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Archives for 2021

Structuring the Sale of Your Business

December 14, 2021 by peter@vertexmarkets.com Leave a Comment

Maintaining the Proceeds & Creating Passive Income

As an entrepreneur, you may eventually be fortunate enough to build your company to a level where you can sell it for a considerable profit. At that time, you will probably be faced with the formidable task of what to do with perhaps the most significant single influx of funds in your working lifetime.

I have been involved in numerous purchases and sales of businesses over my career. From my experience, I’ve learned that it’s essential for the entrepreneur, both before and after the sale of a company, to act expeditiously to protect proceeds, minimize taxes, and plan for their family’s financial future.

In short, founders who sell out must revisit plans for personal finances that were in place before the sale and adjust for the new and improved reality. What follows are suggestions I’ve given to other entrepreneurs that, I believe, will be helpful as you move to the next chapter of your life. Make sure you consult with local professionals as tax laws vary from one area to another. 

Protect your proceeds

The most important step you should take after successfully selling your business is to protect the proceeds. Here are three ways, you may want to consider:

  • Diversify your holdings. If you received cash from the sale, immediately consider a diversification plan for the proceeds. Think about a combination of mutual funds, municipal bonds, money market accounts, and real estate. Your specific diversification plan will depend upon the total proceeds from the sale, your other assets, and your age. Think about hiring an experienced financial planner to guide you through the process.
  • Hedge your bets. If you received stock instead of cash as a result of selling a company, immediately determine the best way to hedge against a downside on the stock you receive. There is no worse feeling than walking away with what you think is a significant return, only to see it evaporate when the stock you received starts to plummet. And this has happened to plenty of people. Start planning your hedge strategy even before you close the sale of the business. Enlist the help of a knowledgeable stockbroker or financial planner.
  • Review your liability protection. Now is the time to review what exposure you have to liability. After all, you now have significant assets that someone could go after. Make sure you have adequate primary and umbrella insurance coverage. Analyze whether you are exposed to personal financial risk in any other businesses you own—for instance, if you are involved in general partnerships or sole proprietorships—get out of those quickly by incorporating or forming an LLC. Incorporation can ensure (if done properly) the entity, rather than you are personally, liable. 

Minimize your taxes on the sale

One of the major considerations connected with the sale of your business concerns is minimizing taxes that result from the sale. Here are some suggestions, though we always suggest consulting a tax professional before making any decisions.

  • Structure the transaction beneficially. If you are getting stock instead of cash from the sale of the company, you should be able to receive the stock tax-free if you structure the transaction properly. Make sure you have an experienced corporate and tax lawyer to ensure proper tax treatment.
  • Seek capital gains treatment. Capital gains on the sale of stock receive much better tax treatment than ordinary income tax treatment. So, review with your tax advisor the types of payments you are to receive under the sale. You can optimize tax treatment by reconfiguring the payment. For example, you may decide that a two-year, $200,000 consulting agreement after the sale is not as advantageous as a higher purchase price and lower consulting payments.
  • Take a loss on other investments. Before year-end, consider selling a losing venture or losing stock to offset some of the gains from selling your business.
  • Consider tax-free investments. Returns are not very high, but if you are looking for a safe, tax-friendly investment, consider investing some of your money in tax-free government or municipal bonds for at least a portion of your portfolio. This is particularly advantageous for a high-income individual.
  • Remember charitable donations. While donations should not be made simply for tax purposes, but for philanthropic reasons, you can always make a couple more at year-end to lower your tax bite. Remember to get receipts.
  • Consider gifts. As of 2021, you can give up to $15,000 a year away tax-free to each person you choose. (By splitting their gifts, married couples can give up to twice that amount.) You may even be able to give more by using your lifetime amount of $5,430,000 per Internal Revenue Code Section 2501.
  • Max out your IRA or other retirement plan contributions. This is a legitimate way to lower your taxes for the year, so make sure you have taken advantage of IRA or other retirement plan contributions that you are allowed to make.
  • Prepay your state and/or local taxes. If you are certain that your personal income tax bracket will not be higher next year, and you are not affected by the alternative minimum tax, you can make state and/or local tax payments before the end of this year so you can take a deduction this year.
  • Pay your January 1 mortgage payment early. If you pay your January 1 mortgage payment on or before December 31, you can take an additional deduction for interest paid. Remember to add the interest amount to the amount reported by your lender when they send you the 1098 form.
  • Defer income. Unless you have reason to believe that next year will bring you a higher income and move you into a higher personal income tax bracket, you may want to defer income until after the first of the year. If you are self-employed, for example, send the last invoices out late in December so you will more likely receive payment in January.

 

Generating Passive Income After the Sale of Your Business

You put in many years and long hours building your business, now it’s time to let it go.  The following are some suggestions to entrepreneurs, I believe, will be helpful to retain the proceeds from your sale. And as you move forward into new adventures.

Selling your company doesn’t necessarily mean giving up ongoing income from the business.  In fact, a carefully structured sale can create lucrative, sweat-free revenue opportunities.  By holding onto a building or working out a consulting or non-compete agreement, you may be able to derive significant income from the business for several years with little or no involvement in the company.

If you’re an owner planning your eventual business exit, calculate your future cash flow needs by considering how much income the company currently provides you personally, and how much you’ll need after the deal closes.

Ask yourself, “What is the business paying you that you’re trying to replace?” said Dean Deutz, an RBC Wealth Management private wealth consultant.

BECOME YOUR BUYER’S LANDLORD

One popular practice involves selling your business while maintaining ownership of the building housing your company, then leasing it to the new owner. This is a terrific way to maintain income coming after the sale.

Owners need to establish these options years in advance, buying a building and essentially paying rent to themselves as they pay off the mortgage. The lease and rent should be structured to create a positive cash flow, while the building has a mortgage, increasing considerably once the mortgage is paid off.  Be sure to consult a commercial real estate professional to structure the lease to cover all expenses, so as not to become a cash flow negative after the business is sold.

This strategy generally requires planning and the building being purchased years ahead in advance, to create a more beneficial cash flow to the seller and the business owner either little or no mortgage by the time they sell the company and can enjoy as much cash flow from leasing the property.

A business owner who’s been earning $1 million a year from the company might be able to generate $400,000 annually in rent by maintaining ownership of a $4 million building, under the right circumstances.

A good attorney and financial advisor can help you organize your business entities to achieve not only the greatest benefit when you sell but also the most advantageous tax treatment while you run the company.

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EXPLORE OTHER LEASING OPPORTUNITIES

A comparable but more unique strategy involves maintaining ownership of your company’s equipment, patents, intellectual properties, etc., and leasing them back to the buyer.
If the seller is no longer capable or interested in running their business. But a key employee has the knowledge and experience to take over the business. But they aren’t able to come up with the necessary funds to purchase the business. In this case, the owner and the purchaser can create a lease and or royalty agreement providing the opportunity for the buyer to be able to purchase the business with their available funds, a win-win for both sides. (Side note: With the correct business continuation planning, implemented by a financial planner, and business capital advisor, experienced with these matters, can develop and fund a plan for such a case. That type of plan takes years to implement, so good planning is always on your side.
Such an arrangement may be more advantageous under some state’s laws than in others. Always consult the correct professionals for advice.
If you’re doing any sort of reorganization to remove real property or other assets as part of a sale. It is always recommended that you do so in consultation with a knowledgeable business tax attorney, business financing consultants, and the appropriate financial planners and accountants, to avoid an unexpected tax implication while structuring the best deal. An improperly structured lease arrangement and/or reorganization could trigger an additional tax liability if the IRS views it as a sale.

CAPITALIZE ON YOUR NAME, KNOW-HOW

A non-compete or consulting agreement with your business successor can allow you to enjoy significant residual income for years. Owners selling their business may secure a multi-year consulting agreement to gain an annual salary from their business after the sale. Owners passing a business to the next generation or key employees can also implement this strategy.  

A note to all those owners planning on passing their business to the next generation. This strategy requires long-term planning and blunt conversations with all involved parties. Don’t assume the next generation wants to or is capable of running the business. Also, don’t assume key employees will be happy with your choice to run the company in your absence.  Make sure you discuss with all key employees your intentions. They may not be on board with your decision. Your choice of a successor may invoke a mass exodus of talent, necessary to run the business in your absence. Also given enough time to plan properly for the owner’s departure, there are multiple ways to fund the transition to a family member or key employee. That doesn’t require draining potentially necessary funds from the business to fund the owner’s departure.   

Even if you do little or no hands-on work to earn the revenue from leasing property, consulting, or non-compete agreements, you’d be wise to consult a professional to determine if the cash qualifies as passive or non-passive income for tax purposes, as the IRS treats these income types differently. 

EVALUATE OUTSIDE INCOME SOURCES

Besides advantageous deal agreements, entrepreneurs selling their companies can sometimes find other income sources that don’t demand their full energy and attention.

Some owners aren’t ready to fully retire when they sell their companies, so they look for new business ventures, many choosing relatively hands-off businesses. 

Many business owners replace a significant portion of their income by investing in a passive portfolio of cash, bonds, and dividend-producing stocks. 

Whichever strategy you’re considering to generate income during and after your business sale, take steps to ensure optimal results by consulting with a knowledgeable lawyer, CPA, and financial advisor.

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GameFi? What is Play to Earn

December 14, 2021 by Peter Spoleti / Vertex Markets Inc. Leave a Comment

GameFi, a hot new trend emerging from the crypto industry, combines decentralized finance (DeFi) and non-fungible tokens (NFTs) with blockchain-based online games.

Unlike many traditional online games, which operate on a “pay-to-win” model, allowing players to purchase upgrades to gain an advantage over other players.  GameFi introduces a “play-to-earn” model. This concept involves giving players financial incentives to play and progress through games. In some cases, allowing gamers to earn a full-time income by doing so.

Alien Worlds and similar GameFi projects along with other play-to-earn games are disrupting the traditional gaming industry as we know it. These play-to-earn crypto games are fundamentally blockchain-based monetization of the gaming experience. What distinguishes them from traditional games is the players play to earn rewards rather than to win. 

Predictably, the ability to financially reward players for their time and effort is behind the rapid growth in acceptance of these play-to-earn games, usually referred to as GameFi. Who wouldn’t like to earn cryptocurrency while having fun?

What Is GameFi?

A perfect combination between Gaming and Finance. GameFi, a very popular term in the cryptoverse, it is a hybrid of “Gaming” and “Finance.” It describes the gamification of the working system creating profit from playing play-to-earn crypto games. 

GameFi projects run on a blockchain’s distributed ledger. All objects in these GameFi games are expressed as NFTs – digital tokens used to prove ownership of limited intangible items. This enables players to have certifiable ownership of virtual items in the game. In contrast to traditional gaming, where users play to win, GameFi projects adopt a play-to-earn model. Consider items such as plots of land, avatars, costumes, weapons, and gold bars. When players find and accumulate items during gameplay, they have the option to trade these in digital marketplaces for different NFTs or sell them in exchange for cryptocurrency.

Depending on which game is played, users can increase their earning potential by dedicating time leveling-up and improving their characters, creating monetized structures on their land which other gamers pay to use or by competing against others in tournaments. To keep track of player ownership, all NFTs and cryptocurrency transaction data is stored on a public blockchain.

Some GameFi projects also include DeFi elements, staking, where players are able to lock away certain tokens to earn annual interest and other rewards. They’re also able to save to purchase other in-game items or unlock new game content.

The term “GameFi” was first used to describe this new trend by Yearn.Finance founder Andre Cronje in a September 2020 tweet. Since then, the term has been widely used to refer to video games embedded with blockchain-powered decentralized financial elements. These projects take advantage of the popularity of video games, combined with unique features of cryptocurrencies, to make GameFi an exciting and growing space.

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How Do GameFi Projects Work?

Different GameFi projects typically have a few commonalities. In-game items such as avatars, land, costumes, weapons, gold, tokens, and pets are represented as NFTs—non-fungible digital tokens that prove ownership of these digital objects. Game players acquire these items through game play and can trade them on NFT marketplaces for profit or exchange them for cryptocurrencies — which can in turn be exchanged for fiat money.

What you need to play

To take part in any these play-to-earn games, users will need to do the following:

  • Create a cryptocurrency wallet: To store their virtual currency, NFTs and make in-game transactions. Which wallet you need will depend on which blockchain the game was built upon. For example, MetaMask – an Ethereum-based crypto wallet service – will work with any GameFi game built on Ethereum.
  • Purchase starter items: All GameFi games are free to download. However, many require players to first purchase characters, native crypto tokens, decks of cards or upgrades to begin.
  • Pre-funded crypto wallet: You will need to pre-fund your crypto wallet with a particular cryptocurrency to purchase starter items and proceed. Cryptoblades, for example, requires users to download MetaMask, purchase Binance coin (BNB) and exchange it for the game’s native cryptocurrency, SKILL.

So Where Did GameFi come from?

The emergence of GameFi comes from a combination of factors that dates back to 2017 and the emergence of the NFT phenomenon CryptoKitties. The digital collectibles economy proved a viral success, with CryptoKitties amassing over 14,914 users a day at its peak. CryptoPunks, a collection of 10,000 pixelated NFT characters also built on Ethereum, enjoyed similar success, surpassing $1 billion in sales and still growing.

Unfortunately, the success of these NFTs showed both the good and bad sides of the state of blockchain technology at the time. Games like CryptoKitties caused heavy congestion on the Ethereum network, leading to extreme spikes in transaction fees and much slower than normal transaction confirmation times. These technical issues highlighted a clear gap in the market for more efficient and scalable platforms that could handle the rising demand from online gamers and virtual asset collectors.

Since then, several new “Ethereum killer” blockchains have emerged promising faster transaction speeds, greater scalability and cheaper fees. These include the likes of Solana, Pokadot, and Cardano.

The increase of decentralized finance (DeFi) platforms over 2020 was the next significant component enabling GameFi’s growth, introducing a range of blockchain-native financial platforms that run entirely using smart contracts. This provided the infrastructure for decentralized exchanges where in-game cryptocurrencies could be launched from and traded, as well as additional features like lending and staking.

In September 2020, Yearn.finance founder and DeFi developer Andre Conje tweeted about the gamification of monetary policies in a decentralized environment. He recognized the many benefits DeFi and NFTs could bring to the online gaming industry, and GameFi applications quickly started to form. Axie Infinity was one of the first play-to-earn games to take off in a big way, surpassing $1 billion in revenue on Aug. 9, 2021.

GameFi Expands its Reach

Early GameFi titles used the Bitcoin blockchain, but the cost of transactions and slow speed lead to the adoption of the smart contract-enabled blockchain network, Ethereum.Crypto.  Game developers, despite its performance issue, due to limited block space frequently use Ethereum.

Naturally, a game that requires exorbitant fees for in-game transactions will have difficulty gaining a significant user base. Faced with this problem, some crypto game developers moved from Ethereum’s base layer to faster networks, such as Polkadot, Solana, Polygon, Wax and BSC.  

GameFi projects have multiple levels to progress through. Players can increase earnings by dedicating time to improving their characters, monetizing their land assets through developing structures other players will pay to visit, or battling other players in tournaments. 

All data is stored on a decentralized public blockchain, keeping track of all players ownership. This way players, not the game developers, own all the assets, providing them the ability to monetize those assets. Since players maintain ownership of their assets even if a server is turned off or the gaming company suffers technical downtime.  Making crypto gaming an actual revenue producing action for players.   

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Additional GameFi Advantages  

DeFi concepts like staking, liquidity mining and yield farming are gaining a traction in GameFi projects. These are additional ways players can earn in-game passive income. Staking their in-game assets, is a way players can earn annual interest and other rewards, which can be used to unlock new levels or to buy additional in-game items. Also, players can secure loans by collateralizing their game assets. 

Unlike traditional game development, which is centralized, GameFi projects may involve users in decision-making. Some games let players decide future game updates by giving stakeholders voting power, of the GameFi DAO (Decentralized Autonomous Organization).

A DAO allows token holders to vote on and suggest project updates, making GameFi truly participatory. These proposals usually have a financial impact, such as members of the DAO voting to increase the reward for a particular in-game action.

You must own a project’s governance token to be a member of the GameFi DAO. Typically, your voting power is directly proportional to the number of tokens you hold. 

GameFi’s New Concept “Play-to-Earn

The play-to-earn model characteristic of GameFi projects is groundbreaking. Traditional online games make money through in-app purchases, affiliate marketing and advertising. As a player, you spend money buying in-game items to help you win or get an edge over other players. Of course, that spending goes directly to the game operators.

Also, if you’re like most players who grew up with online video game staples like Minecraft and PlayerUnknown’s Battlegrounds, you’ll be a custom to highly desirable in-game coins that have no value outside the game environment. Apart from the entertainment, you get nothing in return for your time and effort dedicated to playing these online games. With play to earn that has all changed.

This is where play-to-earn crypto games perform a 180 on the gaming industry: allowing gamers to add real-world value to their in-game purchases. In-game items and products are now NFT’s stored on a blockchain running on a crypto network. This blockchain technology allows in-game tokens and items to be traded for cryptocurrencies and, ultimately, actual cash. 

To heighten the gaming experience, online game players buy items like coins, weapons, extra lives, custom characters, outfits, avatars, accessories, etc., directly from the game. Traditional gameplay involves buying assets from stores owned by the game developers, enriching the developers and not the players. This can limit players’ online gaming experience, especially those who don’t have much cash to spend, resulting in a cost to play the games.  On the other hand, with crypto gaming, these purchases are made with cryptocurrencies and often involve trading valuable assets amongst players, providing the opportunity to go from a cost to the player to a revenue generation proposition for the gamer. 

This is a striking difference for the decentralized operations of GameFi projects, where players own globally distributed digital assets that aren’t limited to gaming purposes.

Minimal or Zero Upfront Cost

Most GameFi games are free to download and play, which makes them more accessible than traditional games. While there are no upfront costs, some games may require you to purchase the in-game tokens, avatars, and other items to get started. 

Easy-to-Learn Games

GameFi projects incorporate simple gameplay mechanisms, an aspect that makes them easy to understand and navigate. This simple approach lowers the barrier to entry, driving considerable increase of potential players of all ages and experience can comfortably participate.

Future Growth

Although GameFi’s origin can be traced to the early development of cryptocurrencies, it’s only recently gaining mainstream adoption. Demonstrated by the growth of the massive success of Axie Infinity. The popular GameFi project became the first to surpass $1 billion in token sales in August 2021 and has seen over a million daily active players. 

The constantly evolving technology behind crypto gaming has advanced to a level where new GameFi projects are attracting massive players & fan bases, as well as institutional funding. Industry experts believe crypto gaming to be the most likely gateway for widespread adoption and use of blockchain technology. As GameFi projects gain popularity with traditional gamers, understanding of crypto can only continue to flourish.

As you might expect, GameFi is increasingly taking up large piece of the growing $175 billion gaming market. Video gamers have long enjoyed and familiarized themselves with the concepts of in-game currencies, limited digital items and tokenization, all without gaining monetary value. Unquestionably, there will be a greater appeal to GameFi projects that comprise all these elements while directly rewarding players financially.

These are exciting times for GameFi. Leading industry players, such as game studios Ubisoft, Roblox Corporation and semiconductor makers, are part of the Blockchain Game

To further the growth of GameFI, an alliance is needed to provide infrastructure for game development, and forums for developers and players to network, collaborate and share knowledge, in addition to creating common standards.

GameFi is rapidly growing, and the collective market capitalization of leading blockchain games has topped $14 billion. But given the massive size of the gaming industry, the total addressable market offers even greater opportunities for growth.

With the runaway success of crypto games like Axie Infinity and CropBytes, the future of GameFi seems bright. With many more GameFi games in the works, newer innovations are expected. Some of the crypto gaming projects currently under development include:

  • Star Atlas
  • Ember Sword 
  • Guild of Guardians
  • The Sandbox
  • Who: Worlds Apart

 

These newer games will provide even more opportunities for gamified profit and a feature-rich gaming experience. 

Gaming platforms like MOBOX are being designed to allow individuals to build their own NFTs and games with interoperability capabilities. The platform also features DeFi functionalities such as staking and liquidity pools, enabling gamers to generate income from their assets. This income can then be used to buy in-game upgrades or generate keys to unlock new NFTs.

Bottomline

GameFi has already gained significant traction, with the collective market capitalization of top games breaking $14 billion. But key opinion leaders in the crypto industry believe there’s a lot more ahead for this new sector, with Tron founder Justin Sun recently stating he believes this new sector will be key to increasing cryptocurrency adoption.

The GameFi concept is clearly an improvement over existing online game. The play-to-earn structure is ultimately the passport to broader crypto adoption as blockchain and NFT games suggest the future of the industry. It’s not surprising, this explosive trend shows no signs of slowing down. At this rate, GameFi and NFTs will become a rallying point for DeFi. With growing public interest and an influx of capital, prospects for this promising industry are limitless.

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General Contractor Loans: How to Get Your Next Project Funded

November 2, 2021 by Peter Spoleti / Vertex Markets Inc. Leave a Comment

In construction, your top priority is to land profitable new projects while ensuring timely progress on existing ones. But in the construction industry, it’s common for general contractors to receive delayed payments for completed work. General contractor loans can help business owners leap over this gap, and continue building on this progress.

When working capital doesn’t cover what you need to lay out for new expenses, you’ll have to turn elsewhere for funding. Here’s what you need to know about qualifying for, obtaining, and using general contractor loans.

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What is Contractor Financing?

Simply put, general contractor loans and financing options give you the cash you need to pursue new opportunities and pay employees while awaiting payments in your contracting business.

As a product of the industry, most general contractors don’t receive payment until up to three months after completing a project. While this delay might be common, it also makes it difficult to take the next step forward in your business. Cash flow shortages can also make managing day-to-day expenses in your business challenging.

That’s where general contractor loans come into play. 

By getting extra cash on hand, you can cover the expenses necessary to keep things moving and take your business to the next level.

How You Can Use General Contractor Loans

Even though you’re managing a building project on behalf of somebody else, it’s your job as the general contractor to cover expenses upfront. To do so, you need cash on hand.

General contractor loans help give you the cash you need to cover all the expenses you might incur while operating your business.

While some products may have restrictions, you can often use cash to cover:

  • Payroll
  • Building materials and supplies
  • Insurance policy costs
  • Unexpected project complications
  • Bidding on new projects for the future
  • Getting bonds to cover potential issues
  • Buy new equipment (or update old machinery)

Overall, though, general contractor loans are frequently used to cover payment gaps.

Some general contractor loans may have restrictions. However, most afford you lots of flexibility when it comes to covering new costs. 

The Top General Contractor Loans You Can Apply For

Which general contractor loans make the most sense for your construction business? The answer might not be that simple—but you don’t have to look too far to find the right information. 

Interest rates can vary based on the product, as well as several details about your business.

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Small Business Loans (Term Loans)

When you receive a small business loan, you’re getting a set amount of cash to finance your business. Like many other general contractor loans, this cash can be put toward anything you need in your business.

If you simply need cash to put toward various expenses and everyday costs, then this may be the best option.

After receiving a small business loan, you’ll pay back the loan over a set time frame, which is determined at the beginning of the term. 

In many cases, you won’t have to secure the loan with collateral, such as your home or a piece of equipment. However, you may have to personally guarantee the loan. This simply means that you’ll be required to repay the loan in the event you default on it. 

SBA Loans

One of the most popular financing options across industries, SBA loans give you large amounts of cash at a low rate. You can also qualify for a longer-term, meaning you won’t be required to pay your SBA loan back right away.

This is made possible by the Small Business Administration, a government agency that backs the funding that lenders give. 

While this can be an appealing option, it’s important to remember the hurdles involved in the SBA process. Often, waiting to receive approval for your SBA loan application can take over a month. It’s not uncommon for business opportunities to disappear during this waiting period. 

Qualifying for an SBA loan can also be quite difficult. In addition to a strong financial profile, you’ll also need an excellent credit score.

How to qualify for an SBA Loan?

Equipment Financing

If your new building project requires an expensive crane, or your existing equipment isn’t up to snuff, then it might be time to consider equipment financing.

While it’s not technically a loan (it is considered financing), equipment financing gives you the power to purchase new machinery outright, without taking the full brunt of the cost upfront. Instead, you can maintain some of your working capital for other costs.

Through most lenders, you can make small daily or weekly payments to cover the equipment’s full cost. Because the equipment functions as collateral, you don’t need to put your home or any other assets up. You can also write off the full cost of the equipment in year 1.

Unlike equipment leasing—in which you make monthly payments and rent the equipment—the equipment belongs to you. At the end of the term, you can choose to keep it, sell it, or rent it yourself.

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What if you know you need additional cash to cover expenses, but you’re not sure just how much?

A business line of credit is the perfect general contractor loan (though it’s also a financing option, not a loan) when you need flexibility. 

You’ll qualify for a set amount of cash, and can gradually draw from that as you go. Additionally, you’ll only pay interest on what you take, rather than what you qualify for.

Let’s say you qualify for a total of $100K, but only need $25K at the moment. You can draw $25Know and begin paying it down. If you need additional cash, later on, you’d draw that cash as well.

In a pinch, a business line of credit can be the best tool available to your fast-moving business.

Accounts Receivable Financing

Through accounts receivable financing, you can use your last customer to bring on the next one. By selling outstanding invoices to a financing company, you can receive the cash you need to push your business forward right now. 

Unlike a merchant cash advance—in which you’re getting funding based on future sales—accounts receivable financing gives you cash based on invoices you’ve already sent.

Through this method, you can sell just one invoice or several—it’s up to you. Either way, you’ll receive funding right away.

When you work with a trustworthy lender, you can rest assured that your sale of the invoice will remain private.

How to Get a Loan as a Contractor

Unfortunately, bank loans aren’t always a possibility due to sky-high standards and long turnaround times. However, there are other ways you can get general contractor loans.

Fintech lenders (also called alternative lenders) offer fast financing, meaning you could have the money deposited in your account in less than 24 hours.

While banks will require a credit score of at least 680, most fintech lenders will have options for all credit scores. To qualify, you’ll normally only need to generate around $120K in annual sales.

Alternative lenders offer a faster and easier process when it comes to paperwork, too. You’ll only have to submit bank statements and potentially a tax return, instead of a laundry list of other documents.

Learn Your General Contractor Loans Options in Minutes

At National, we understand that the right financing option could be a game-changer for your business. That’s why we do all we can to ensure that we find the best solution for you.

Through our 75+ lender marketplace, we find the best financing programs on the market and help you understand which options might work best for your business. Because lenders are competing for you, you can access the best rates, terms, and amounts.

A dedicated Business Financing Advisor will be there to help you through the process, every step of the way.

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Vertex Markets represents a top FinTech marketplace, offering SMB loans, financing & capital funding.  As your business’s financial consultant & advocate. Our expertise comes into play to address your funding needs. Presenting a solution tailored to meet your specific goals. 

Our FinTech marketplace has access to a 150+ Lender platform, matching you with the right option to meet your financing goals.  With options including low-interest SBA loans, short & long-term loans, business lines of credit, equipment financing, and commercial real estate lending.

Our client’s businesses are unique, our approach is constant:

  • We take the time to understand where our clients are and what they want to achieve.

  • We analyze their Financial data and Market conditions.

  • We explain their status then illustrate the path(s) for them to arrive at their desired destination.

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Benefits of Owning Your Business Property vs Leasing it.

October 27, 2021 by Peter Spoleti / Vertex Markets Inc. Leave a Comment

Leasing your company’s office building or manufacturing facility may work well for you right now, and even provide certain advantages. But any entrepreneur heading up a healthy, growing business would be wise to explore the compelling financial and practical benefits of owning your company’s real estate.

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Why Entrepreneurs Should Consider Purchasing their Property

When deciding whether to lease or own, you must consider various factors, including your life plans, the local real estate market and personal preferences. However, in most cases it pays to at least weigh the significant benefits associated with investing in your company’s home, especially if you plan to stay there for decades.

USE AS AN INVESTMENT TO SUPPORT RETIREMENT

Business owners often have their eventual exit plan and retirement in mind when they decide to buy a building.

The idea of being able to sell the company but keep the real estate appeals to many business owners. This isn’t a short-term strategy for those looking to sell their businesses in a few years, but owners with longer time frames are more likely to be able to pay off their commercial mortgages, keep the property and collect substantial income from future tenants in retirement. Meanwhile, long-term real estate trends should work in their favor.

Economic cycles typically last about seven to 10 years, so businesses looking to hold onto a property in a high-density area for two or three decades are likely to see the facility appreciate in value over the company’s life cycle.

Even an owner with only 10 – 15 years until retirement could benefit from investing in a property in a desirable commercial market, Financial experts, note that during the Great Recession and recovery, from roughly 2008 through 2012, commercial real estate values “performed very well.”

GENERATE RENTAL INCOME NOW

Owners, who often form LLCs to buy their property, may not need to wait decades to derive some income from the building.

Depending on the type of business, the building and their real estate loan restrictions, entrepreneurs may be able to rent out parts of their industrial facilities or office buildings to tenants, thereby subsidizing their monthly mortgage expenses or perhaps breaking even on the property.

Commercial real estate development trade group NAIOP reported strong industrial space demand in U.S. markets in early in recent years, with an historically low 7 percent national vacancy rate – decreasing the chances of a downturn in the industrial market. Meanwhile, record high asking rents across the country indicate that market supply continues to tighten steadily.

“Overall, the U.S. industrial real estate markets appear to be healthy and stable. It is the asset class that is potentially in the best position to weather any macroeconomic downturn that may come in the next several years,” the report said.

Of course, there’s no guarantee that every retiring business owner will instantly reap financial rewards from his or her real estate investment, but the property itself can provide some protection, nonetheless. Combining present-day benefits with the potential to build wealth long-term can make building ownership particularly powerful.

 Always consult your financial advisors when considering any retirement strategy.

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LOWER COSTS WITH FIXED MORTGAGE PAYMENTS

By fixing your monthly mortgage payments for a decade or longer, you can hold down costs by protecting your business against rising lease rates, which a landlord could increase annually. While you’ll have to make a down payment up front, you may well enjoy lower monthly mortgage payments as a building owner than you would with lease payments as a tenant.

Those making monthly lease payments, meanwhile, are missing the opportunity to build equity and own something.

In addition, business owners who’ve invested in their commercial real estate may be able to borrow against the property to extract cash flow for their company.

CUSTOMIZE THE FACILITY TO SUIT YOUR BUSINESS NEEDS

Business owners who lease rather than buy also may find themselves facing greater environmental, zoning or landlord-imposed limits on what they may do with the property. Noting some industries need significant latitude to customize their facilities, some, the building is very integral to the business.

It’s important for business owners looking to buy a particular property to explore the surroundings and the regulations and covenants affecting the real estate. “You’ve got to be sure that you know what the restrictions of the community are and they will work into your future goals.

He suggested that buyers walk around the area, talk to neighbors, check with the local government and use a knowledgeable broker. “You don’t want to get in there and have a legal fight. You never go wrong doing your due diligence.

LEVERAGE TAX ADVANTAGES SUCH AS DEPRECIATION AND INTEREST DEDUCTIONS

While businesses leasing their space can deduct rent payments from their income taxes, ownership also brings significant tax advantages, including potential depreciation on the property, which lowers taxable income, and a mortgage interest deduction. Consult a tax expert to help you analyze the numbers to see if they work in your favor compared with renting.

Considerations Before You Buy

Despite the strong advantages of owning your company’s building, an entrepreneur facing the decision should consider the positive aspects of leasing as well, including a certain amount of freedom.

As a tenant, for example, you’re less likely to have to worry about major building maintenance and repair. Along the same lines, a tenant generally doesn’t take on the same level of potential liability as a building owner does.

Depending on the type of business, a company leasing its space also may enjoy greater flexibility in moving to a new location. While a manufacturer may not be able to pull up stakes quickly or inexpensively, retailers and professional service firms typically find it relatively easy to move to a new storefront or office high rise.

Leasing also enables you to hold on to more of your cash now rather than coming up with a 10 to 25 percent down payment to buy a building. Further, if a sleek address is important for your business, leasing may give you more financial leeway to secure space in an upscale area where you might not necessarily be able to afford to buy property.

If you make the decision to buy instead of lease. You will want to consult with professionals with the needed expertise in your local real estate market, industry and local regulations to help you through that process.

While companies know they need extra space to grow, many don’t know exactly how to go about it. You’re spending your time running your business, gaining new customers and ensuring your product or service meeting your customer’s needs. 

 

Seek out the appropriate financial experts to help you secure the best options available at the time, interest rates, pay back terms, commercial mortgages are different then residential mortgage terms.  Identify the solution that will help you get exactly what’s needed to grow your business.

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Filed Under: Banking, Business Financing, Business Tax Info, Construction, Investing, Real-estate, Slider

Targeted Email Marketing. A, Inexpensive And Effective Marketing Tool. What you Need to Know.

October 27, 2021 by Peter Spoleti / Vertex Markets Inc. Leave a Comment

Inexpensive targeted email marketing campaigns can help you reach your marketing goals.  

Email marketing campaigns are one of the cheapest ways to advertise your business, but email blasts can easily get lost in the inbox shuffle. To get the most out of your email marketing campaigns, take time to develop a concrete process that attracts your subscriber’s attention and leaves them wanting to take action. This article will address setting goals, developing campaign ideas, creating effective subject lines, and choosing the images that best represent your message and brand.

Email marketing ROI

How to develop a marketing campaign

  1. Outline a clear goal.

The first step in creating a successful email marketing campaign is to outline a clear goal.

Some questions your team should address as you launch your first email campaign:

  • What is our primary goal with this email campaign?
  • Who is our target audience, and what types of language, offers, and information do they care about?
  • Did we implement measurable goals? If not, we aren’t able to determine the campaign’s success or failure?
  • What action do we want prospective clients to take upon viewing our email?
  • How long are we going to use this campaign before reevaluating it?

The answers to these questions should help you determine the type of campaign that best suits your needs.

2. Determine the type of email campaign.

There are several types of email campaigns that you may deploy, depending on the nature of your business and your goal.  The following are some of the most common types of email campaigns:

  • Sale or promotion: A sale or promotional email alerts current or prospective customers to a time-limited offer. You may also use promotional emails if your business or sales are seasonal.
  • Newsletter: Newsletters are not appropriate for all businesses, as they tend to omit a direct call to action (or CTA) for the reader – with the exception of directing them toward online communities. The goal of most newsletter campaigns is to become a source of trusted information and raise the business’s overall profile.
  • Reengagement email: When an existing customer stops patronizing your business, you could deploy a reengagement email to win them back. Reengagement emails can help you increase brand awareness and remind former customers of your services, especially if your business is seasonal.
  • Transactional email: While not always considered in email marketing, transactional emails are quite important, especially for online businesses. A transactional email, also called a trigger email or behavioral email, is sent to a customer in response to a transaction. A transactional email might be a confirmation of an order, a response to a specific question, or a confirmation of a refund in progress. Another common triggered email scenario is an abandoned cart email, which can be helpful for online retailers looking to reduce the number of abandoned carts at checkout.
  • Lead nurturing email: A lead nurturing email can be a transactional email or a promotional email. However, lead nurturing emails are usually typed individually by salespeople who are attempting to move leads through the customer journey, rather than sent en masse as promotional and transactional emails often are. Many companies use sets of customizable form emails for lead nurturing scenarios to ensure consistency and streamline communication for sales staff.
3. Compile a mailing list.

For transactional and reengagement emails, your mailing list will be self-generated from your existing customers’ contact information. New email campaigns intended to target a new patron, rather than existing or past customers, will require a fresh list. You can obtain mailing lists in several ways.

Buying a mailing list

Lots of companies sell mailing lists. Large companies targeting small businesses, like Vistaprint and DirectMail.com, offer mailing lists at affordable prices. The best email marketing services and top list broker services like these usually offer somewhat customizable lists. So, you may be able to choose between targeting individuals and targeting businesses, specifying ZIP codes, ages, industries, sales volume, and gender, for example.

If your business is all right to cold emailing, these big-box lists are not the worst place to start, but you get what you pay for. Boutique and high-end email marketing and mailing list firms offer tailored lists that fit your business, and such firms usually offer other marketing services, such as copywriting and graphic design.

Gathering leads online

If your website has decent traffic, you can gather leads directly by asking for users’ email addresses. Many businesses do this by offering a newsletter or a discount for new customers (for instance, “Sign up for 20% off your first order”).

To create a web form that can capture contact information without any coding, you can use a drag-and-drop style like the one Mailchimp offers. If you use an easily shareable form, you can link it to online advertisements, casting a wider net for leads than you would get directly from your website.

Creating your own mailing list

Some businesses are better suited to smaller, more focused mailing lists, and such lists can be partially or fully self-compiled. Networking events and trade shows are excellent opportunities to make contacts for your mailing list, but research works well too.

Market segmentation is the first stop on the path of creating your own mailing list. Many marketing departments begin the process of creating a campaign by identifying one or several profiles of the ideal customer. The thought is that if you cannot describe your potential customer, you cannot sell to them. [Read related article: 7 Ways to Build a Quality Email List]

4. Identify your ideal customers.

Your profile of potential customers should be specific enough to do your market segmentation for you. Let’s use a fake lawn company called Great Greens as a case study. The first thing a good marketer would note is that anyone who hires Great Greens is someone with a lawn to maintain, so homeowners and property managers are immediately the main targets. Since one of those groups is B2C and the other is B2B, two profiles may be necessary.

The other obvious segmentation is location. A lawn company is probably operating within a certain radius, so collect the applicable ZIP codes and rule out everything outside of that. Identifying all the property management companies within a few ZIP codes is a matter of a little online searching, which leaves the B2C profile.

The profile of your B2C company depends on the service or product you offer and who you want to offer it to. For example, if you decide you want Great Greens to be a high-end landscaping service, not one that offers small contracts, account for that in your customer profile. Then you need to imagine how that person makes buying decisions and how they like to be informed.

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Using market segmentation like a marketer

With a little imagination, it’s easy to picture Great Greens’ ideal client, and similar profiles can be constructed for any type of client. The information above provides clear guidelines for gathering leads based on home type (detached, with a lawn) and proximity to Great Greens. This ideal client also has relatively high income, so a good marketer would tell you it makes sense to focus on neighborhoods with a high median home price. Median home prices are a matter of public record and easy to obtain on websites like Trulia and Zillow.

A broad email marketing campaign, targeting high-income homeowners with lawns in your area, is a good way to begin your advertising. You have three options here:

  • Purchase email addresses for people in the areas you’ve identified.
  • Do research online, starting with physical addresses and names, and working your way back to email addresses – which is time-consuming and requires some digging skills.
  • Consider a well-placed local advertisement or snail mail marketing campaign, since physical addresses are easier to find.

How to write marketing emails that get results

An email is an opportunity to connect; however, if you are going to do the copywriting yourself, apply best practices.

1. Craft a great subject line.

Emails with attention-catching subject lines are more likely to be opened. The key is to keep your subject line short and to the point. Consider what your customers want to hear from you, not vice versa.

If you’re writing a subject line to notify potential customers of a sale, for example, focus on the sale itself. There is a tendency among amateur writers to overwrite, but subject lines are short by design.

Remember that most of your potential customers will read the subject line and nothing else. If you only have one sentence to make your sale, what do you want to say in that sentence to increase brand awareness? Always focus on what you can do for the patron, not how you want your brand to be perceived. You can convey your brand identity in other ways, like through word choice and design.

2. Be focused and clear

Focus is on the top of the list when building a successful email marketing strategy. Each email you send should have only one purpose; don’t try to make your customers aware of every service and every promotion you offer in one email.

If you have a lot of information to convey or your services are complex, consider doing a full email series, with targeted emails presenting different topics. Plan your topics from initial customer introduction of your products or services through the sales process to purchase. A newsletter with educational content on your products or services is an additional option business with a complicated customer sales process. Either choice you decide on, use an organized process when executing.

Ideally, targeted emails should be brief and to the point, similar to cover letters for job applications. What are you offering or showcasing, why is it better than the competition, and how can the customer get it? Don’t get so caught up in gimmicky taglines that you forget vital information like where your business is located, links to your website, or your hours of operation.

If you are not a natural writer, you might begin the process by writing in simple terms and adding finesse later. This can be helpful for clarifying which information is important and establishing the right order in which to present it.

Using the local swimwear line example, you could start out with something like this:

  • Our swimwear is a luxury product. Our brand is Swim Elite. Our swimwear is locally designed and handcrafted. We are having a 50% off sale. The sale lasts through August. You can order items on our website link listed here. People should order soon, while they can.

That’s not much of a sales pitch, but it illuminates the important information. For example, the mention of the 50% sale should happen earlier, since that is the main purpose of the email. Plus, customers need to know the product is both high-end and local, and you want to promote the name of the brand.

Once you’ve covered the basic information, you can now brighten the message. These are some examples:

  • Swim Elite is offering 50% off our luxury swimwear line! Our sale on locally designed swimwear only lasts through August. Order now!
  • Swim Elite’s luxury swimwear line is now 50% off through August. Order our locally designed swimwear while the offer lasts!

3. Include a CTA.

One of the most common mistakes novices writing targeted emails make is not including a call to action (CTA). The CTA is a core of copywriting and exactly what it sounds like: a call for the reader to do something.

Keep your CTA short and clear. If you can’t figure out what your CTA should be, it may indicate that your marketing strategy is unclear. Without a clear goal, it’s impossible to create a successful marketing campaign. 

These are some examples of CTAs:

  • Order now!
  • Register for this event today.
  • Request a price quote now!

4. Focus on engagement.

Higher engagement should be a priority of a short-term goal of your sales process. You can achieve engagement by directing your readers to additional content, your blog posts,  social media accounts, and educational content within the campaign itself, to help move prospects down your sales funnel. Your language concentrate on brand’s message and provide expertise in your industry that your competitors aren’t offering.

These are ways you should engage your audience:

  • Add links to subscribe to your newsletter.
  • Include the option to follow your social media pages.
  • Include links to your blog page
  • Include thought-leadership content in your emails.

5. Personalize the emails.

Personalized emails tend to perform better than generic email blasts. Personalization entails more than inserting the recipient’s name in the subject line, though. These are a couple of ways to create personalized emails:

  • Send targeted email campaigns based on a group’s interests, needs or demographics.
  • Follow up on any replies you receive.
  • Look into technology that can help analysis the potential data generated by your email campaigns.

6. Don’t spam your email lists.

Don’t flood your clients with too many emails, or they will end up in the spam box. It is more efficient to limit your emails to important notifications. Use the format to advertise special events, sales or new product offerings.

7. Watch your language.

The type of language used in your marketing email influences the response to your campaigns. For instance, write in the second person to give a personalized feel, and use actionable language to increase response rates. Phrases such as “brand new,” “limited time,” “today only,” and “last chance” can create a sense of urgency for readers to open your email and follow your CTA.

8. Test your copy first.

An expert marketer knows that all email advertisements need fine-tuning before their release. Use A/B testing to get the best responses from your campaigns and test each feature separately – including the subject line, body and CTA.

9. Keep your email lists up to date.

Maintaining your email distribution lists is worth the time and effort. Make sure addresses are inputted correctly and updated as needed. Although you want to attract new subscribers, you also want to make sure current subscribers receive your mailings.

Choosing images for marketing emails

The text in your emails is only part of the marketing puzzle. Ensure the images are not violating any copyright laws, are of high quality, add to the overall message and identity of the brand, and look good on mobile devices, laptops, and desktops.

Email marketing automation 101

Once you’ve established a marketing strategy and your campaign is ready to be initiated you should consider using marketing automation software to modernize your future email campaigns to collect data to fine tune your ongoing and future campaigns.  Email templates, including design templates, are a staple of many SaaS marketing products. Another useful feature is the option to schedule emails, customize them with customer names, track deliverability and open rates, track click-through rates, and automatically send trigger emails. Mailchimp and Constant Contact are popular marketing automation products, but there are dozens of others.

Some email marketing automation tools are also linked to larger popular CRM systems (like in the case of HubSpot, which offers a free trial,  and Salesforce), which can help your sales staff track the customer journey through your sales pipeline.  

Tip: If your company already uses a dedicated CRM, see if it offers any add-on tools to streamline your email marketing.

Source: Business.com

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