The Recovery and Reinvestment Act of 2009 included some terrific financing opportunities for small businesses. The SBA ARC Loan Program offers 0% loans to small businesses for up to five years.

The program caught my eye, because it looks like a fantastic arbitrage opportunity!

ARC Loan Program

The loan program offers loans to small businesses 100% backed by the small business administration. The idea is to help businesses experiencing hardship, which includes declining revenues; common for many small businesses right now. The loans are structured as follows:

Loan Terms. Loans up to $35,000, at 0% with no fees. No collateral is needed.

Repayment. The loan money is distributed over 6 months. Repayment begins one year after the last distribution and can last up to five years.

Time Frame. The loans will be offered until September 30, 2010. It will end sooner if all the funding is used before then.

ARC Loan Eligibility

To qualify for the ARC loan, businesses must meet the following criteria:

• Show profits in one of the past three years.
• Show cash flow projections for the next two years to meet loan payments.
• Established business, in operation for at least two years.
• Current on all debts, or no more than 60 days past due on any loan.

Arbitrage

I’ve been a fan of using 0% balance transfers for credit card arbitrage for a long time. This is another opportunity to keep that arbitrage wheel spinning!

You’ll need some current business debts to qualify, which can include credit card obligations. Since we’ve used business cards to super-size our credit card arbitrage in the past, we’ll have plenty of “business debt” to show.

Action Plan

Our business will hit the 2 year mark later this year, so I’m planning to submit an application. Because I’m taking time off this summer, I’ll have no problem showing a decrease in revenue!

What a fantastic way to convert some 0% balance transfer money into five years at 0%!

 Print   |   Email   |   9 Comments

The Make Working Pay tax credit was included as part of the American Recovery and Reinvestment Act. Beginning in the next few weeks, you’ll begin to see the money in your paycheck.

Make Working Pay Tax Credit

The credit is $400 for working individuals and $800 for married filing joint. The refundable credit is available in 2009 and 2010. (In 2011, it will be replaced by the Payroll Tax Credit). The maximum credit is 6.2% of earned income; it phases out at $75,000 for individuals and $150,000 for married couples filing jointly.

If you don’t meet the making work pay tax credit eligibility, you may have to repay the tax credit.

How To Get Your Money

The withholding on your paycheck will be lowered resulting in more take home pay. You do not need to submit a new W-4 form, your employer will automatically adjust your withholding. Employers need to begin using the updated withholding tables no later than April 1, 2009.

If you are curious, you can calculate the new amount you’ll have withheld based on the new withholding tables. Use the table that corresponds to the filing status and number of exemptions your employer has on file from your last W-4.

If you don’t make enough to pay income tax or your employer does not withhold taxes, you can claim the credit on your 2009 tax return.

For Self Employed

Self employed workers can reduce your estimated tax payments if you want to keep the money in your pocket instead of waiting to claim your tax credit when you file your return.

You can see Publication 15-T for more information from the IRS on the Make Working Pay Tax Credit.

Action Plan

Because the $400 will be spread out over 9 months, it could get easily lost in your day-to-day finances. If you are paid every other week, you will probably see about $20 extra per paycheck.

Make a plan of how you want to spend your tax credit, without just absorbing the money into your monthly cash flow. To keep track, separate the extra money each time you get paid and allocate it to your goals. Once you receive your entire $400, you’ll have something to show for it instead of wondering where it went!

 Print   |   Email   |   9 Comments

I mentioned while reflecting on leaving my job that my husband is reevaluating his plan to work. He was presented with a unique career opportunity, but he only essentially had 2 days to make a decision.

Background

I mentioned that my dad was in the hospital. He was recovering slowly, but wasn’t able to return to his job at the time. He’s a self-employed business owner of 30 years, but has no employees. That means no one to run the business while he’s gone.

His business is about 75% sales, but there is plenty of physical labor involved.

My husband, Scott, has a job at our University as a computer programmer. He’s been there about 10 years and likes his job.

Obviously, the two careers are at opposite ends of the spectrum. Scott currently has a salaried, office job, with terrific state benefits in the IT world. My dad has a manual, self employed business, in a field Scott doesn’t know anything about.

Opportunity

Can you guess where I’m going? When my dad got sick, it became apparent that he wasn’t going to be able to run the business anymore. I thought, why not have Scott take over my dad’s business? After all, I didn’t want to see my dad’s business close, since I’ve grown up around it and I feel a bit of emotional attachment to it.

I pitched the idea to Scott and my parents. One day later we had a plan devised. However, because my dad’s business had been closed for two weeks already, time was of the essence. Scott needed to make a decision immediately.

Considerations

We discussed various pros and cons all weekend. Here were some of our bigger discussions:

Health Insurance. Scott carries our health insurance, which is the primary reason he stayed at his job when I quit. It’s really important considering the upcoming birth of our next child. We got some quotes from our local HMOs and the price right now is fine…. since we’re all healthy. However, the variability of the health insurance market is something I’m not sure I feel up to placing bets on.

Different Field. Did I mention they are in two completely different fields? Scott would have a steep learning curve, although my dad would be more than willing to teach him. Probably the most valuable asset to the company is my dad’s knowledge, so Scott would have to work really hard to learn as much as he could from my dad.

Being Your Own Boss. Since Scott has watched me stay at home over the last six months and seen the business take off, he has started to consider working for himself more and more. The appeal of being your own boss is something that really is starting to entice him.

Established Business. Because my dad’s business has been around for 30 years, it isn’t like Scott would be starting from scratch. There is a solid customer base, and the majority of sales would continue, even if my dad handed over the business.

Income. The income wasn’t really a factor in the decision, as either position would allow enough income for Scott to continue his hobbies. However, the appeal of being able to have a more direct impact on the income is something that interests him, since his raises are currently not usually tied to performance.

Stability. Because Scott works for our local University, his job is pretty stable. Each time the state faces budget cuts, it’s something that comes up, but overall, his job is much more stable than many in the current economy.

Expansion. One of the possibilities for taking over the business was the ability for Scott to use technology to update it. Currently the business has local customers, however, developing an online presence and a distribution system, could mean endless possibilities, and using some of Scott’s technical background.

Will He Like It? A huge factor, would be whether or not he actually enjoys the work. We thought it might be good for Scott to go to work with my dad for a few days to see if it’s something he might like. We also considered using part of Scott’s upcoming paternity leave to give it a trial run for six months or so.

Back Up Plan. I like to have a plan in place in case things don’t go as planned. If Scott decided after a year, that he hated it, would he be able to return to the computer field? And in a job that he enjoys?

His Decision

Find out what he decided in: The Decision on a Whole New Career.

 Print   |   Email   |   10 Comments

Here’s the 2008 tax limits, credits, exemptions, deductions, phase-out and exclusion numbers all in one place! It is a good reference and will come in handy at tax time. Last year, the list was a popular reference sheet, so I thought it would be good to publish it again.

Many of the limits above are affected by the Midwestern Disaster areas, including additional exemptions, deductions and credits.

 Print   |   Email   |   2 Comments

Here’s the 2007 tax limits, credits, exemptions, deductions, phase-out and exclusion numbers all in one place! It is a good reference and will come in handy at tax time. Thanks to a reader, Sam, for the initial list.

 Print   |   Email   |   4 Comments