What is a Certificate of Existence and Do I Need One?

You may be asked for a Certificate of Existence by a lender or if you do business in another state. What exactly is a Certificate of Existence? A Certificate of Existence is simply a document that indicates that your business is properly registered with the state and have followed all state requirements. It serves as evidence that the entity exists and is authorized to transact business in the state.

 

Why would a business need to provide a Certificate of Existence?

Carl Dietz, Business Services Attorney, with the Iowa Secretary of State’s office explains, “The primary reason an entity may want to have a Certificate of Existence issued is to include it with an application for authority to operate in another state.  For example, if a corporation incorporated under the laws of Iowa that operates a restaurant chain wants to open its first restaurant location in Nebraska, it will need to apply for authority from the state of Nebraska to do business in that state.  Part of Nebraska’s application requirements will almost certainly be a Certificate of Existence issued by the Secretary of State of Iowa.”

You may also be asked to provide it by a bank when applying for a loan or line of credit in the name of the business.

 

Which businesses can obtain a Certificate of Existence from the Secretary of State?

Requirements in order to be in “good standing” vary by state but typically they include:

–            Registering with a state agency to conduct business

–            Being up-to-date on all your taxes and fees

–            Filing annual or biennial reports

All states require registration of corporations and limited liability companies (LLCs).

 

How do I obtain a Certificate of Existence?

You can apply for the certificate by simply contacting the Iowa Secretary of State’s Business Services Division in person, by mail, or online through their website, www.sos.iowa.gov. The cost is five dollars. Be careful not to fall for scams and pay more than needed for this certificate. If you are in doubt, contact the Secretary of State’s Business Services Division for clarification.

 

Have further questions about this or other business concerns? Schedule an appointment for confidential, no-cost business advising at one of our 15 regional centers across the state of Iowa. You can request an appointment online at iowasbdc.org.

America’s SBDC Iowa is an outreach program of Iowa State University’s Ivy College of Business and the Office of Economic Development and Industry Relations. Funded in part through a cooperative agreement with the U.S. Small Business Administration, America’s SBDC Iowa has 15 regional assistance centers located strategically across the state. Since program inception in 1981, the SBDC has helped Iowa businesses and entrepreneurs through no fee, confidential, customized, professional business counseling and practical, affordable training workshops.

For more information on America’s SBDC Iowa programs or services, visit www.iowasbdc.org, https://www.facebook.com/AmericasSBDCIowa, or @IowaSBDC on Instagram and Twitter.

Do I need an Iowa Sales Tax Permit?

When opening a new business, an important step is determining whether the product or service you are selling requires obtaining an Iowa sales tax permit. If you are selling any tangible item, specified digital products, or service that is taxable, you must obtain a sales tax permit.

Tangible Products:

Iowa law states that tangible items are taxable unless specifically exempted by law. Common reasons for exemption are listed below with links to the Iowa Department of Revenue guidebooks relating to that topic. This is not an exclusive list.

» Items primarily and directly used in agriculturally production
https://tax.iowa.gov/farmers-guide-iowa-taxes

» Certain food items
https://tax.iowa.gov/iowa-sales-tax-food

» Medical products for human use and consumption
https://tax.iowa.gov/medical-clinics-and-related-businesses-iowa-sales-and-use-tax-information

» Certain nonprofits
https://tax.iowa.gov/iowa-tax-issues-nonprofit-entities

Specified Digital Products:

Prior to January 1, 2019, whether a digital good or service was subject to sales tax depended on various factors. To be subject to sales tax, a digital product had to constitute either tangible personal property or an enumerated service. Beginning January 1, 2019, taxation of specified digital products, software, and related services changed. Additional information can be found at: https://tax.iowa.gov/taxation-digital-products

Services:

Services, unlike tangible property, are exempt unless specifically listed in the code as taxable.
Approximately 80 services are considered taxable in Iowa and they are as follows:

» Aircraft lease or rental, 60 days or less
» Aircraft repair, remodeling, or maintenance, except when used in a scheduled or nonscheduled interstate FAA certified air carrier operation
» Alteration and garment repair
» Armored car services
» Bank and financial institution service charges
» Barber and beauty services
» Battery, tire and allied services
» Boat repair
» Cable/pay television fees
» Camera repair
» Campgrounds
» Carpentry
» Carpet and upholstery cleaning and repair
» Communication services; excluding internet access fees
» Dance school and dance studio
» Dating services
» Demolition
» Drain cleaning; unplugging toilets, sinks, and sewers
» Dry cleaning, pressing, dyeing, and laundering. Beginning 7-1-2015, the use of self-pay washers and dryers is exempt from tax.
» Electrical and electronic repair and installation
» Employment and executive search agencies
» Excavating and grading
» Exterminators
» Farm implement repair of all kinds
» Flying service and instruction
» Furniture repair and cleaning
» Fur storage and repair
» Garbage collection and disposal, nonresidential commercial only
» Golf and country clubs and all commercial recreation fees, dues, and charges
» Gun repair
» House/building moving
» Household appliance, television, and radio repair
» Investment counseling
» Janitorial and building maintenance or cleaning; non-residential only
» Jewelry and watch repair
» Landscaping, lawn care, and tree trimming and removal
» Limousine, including driver
» Machine operator fees
» Machine repair of all kinds
» Massage; unless performed by a licensed massage therapist
» Mini-storage
» Motor repair
» Motor vehicle, recreational vehicle, and recreational boat rental; when rented without a driver or operator
» Motorcycle, scooter, and bicycle repair
» Oilers and lubricators on vehicles and machines
» Office and business machine repair
» Painting, papering, and interior decorating
» Parking facilities
» Pet grooming
» Photography
» Pipe fitting
» Plumbing, including drain cleaning and unplugging toilets, sinks, and sewers
» Reflexology
» Retouching photographs
» Roof, shingle, and glass repair
» Security and detective services
» Sewage services, nonresidential commercial only
» Sewing and stitching
» Shoe repair and shoeshine
» Sign construction and installation
» Storage warehouse or lockers of raw agricultural products
» Storage of household goods
» Swimming pool cleaning and maintenance
» Tanning beds or tanning salons
» Taxidermy
» Telecommunication services; excluding Internet access fees
» Telephone answering service and telephone services
» Test laboratories, except tests on humans and animals. Beginning 7-1-2015, environmental testing is not taxable
» Tin and sheet metal repair
» Tree trimming and removal
» Turkish baths and reducing salon
» Vehicle repair
» Vehicle wash and wax
» Water conditioning and softening
» Weighing
» Welding
» Well drilling; repair only
» Wood preparation (for example, stripping, cleaning, sealing)
» Wrapping, packing, and packaging of merchandise other than processed meat, fish, fowl, and vegetables
» Wrecker and towing

The following are considered sales of tangible personal property and are taxable:

» Engraving
» Equipment and tangible personal property rental
» Optional warranty contracts
» Printing and Binding
» Recapping and retreading tires
» Vulcanizing

Services that would normally be considered taxable are exempt when performed in connection with new construction, reconstruction, alteration, expansion, or remodeling of a building or structure.

Applying for the permit

If you have determined that the nature of your business requires procuring a sales tax permit, you may apply for the permit at the Iowa Department of Revenue’s website: https://tax.iowa.gov/businesses/business-permit-registration

Your permit number and instructions on how to file returns via the Department’s eFile & Pay system will be mailed to you. You do not need to wait to receive the sales tax permit number to begin operating your business. Once you have applied for the permit, you are allowed to begin conducting taxable sales.

Personal Liability for Paying Taxes

An important thing to keep in mind is that if a business fails to pay sales and use taxes, the officers or partners are personally liable for the tax, interest, and penalty. The dissolution of a corporation or partnership does not discharge a responsible person’s liability for failure to pay tax.

Final note

Taxability of specific items is fact and circumstance dependent. Additional information may found at www.tax.iowa.gov. If you would like assistance in determining taxability, you may reach out to the Iowa Department of Revenue at idr@iowa.gov or 515-281-3114.

 

 

About America’s SBDC Iowa and the Author
Lisa Casper, Business Tax Counselor for America’s SBDC Iowa, assists small businesses with questions relating to the Iowa tax code. She provides advice on sales and use tax filings, Iowa tax law that affects small businesses, and general services provided by the Iowa Department of Revenue. She also provides business consulting to help small businesses grow and succeed.

America’s SBDC Iowa is an outreach program of Iowa State University’s Ivy College of Business and the Office of Economic Development and Industry Relations. Funded in part through a cooperative agreement with the U.S. Small Business Administration, America’s SBDC Iowa has 15 regional assistance centers located strategically across the state. Since program inception in 1981, the SBDC has helped Iowa businesses and entrepreneurs through no fee, confidential, customized, professional business counseling and practical, affordable training workshops.

For more information on America’s SBDC Iowa programs or services, visit www.iowasbdc.org, https://www.facebook.com/AmericasSBDCIowa, or @IowaSBDC on Instagram and Twitter.

Is an SBA 7(a) Loan the Right Business Financing Option for Right Now? – Blog post from Ryan Collins, a commercial lender with Lincoln Savings Bank

Is an SBA 7(a) Loan the Right Business Financing Option for Right Now?

With the National Federation of Independent Businesses (NFIB) reporting that 92% of small businesses have been negatively impacted by coronavirus pandemic, the Small Business Administration has become an even more critical financial resource.

The SBA’s business relief Payroll Protection Program has captured a great deal of attention recently, but its narrow focus on maintaining payrolls during the pandemic means the funds can only be used for very specific purposes: payroll, rent, mortgage interest, and utilities. For businesses that need longer-term financing for more flexible purposes, the SBA’s flagship 7(a) program offers many benefits.

Though it’s been around for decades, many business owners aren’t familiar with the SBA 7(a) program – which gets its name from section 7(a) of the Small Business Act of 1953 – and may have never considered a 7(a) loan.

Particularly when the economy is uncertain and business cycles are unpredictable, an SBA 7(a) loan can be critically valuable. There are many reasons a business may be a good candidate, including factors such as:

  • Being a start-up business without an established history
  • Experiencing a temporary slowdown in revenue
  • Having seasonal income
  • Not having enough collateral to secure your desired loan amount

Does anything on that list apply to you?

An SBA loan may not have been on your radar screen before, but today’s business climate is like nothing we’ve seen in the past. Now may the right time to give the 7(a) program a fresh (or first) look. Here’s an overview of the key features.

  • Access up to $5 million in capital. If needed, a business can access high amounts of capital with an SBA 7(a) loan. This can be particularly helpful for companies that need to invest in expensive equipment, materials, or technology. Business that don’t have as sizable financial needs will be happy to learn that for loans under $350,000, there is a more streamlined process and faster turnaround time.
  • Obtain a loan with little or no physical collateral. Most conventional commercial loans are fully secured with physical collateral, which mitigates risk for the lender. An SBA loan offsets the lender’s risk when collateral is missing because it is backed by the U.S. government.
  • Longer terms for lower monthly payments. A key benefit of 7(a) loans is the option to extend the terms beyond what conventional business loans offer. This can mean up to 10 years for equipment loans, and 25 years for real estate loans. Business that take advantage of the maximum terms can lower monthly payments and significantly improve cash flow – a particularly attractive benefit while the economy is uncertain.
  • Competitive interest rates. The growth of financial technology in recent years has created a new arena of non bank lenders that companies can turn to for fast capital – but, this often comes at a cost. An SBA 7(a) loan almost always offers better interest rates for long-term financing, saving companies thousands of dollars over the long run.
  • Six months of payment relief. For new 7(a) loans authorized prior to Sept. 27, 2020, the SBA is offering six months of payment relief as part of its coronavirus business aid. This means the SBA will make six months of payments, interest, and associated fees, beginning with your first loan payment. This is not a payment deferral, and you won’t be required to apply for loan forgiveness. You are automatically eligible when your loan is approved by the SBA.

SBA 7(a) loans are here to help small businesses succeed whether the economy is up, down, or somewhere in-between. In any business climate, an experienced SBA lender can be an important partner in supporting the long-term health of your business.

Ryan Collins is a commercial lender with Lincoln Savings Bank, a community bank proudly serving Iowans since 1902. For more information about an SBA loan through LSB or other commercial lending services, please contact  bln@mylsb.com or visit www.mylsb.com.

Ryan Collins’ passion for assisting small business owners began with his time at Lincoln Savings Bank, but his passion for teaming up with individuals can be traced back to pre-professional days as a football player and strength coach at Central College. It is at that time when he started to truly learn the importance of a strong team. That passion/understanding has carried over to his professional career as he implements that teamwork with small business owners. He and Lincoln Savings bank aim to fulfill dreams by providing access to the necessary capital.

The information in this blog post is intended for general educational purposes only. This is not an official endorsement of any bank service or product. 

Online Transactions and Iowa Sales Tax

In today’s business world, more customers are moving to online purchasing as an alternative to in person transactions. Covid-19 has only increased the amount of online shopping consumers are doing. In Iowa, there are laws that both businesses and individuals must be aware of and in compliance with when selling or purchasing online.

Retailers:

» Businesses located in Iowa or out-of state-retailers with nexus in Iowa and selling to Iowa customers online have an obligation to collect and remit Iowa sales tax depending on where the product is being shipped to. If the merchandise is delivered to an Iowa address, both the sales tax rate of 6% and the additional 1% local option sales tax (LOST), if applicable, must be collected from the customer. LOST has been adopted by voters in most cities and unincorporated areas in Iowa and applies if delivery of the tangible personal property occurs within a local option sales tax jurisdiction.

Sales tax and LOST rates searchable by address can be found at:
https://tax-mapper.iowa.gov/.

A spreadsheet listing all jurisdictions may be found at:
https://tax.iowa.gov/documents/status-all-ia-jurisdictions

» Businesses located in Iowa and selling online to customers with a delivery address outside of Iowa will not collect Iowa sales or LOST. The retailer will want to check the laws in the state where the delivery is being made to determine if that state’s sales tax applies to the transaction.

» For out of state businesses with no physical presence in Iowa, beginning July 1, 2019, Iowa requires sales tax plus applicable LOST to be collected and remitted if the company has $100,000 or more of gross revenue from Iowa.

» Marketplace facilitators must collect and remit Iowa sales tax and LOST if they made or facilitated Iowa sales of tangible personal property, services, or specified digital products into Iowa equal to or exceeding $100,000. A marketplace facilitator generally includes businesses that facilitate retail sales by providing infrastructure (listing the product on the marketplace, communicating offer or acceptance of a retail sale, providing the physical or electronic marketplace) or support (customer service, fulfillment or storage services) for retail sales to occur and collecting the sales price, processing payments, or receiving compensation from the retail sales. Marketplace facilitators include consignment stores, auctions, and online marketplaces.

For further information on marketplace facilitators, visit:
https://tax.iowa.gov/marketplace-facilitators.

Consumers:

» If a customer makes a purchase from an out-of-state supplier not collecting Iowa tax and the product is for use in Iowa, the purchaser must pay Iowa use tax. Consumer’s Use tax applies to both individuals and businesses. If out of state purchases are being regularly made from an out of state source not collecting Iowa tax, the purchaser must obtain a consumer’s use tax permit. See https://tax.iowa.gov/consumers-use for more information.

The information in this blog post is intended for general educational purposes only. Nothing should be construed as legal advice. Any oral or written opinion by Iowa Department of Revenue personnel not pursuant to a Petition for Declaratory Order under 701 IAC 7.24 is not binding upon the Department.

 

About America’s SBDC Iowa and the Author
Lisa Casper, Business Tax Counselor for America’s SBDC Iowa, assists small businesses with questions relating to the Iowa tax code. She provides advice on sales and use tax filings, Iowa tax law that affects small businesses, and general services provided by the Iowa Department of Revenue. She also provides business consulting to help small businesses grow and succeed.

America’s SBDC Iowa is an outreach program of Iowa State University’s Ivy College of Business and the Office of Economic Development and Industry Relations. Funded in part through a cooperative agreement with the U.S. Small Business Administration, America’s SBDC Iowa has 15 regional assistance centers located strategically across the state. Since program inception in 1981, the SBDC has helped Iowa businesses and entrepreneurs through no fee, confidential, customized, professional business counseling and practical, affordable training workshops.

For more information on America’s SBDC Iowa programs or services, visit www.iowasbdc.orghttps://www.facebook.com/AmericasSBDCIowa, or @IowaSBDC on Instagram and Twitter.

 

Summer for Small Business

This summer has been hot.  With many days climbing into the upper 80’s and 90’s, it’s hard to find motivation to accomplish any amount of work.  All you want to do is hop in the pool, or sit on your couch with a fan.  It can even be hard to run a business in this heat.  Customers may not want to walk or drive to your store to avoid the heat.  Your employees may lose productivity as they take vacations or simply daydream about being outside in the fresh air.

However, you can still improve your business in the summer months.  Here are four ideas to help you keep your business running smoothly when even the air conditioning is struggling.

  1. Take advantage of “rainy days”.

I know many people still use the adage “I’ll save it for a rainy day.”  Generally this means they’re saving some money for when it’s tight, but it also means sometime when a job can be accomplished.  Luckily for us, this summer has brought many rainy days to accomplish tasks.  However, you don’t need to watch the sky to know if it’s a rainy day.  A rainy day can be any time that you can accomplish a task.  Is your business often quiet before 10 am?  Then schedule some time in the morning to work on that bookwork that’s been piling up.  Do five people call on Tuesdays compared to 20 the rest of the week?  If so, start using that day to update your client profiles.  “Rainy days” can happen at any time.

  1. Make sure all your systems are running smoothly.

This one is especially true if your business involves a lot of outside work or has many pieces of equipment.  The summer months are the best time to fix anything that may be broken on your office building or within your machinery.  Take this one from me as I have had to set fence posts into the cold ground on Christmas Day and also demolish a building in mid-May.  I would much rather demolish buildings all summer then set one fence post in December.  Your employees will thank you if you accomplish outside tasks during the warm summer months.

  1. Plan an employee or customer appreciation night.

This one can help you express your gratitude to loyal employees and customers.  Rent a park, picnic shelter, or even just offer up your house one night (assuming it can hold all your employees).  Your customers will appreciate the gesture, and it can help build comradery between your employees.  It can also be cheap, especially if it’s an outdoor employee potluck or barbeque.

  1. Take a class

This is a page right out of your college handbook.  If you get behind on your degree, take summer courses.  Running a business is no different.  If you’ve been running your business for a long time, taking a class that is focused on your business can give you new perspective on how to attract customers, create marketing schemes, or simply get you up to date with new rules and regulations.  There are many classes for business owners offered in the summer months.  If you are interested in this, check out www.iowasbdc.org/workshop-calendar/ for different classes, workshops, and seminars offered around the state of Iowa.

Studying vs. Learning in Entrepreneurship

Students.  The children, teens, and young adults out there in the world trying to learn as much as they can in order to succeed in life.  As I am currently one of these, I can say that studying and learning is my job.  As I write this post, I am well aware of the fact that I have three to four hours of homework waiting for me at home, and I can’t say I’m excited about that fact.  Some business owners may understand my pain as you have piles of bookwork stashed away to be tackled when you have time.

But this blog isn’t for the people who already have a business started.  It’s for all of the people who are reading this, hoping to gain more information on how to be a business owner so they can become one too.  You’re doing your homework, so to speak.  Reading entrepreneurship articles for hours, trying to understand as many concepts as you can to ensure that your vision can come to fruition.

I realize that I’m still a student with very little “real world experience”, but I can say that I understand homework and studying.  It’s tedious, your hand cramps as you write yet another research essay, and you can’t cram any more accounting information into your head.  Studying is legal torture, and you cannot convince me otherwise.

I’ve also heard that you never stop learning.  But I’m beginning to realize that we have confused studying and learning.  Many students study for hours to simply regurgitate what they memorized onto a test, and then forget it immediately after.  They haven’t really learned anything, just passed the test.  Most of you are probably wondering what this has to do with business, but I’m not just talking about formal education here.  Many people have goals and visions for a future company.  They spend hours researching on sites like Forbes, Entrepreneur, and The Wall Street Journal hoping to eventually figure out exactly how they should put this idea into action.  They study, and while this isn’t bad, it’s not learning.

Growing up on a farm, I never studied how to check cattle.  There was never a website that I logged onto to figure out how to unlatch a gate, or read a magazine article on how to carry a hay bale.  But I learned a lot.  It was informal, and often painful as I would get kicked or stepped on, but I learned a lot about how to properly handle an animal and farm work that I couldn’t have learned through a book.

One Entrepreneur article says that many people have the knowledge to become business owners, they have studied so much that they have “information overload” and don’t know where to go.  They haven’t turned their hours of studying into learning.  The article goes on to encourage aspiring business owners to take action, and start the business.  You can’t fail if you never start, but you can’t succeed either.

I doubt that most of you will have to worry about stampeding cows if you open your business, but there are other things that will be difficult.  You may struggle finding loans, creating a customer base, or marketing your product.  However, I would have never learned how to jump over a fence if I never had the cattle in the first place.  Maybe it’s time for you stop studying entrepreneurship, and start learning about entrepreneurship.

If you’re ready to take the next step but are still uncertain on exactly where to go, the Iowa SBDC is here to help.  Visit / to schedule your free and confidential advising appointment.

 

Cybersecurity, Part II

Last time, we looked at some reasons to start thinking about cybersecurity for your business. You may have found yourself asking, “Ok, how can I protect myself?” Below is a high-level overview of three fundamental aspects of cybersecurity, as well as some resources for further study. This technology doesn’t take a genius to understand, just a little patience and willingness to learn. Your business’s survival may depend on it.

Firewalls

“Firewall” may be a term we are all familiar with, but many of us don’t know what exactly a firewall is. According to cisco.com, “A firewall is a network security device that monitors incoming and outgoing network traffic based on a defined set of security rules.” Basically, a firewall will use filters to keep certain pieces of information out of your network. Most firewalls will let you choose which filters you want. In a post on their website, Comodo explains that firewalls can be configured to “prevent access to certain websites,” “prevent employees from sending certain types of emails,” and “prevent outside computers from accessing computers inside the network.” Some operating systems have firewalls built-in, including Mac OSX and Microsoft Windows. According to Microsoft, setting up a firewall is “the most effective and important first step you can take to help protect your computer.”

Firewalls can often act as your router, and even have “more advanced features that are designed to offer a superior level of [defense],” as opposed to a normal router, according to Manx Technology Group. For this reason, they recommend a firewall for a small business, rather than a traditional router. MTG goes on to list various features you will want when choosing a firewall. These include:

  • “Internet connection support”
  • “Wireless support”
  • “Antivirus”
  • “Intrusion Prevention Service”
  • “Web filtering”
  • “Reporting”
  • “Virtual Private Networks (VPN)”
  • “Technical support”

Popular vendors of firewalls include Cisco, Fortinet, and Sophos.

Antivirus software

Geeks On Site offer the following explanation of antivirus software: “Antivirus software, sometimes known as anti-malware software, is design to detect, prevent and take action to disarm or remove malicious software from your computer such as viruses, worms, and Trojan horses.” They go on to list the three scanning detection processes antivirus software uses:

Specific Detection, Generic Detection, and Heuristic Detection. Specific Detection “works by looking for known malware by a specific set of characteristics.” Generic Detection “looks for malware that are variants of known ‘families,’ or malware related by a common codebase.” Heuristic Detection “scans for previously unknown viruses by looking for known suspicious behavior or file structures.”

In a March 2007 article for TechRepublic, Erik Eckel lists 10 thing to look for in an antivirus application. These were:

  • “Potency”
  • “Low overhead”
  • “Centralized administration”
  • “Email protection”
  • “Compatibility”
  • “Effective reporting tools”
  • “Technical support”
  • “Certification”
  • “Simplified licensing”
  • “Reasonable cost”

Techradar offers suggestions on which antivirus software to use for your business: http://www.techradar.com/news/best-business-antivirus-8-top-paid-security-tools-for-small-businesses

Data backup

Losing data can be the ultimate business killer. According to atlantatech.net, “the cost of lost or stolen data access is estimated at $1.7 billion per year,” industry-wide. Backing up your data is the simplest step you can take to avoid these huge costs. In a 2014 article for CIO, Paul Mah advises that businesses use the “2+1” strategy. “For critical data,” he says, “businesses should make two full copies, maintained on separate physical devices. In addition, a third copy should be kept offline, preferably stashed at another location.” He points out that having one copy in a different location “protects a business from fires, floods and other localized natural disasters.”

Cloud backup solutions are gaining traction among small business owners these days, with companies like Carbonite, CrashPlan, and Backup Blaze being major players in the field. The previously mentioned Atlanta Tech article gives the following as factors to consider when choosing a cloud backup provider:

  • “Is Public, Private, or Hybrid Cloud the Best Bet for Your Business?”
  • “Which Type of Backup Schedule is Best for You?”
  • “Do They Offer Sufficient Flexibility for Your Storage and Scalability Needs?”
  • “How are Their Uptime Guarantees?”
  • “Do They Offer Sufficient Data Security and Compliance?”
  • “Do You Have Adequate Bandwidth?”
  • “Is There an Opportunity for Unified Business Communications?”

While cloud backup is the hip thing to use, Paul Mah recommends tape storage technology for your backup.

There are plenty of options out there for Cybersecurity. It all may seem a little overwhelming at first, but the important thing to do is educate yourself. Below, I’ve listed some resources that can be very useful in learning what security you need, how that security works, and what the options available are. Be sure to check them out, and ask your SBDC counselor about the Cybersecurity Workbook.

For further reading:

https://www.cio.com/article/2378019/small-business/how-to-build-a-storage-and-backup-strategy-for-your-small-business.html

https://www.techrepublic.com/article/10-things-to-look-for-in-an-antivirus-application/

http://www.techrepublic.com/blog/10-things/10-things-to-look-for-in-a-hardware-based-firewall/

https://www.comodo.com/resources/home/how-firewalls-work.php

Cybersecurity, Part I

Why should a small business need to worry about cybersecurity? Sure, there are hackers and data thieves out there, but they only go after big corporations, right? Some of the numbers regarding the threat to small businesses may surprise you. While you shouldn’t let these statistics paralyze you, or shy away from the competitive advantage technology can provide, you need to be aware of the risks that exist. Let me outline for you why you need cybersecurity, and give you some numbers for perspective.

Organizations are relying more and more on cloud services. While this provides extra convenience, it is also a great target for potential hackers. Additionally, any device connected to the internet can be attacked. Munichre.com reports that “one-third of U.S. consumers experienced a computer virus, hacking incident or other cyber attack in [2016].” Clearly, attackers are more active now that they know the pool of potential victims is growing. Not only that, but they know that businesses are viable targets as well. On October 31 of last year, nudatasecurity.com reported that “64% of companies have experienced web-based attacks.” Unfortunately, the increased convenience and capabilities that come with cloud storage, digital technology, and the like, also bring increased risk in the form of viruses, ransomware, and data breaches.

These attacks can damage your business in any one of a number of ways. The most prominent form of damage among small businesses, however, is financial. A 2015 report by juniperresearch.com estimated that “the average cost of a data breach…will exceed $150 million by 2020.” Now, this number is inflated by the cost of breaches to major corporations. Still, a recent Poneman Institute study revealed that small businesses (less than 1,000 employees) spent an average of $879,582 recovering from data breaches (between May 2015 and May 2016), because of theft or damage. Also, revenue losses among businesses breached averaged $955,429. This can be absolutely devastating for your business. According to the study, 60% of small businesses who experience these attacks go out of business within six months.

At this point, it may seem obvious that there is a serious threat to small businesses from cyber attackers and data thieves. According to smallbiztrends.com, “43% of cyberattacks target small businesses.” That number is staggering, considering the number of large firms and individuals who could be targeted instead. In a June 2, 2017 article for Business News Daily, Sammi Caramela observed that “The…reason small businesses make such appealing targets is because hackers know these companies are less careful about security.” Most small business owners underestimate the threat to their businesses. As Caramela points out, “small businesses fall into hackers’ cybersecurity ‘sweet spot:’ They have more digital assets to target than an individual consumer has, but less security than a larger enterprise.”

You don’t have to live in fear of a cyberattack on your business. But you shouldn’t be naïve either. Next week, we’ll go over some valuable tools you can use to protect your business.

Also, be sure to get the Cybersecurity Workbook from your SBDC Adviser.

Crowdfunding: Pros and Cons

Crowdfunding has become a popular way of obtaining capital among entrepreneurs. Everything from movies to bottle cutters have gone through the financing process on sites such as Indiegogo and Kickstarter. Many have achieved success this way. Others have failed. Today I want to explain what exactly crowdfunding is, and what the pros and cons of using this method are.

According to investopedia.com, “Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture.” The purpose of crowdfunding is to increase the availability of funds for entrepreneurs by putting them in contact with a larger pool of potential investors. On the other side of the equation, investors can avoid the risk of putting large sums of money into a single venture, and instead only donate amounts as low as $10. Entrepreneurs are required to provide updates to investors periodically, protecting the investors’ interests. Crowdfunding is sometimes rewards-based, meaning investors will “get to participate in the launch of a new product or receive a gift for their investment,” according to Investopedia. Equity-based crowdfunding is another option. This option works more like a typical investment, where funders become partial owners of the company. Equity-based funding is fully regulated by the SEC.

Crowdfunding comes with its own set of problems. According to floship.com, there’s “a huge amount of uncertainty when it comes to the accounting rules for funds raised through crowdfunding.” Because crowdfunding doesn’t work like a typical investment (such as a loan), there is confusion as to whether funds received in this manner should be declared as capital or income. Additionally, each state will have different rules on taxing this money. Some legal experts are also concerned that the lack of regulation will lead to scammers using crowdfunding sites to grab free money (Forbes). This is due to the businesses seeking funding not being required to provide financial statements to investors. This may cause many investors to put a lot of money in the hands of irresponsible business owners. There are other problems with crowdfunding, but these are some of the most widespread.

Despite the risks, crowdfunding has considerable benefits that come with it. After all, there have been a number of successful ventures that have used crowdfunding to reach their goals (onlinemba). Notably, all-or-nothing crowdfunding platforms have no participation fee, and return funds to investors if the project doesn’t reach 100% of its goal. It can also be a valuable marketing tool. According to Tanya Prive on Forbes, “an active crowdfunding campaign is a good way to introduce a venture’s overall mission and vision to the market, as it is a free and easy way to reach numerous channels.” This is because “many crowdfunding platforms incorporate social media mechanisms, making it painless to get referral traffic to your website and other social media pages.” Another attractive aspect of crowdfunding, according to nibusinessnessinfo.co.uk, is that “your investors can often become your most loyal customers.” After taking part in the financing process, it is likely that they will not only buy whatever you are selling, but also will refer their friends to the product or service. This makes your investors your marketing team, minus the salary expense.

Like all investments, there are considerable risks and benefits that go along with crowdfunding. When done the wrong way, investors can waste considerable amounts of money, and business owners can lose customers and develop a negative image. When done right, however, it can result in visionary products being developed, and benefit everyone involved in the process. If you decide to invest in a crowdfunded project, be sure to proceed with caution. If you decide to use crowdfunding to obtain funds, make sure you keep your investors informed, and develop a plan beforehand. Despite the criticism, plenty of businesses and entrepreneurs have used crowdfunding successfully, and you can as well.

For further reading:

https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-crowdfunding

https://www.cnbc.com/2015/09/15/how-to-crowdfund-successfully-tips-from-experts.html