equally important to develop a strategic plan for your business. Strategic planning has a larger scope than your business plan. It allows you to look at the big picture. Like going from one shop to national franchises. Or taking your design firm international via the web. This strategic planning will help you envision the ultimate business possibilities and how you plan to get there. 

The essential elements that make up your business concept will help you determine whether or not your ideas are feasible. 

Some New York City businesses require specific licenses or permits (see page 114 for more information on licensing and permits). It is important to find out the regulations that may apply to your local area such as zoning and parking. The office of the city clerk should be able to provide you with such information: 

New York County Clerk (Manhattan) 

NYS Supreme Court Building 

60 Centre Street, Room 109 

New York, NY 10007 212-374-8314

It may be necessary to consult with a qualified professional before deciding on a particular business structure. The most common organizing entities are sole proprietorships, general partnerships and corporations. If the business will be conducted under a “trade name” other than your own, it must be registered. Sole Proprietorships and Partnerships are registered with the county clerk where the business will be operated. Partnerships and Corporations must be registered with the New York State Department of State. 

Sole Proprietorship A Sole Proprietorship is more flexible than Partnerships or Corporations and may be suitable for the start-up of a single person entity. However, all responsibilities will rest with the owner. Steps: 1) Research; 2) EIN: tax identification number; may opt to use SSN; 3) DBA certificate in triplicate for business, bank and clerks office; 4) Tax obligations: self-employment tax or estimated tax. 

Partnerships A Partnership is between two or more persons or companies that conduct a trade or business jointly. The terms of the partnership should be clearly defined in an agreement, otherwise the State Partnership Law will set forth the rights and duties of the partners. Steps: 1) Research; 2) EIN (IRS form SS4); 3) Partnership Agreement; 4) Certificate of Partnership, notarized and filed with the county clerk; 5) a Limited Partnership certificate filed with the Dept. of State. After filing of the certificate, a notice should be published in two newspapers in the county where the business is located for six consecutive weeks detailing the specifics of the partnership. Income from a partnership is considered business income rather than wages or salaries. 

Corporations A New York Corporation is an entity separate and distinct from the individuals who own and mange the business. A corporation’s debts and obligations are its own. It is authorized to sell, buy and own property, operated for profit and are authorized to raise capital by selling/issuing shares of interest in the corporation. Steps: 1) Research; 2) EIN (IRS form SS4); 3) organizing documents: certificate of incorporation, bylaws, corporate resolutions; 4) send certificate to the NYS Dept. of State, Division of Corporations, 41 State Street, Albany, NY, 12231—Phone: 518.473.2492 and Fax: 518.474.4765. 

The City of New York Department of Finance administers several business and excise taxes, including General Corporation Tax, Unincorporated Business Tax, Commercial Rent Tax, Commercial Motor Vehicle Tax and Retail Liquor License Tax. Businesses should call the Taxpayer Assistance Unit at 718.935.6000 to obtain up to date information on required taxes.

 

 

Intellectual capital is more than just legally protected property such as trademarks, copyrights and patents; it is your company’s most valuable asset. Intellectual capital accounts for the value in a company other than tangible assets like inventory or fixed assets such as equipment, furniture and real estate. It is your image, business model and formulas, employee expertise and the technology that separates you from competitors. Intangibles like ideas, reputations, people, relationships and legally protected intellectual property such as trademarks, patents and copyrights are now being explored for new financial reporting alternatives in our new service economy. The Financial Accounting Standards Board may soon approve a new way for accountants to keep the intangible assets on their books and on balance sheets. Businesses need to get involved in the game of analyzing their intangibles and which intangibles create value for future revenues. Although it may be harder to quantify the uncertain future value of these assets, the same creative accounting methods may apply as those in measuring the standard business forecasts. 

Intangible assets like patents and trademarks (intellectual property) are licensed for real money every day. For example, Compaq paid $3.3 million for the domain name AltaVista.com; Fox paid $2.5 billion for the exclusive TV rights to Major League Baseball’s post-season games from 2001 to 2006. And, if truth be told there are many specialty restaurants and businesses in Harlem that have unseen wealth in many of their processes, from soul food recipes to a strong customer base.

In the past patents and trademarks could be costly and time consuming. But as of March 2001, the U.S. Patent and Trademark Office (USPTO) has established new guidelines to help simplify the process for establishing small entity status. 

The following outline of facts and definitions from USPTO may help assess the best situation for your business. More information may be downloaded from the USPTO website, www.uspto.gov. (The following is taken directly from USPTO literature as to not distort the legal definitions). 

Patents protect inventions and improvements to existing inventions. Copyrights cover literary, artistic and musical works. Trademarks are brand names and/or designs which are applied to products or used in connection with services. 

· Patents: 

A patent for an invention is the grant of a property right to the inventor issued by the Patent and Trademark Office. The term of a new patent is 20 years from the date on which the application for the patent was filed in the United States or from the date an earlier related application was filed, subject to the payment of maintenance fees. U.S. patent grants are effective only within the United States and its territories and possessions. 

The right conferred by the patent grant is, in the language of the statute and of the grant itself, “the right to exclude others from making, using, offering for sale, or selling” the invention in the United States or “importing” the invention into the United States. What is granted is not the right to make, use, offer for sale, sell or import, but the right to exclude others from making, using, offering for sale, selling or importing the invention. 

· Trademark/Servicemark: 

A trademark is a word, name, symbol or device which is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others. A servicemark is the same as a trademark except that it identifies and distinguishes the source of a service rather than a product. The terms “trademark” and “mark” are commonly used to refer to both trademarks and servicemarks. 

Trademark rights may be used to prevent others from using a confusingly similar mark, but not to prevent others from making the same goods or from selling the same goods or services under a clearly different mark. Trademarks which are used in interstate or foreign commerce may be registered with the Patent and Trademark Office. 

-Certification Mark – A mark used in commerce, or intended to be used, with the owner’s permission by someone other than its owner, to certify regional or other geographic origin, material, mode of manufacture, quality, accuracy, or other characteristics of someone’s goods or services, or that the work or labor on the goods or services was performed by members of a union or other organization. 

- Collective Mark – A collective mark is a trademark or service mark used, or intended to be used, in commerce, by the members of a cooperative, an association or other collective group or organization, including a mark which indicates membership in a union, an association or other organization. 

Trademark Application Process: 

A registration may be applied for by filing a properly executed application with the Patent and Trademark Office, by mail or electronically via the Internet. The current filing fee of $325 per class should accompany application. Forms may be downloaded from http://www.uspto.gov/web/offices/tac/doc/basic/index.html 

Via Mail: Addressed to: 

Assistant Commissioner for Trademarks Box New App/Fee 2900 crystal Drive Arlington, VA 22202-3513 (These forms may be downloaded using the USPTO PrinTEAS available from http://teas.uspto.gov/indexTLT. html  Credit cards are not accepted for paper filings.) 

Via Internet: You may file using TEAS – Trademark Electronic Application System, by filling out the required application form online, which checks for completion for you, then pay by credit card or through an existing USPTO deposit account. Both PrinTEAS and eTEAS are available from http://teas.uspto. gov/indexTLT.html. 

For a hard copy of the Basic Facts brochure or for answers to specific trademark questions contact the Trademark Assistance Center at 1-800-786-9199. To find out whether any person or company is using a particular trademark it will be necessary to do a trademark search. A Trademark search may be conducted at the Trademark Public Search Library, which is free to the public, at 2900 Crystal Drive, 2nd Floor, Arlington, Virginia, between 8:00am and 5:30pm. A search may also be conducted on the web from a database recently provided by PTO (http://tess.uspto.gov/bin/gate.exe) or by accessing it through the search from their main website. There are also more than 70 Patent and Trademark Depository Libraries throughout the country with locations listed on the PTO site. 

Copyright: 

Copyright is a form of U.S. intellectual property law that protects “original works” of authorship including literary, dramatic, musical, artistic works such as poetry, novels, movies, songs, computer software and architecture. Copyright does not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed. Original work is under copyright protection the moment it is created and fixed in a tangible form so that it is perceptible either directly or with the aid of a machine or device. This protection is available to both published and unpublished works. The Copyright Act of 1976 gives the owner of copyright the exclusive right to reproduce the work in copies or phonorecords; to prepare derivative works based upon the work; to distribute copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease, or lending; to perform the work publicly, in the case of literary, musical, dramatic and choreographic works, pantomimes, motion pictures and other audiovisual works; to display the copyrighted work publicly, in the case of literary, musical, dramatic, choreographic, pantomimes, pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work; and in the case of sound recording, to perform the work publicly by means of a digital audio transmission. 

Copies of all works under copyright protection that have been published in the United States are required to be deposited with the Copyright Office within three months of the date of first publication. Copyright forms may be obtained from the U.S. Copyright Office in person, by mailing in a request, or by calling the 24-hour forms hotline: (202) 707-9100. These forms may also be downloaded from the Internet: http://www.loc.gov/copyright/forms. Some public libraries carry Copyright forms. 

To register a work, you must submit a competed application form a non-refundable filing fee of $30, and a non-returnable copy or copies of the work to be registered. Each work normally requires a separate application and fee. A deposit is usually one copy, if unpublished, or two copies, if published, of the work to be registered for copyright. The Deposit becomes the property of the Library of Congress. Architectural works became subject to copyright protection on December 1, 1990. 

The copyright law defines “architectural work” as “the design of a building embodied in any tangible medium of expression, including a building, architectural plans, or drawings. Under the copyright law, the creator of the original expression in a work is its author. The author is also the owner of copyright unless there is a written agreement by which the author assigns the copyright to another person or entity, such as publisher. In cases of “works made for hire”, the employer or commissioning party is considered to be the author. Copyright does not protect names, titles, slogans, or short phrases nor does it protect ideas, concepts, systems, or methods. However, in some cases, these things may be registered as trademarks or granted patent. 

The information provided on these pages is not intended to offer legal advice, but designed to simplify your process for protecting your intellectual property. This reference guide may assist in speeding up the organizing process by compiling the general requirements for quick reference. For detailed information contact the appropriate agencies as follows: 

 

 

 

INVESTING BASICS

Investing makes many people nervous because of their lack of knowledge on the subject or the possibility of the risks involved. But investing doesn’t have to be difficult or extremely risky. In fact, savvy investing can create a bridge to financial reassurance. Rev. Jesse Jackson, in his and his son’s book, “It’s About The Money”, says, “We must expand our focus from the historical race gap to the vertical resource gap, the structural gap”. Their book suggests becoming educated in investing by reading business and financial journals, subscribing to newsletters written by expert analysts, watching financial programs on television or searching the internet. 

New investors can choose from a variety of ways to begin an investment portfolio. One can find a good financial advisor, start with an investment club or simply try it alone. The first step is to determine your financial goals. Whether you are investing for retirement, a child’s college education or to simply strengthen your financial position, your objective can help define the best strategy. 

Here is a brief overview and the most frequently asked questions.

What is a Bull Market Vs. a Bear Market? 

A bull market is when stock prices are rapidly climbing and a bear market means the market is declining. 

How can I get the most out of my investment? 

When it comes to financial markets, the higher the risk, the higher the return. Just be sure to analyze risks and your ability to tolerate them. It may be wise to base your decision on age, family situation and your current assets. 

What is a diversified portfolio and how do I diversify to reduce risks? 

A diversified portfolio is basically “not putting all of your eggs into one basket”. Money should be spread throughout a variety of investments. A good mixture of investments of stocks and bonds may increase your return and lower risks. Bonds yield smaller returns but are not as risky as some stock. 

How do I know when to cash out? 

There’s always a lot of speculation when trying to decide whether to sell when the market climbs to lock in profits or when the market drops to cut losses. Deciding on when to sell is often the hardest part of investing. But most experts say that you should stay the course of your investment strategy. Many times, even when your investment stock falls, your money is still ahead of where a savings plan would be.

Stocks 

When you buy stocks, you become a shareholder or part owner of the company you buy the shares from. Companies issue common and preferred shares. Preferred shares, which are not always issued publicly, reduces investor risk and guarantees the dividend amount. United States stock exchange is regulated by the Securities and Exchange Commission (SEC). The top U.S. stock exchanges are listed on the New York Stock Exchange (NYSE), Nasdaq, and American Stock Exchange (Amex). Publicly traded companies must follow SEC guidelines, furnishing a prospectus (IPO’s), annual and quarterly reports that disclose important information for investors. While there are no easy rules to picking the best stocks, many professional investors screen companies based on a number of factors, including growth in sales and earnings, cash flow and net profits compared with total assets. These figures are important because the future value of a company’s shares is likely to hinge on its ability to grow and prosper. A good analysis often depends on the price-to-earnings ratio (P/E), which is a measure of how the company’s stock price compares to its per-share earnings. A company with a P/E ratio of 10 means the company’s stock price is equivalent to 10 times its annual earnings per share. As suggested above, it is recommended that your investment strategy be suited to fit your goals. In choosing stocks, it is best to be thorough in your research. 

Bonds 

When you buy bonds you are in essence lending the issuer money. The issuer promises to pay back your principal at some point in the future at a set rate of interest for as long as the bond is outstanding. The biggest bond risks are default and interest rate fluctuations. In the case of default, the issuer will be unable to pay all or part of the principal or interest, be it government or corporate. Government bonds and treasury bills are believed to be safe because the U.S. government is creditworthy. Other kinds of bonds should be investigated. 

Mutual Funds 

Mutual funds are investment pools that collect money from many investors and use it to buy stocks, bonds and other investments. There are different levels of mutual funds: income funds look for steady income through dividends, growth funds buy stocks of established companies expected to rise over longer terms, and aggressive growth funds buy new stocks to get the highest return in a shorter time span. Balanced mutual funds that offer a combination of stocks and bonds to produce capital gains and steady income are the most common choice for those with little time or money to spare. Mutual funds make investing easy. The type of funds and their general missions are spelled out in the prospectus. Investment Clubs Investment clubs have grown popular over the last few years. This investment approach is a more hands-on, “do it yourself” process and requires participation and research. Becoming a member of an investment club is a great way to understand the market with a team. In most cases, the groups pool their money and invest in companies and funds that have been selected through research and group meetings. National Association of Investors Corp. (NAIC) is a nonprofit that can assist in the start up and guidance of investment clubs. They can be reached at 877-275-6242.

Financial Advisors

Beware of financial advisors who are trying to sell you their products and services. It may be better to utilize a “fee only” financial planner. A full-service broker should track the stocks you own and call you when it makes sense to buy or sell. The broker should also spend time with you and your portfolio to know the type of investments you prefer and whether you are active, passive, conservative or aggressive. Investors may also choose a discount brokerage. Visit the web site of The National Association of Personal Financial Advisors at www.napfa.org, or the nonprofit American Association of Individual Investors at www.aaii.org. These groups may help you take the first steps in choosing a certified financial planner in your area. It will also be helpful to get referrals from people you know and trust in judgment. Managing Investment Fees However you choose to invest, be sure to understand the costs of trading or fund charges. All funds charge annual management fees, but some funds charge “loads” and 12(b)1 fees. A load is a sales charge that is deducted either from your initial investment when you buy or from your proceeds when you sell, and is used to compensate the broker. Front-end loads are taken from your initial investment and can amount to between 1% and 8.5%. Back-end loads rarely exceed 5% of the account value, but can be substantial because the fee is paid on the initial investment plus earnings. 12(b)1 fees are deducted annually from fund assets, typically 0.5% annually. Every mutual fund prospectus must include a summary of all fees the fund charges. When making decisions, look closely at fee charts and compare the expenses with the expenses charged by other funds. Fees can make a significant difference in your long-term performance. 

 

  • Balanced 
  • Capital Appreciation 
  • Emerging Markets Funds 
  • Equity Income 
  • European Region 
  • General Municipal Debt 
  • Global Funds 
  • Gold Growth 
  • Growth & Income Funds 
  • Health & Biotechnology 
  • High Yield Municipal Bond 
  • High Yield Taxable Bond 
  • Insured Municipal Debt 
  • Intermediate Term Municipal Debt 
  • International Inter. 
  • Investment grade 
  • Corporate Bond Investment grade 
  • Bond Funds 
  • Long Term Investment Grade Corporate 
  • Bond Long Term U.S. Treasury/Govt. Bond 
  • Mid Cap 
  • Mortgage 
  • Natural Resources 
  • Pacific Region 
  • Science & Technology 
  • Sector Equity Funds 
  • Short Term Investment Grade Corp Bond 
  • Short Term Municipal Debt 
  • Short Term U.S. Treasury/Govt. Bond 
  • Single State Municipal Debt 
  • Small Cap 
  • Stock & Bond Funds 
  • Utility 
  • World Bond 

 

HELPFUL NUMBERS 

American Association of Individual Investors 

312.280.0170        www.aaii.org 

SEC 

800.732.0330 

National Association of Investors Corp. 

877.275.6242 

Fidelity Investment Mutual Fund Company 

800.544.8888 

US Government Consumer Information Ctr. 

  www.pueblo.gsa.gov

P.O. Box 100, Pueblo, CO 81009 

 

Investment Company Institute 

202.326.5800 

Institute of Certified Financial Planners 

800.282.7526        www.icfp.org 

Rainbow/PUSH Wall Street Project 

212.425.7874