Direct Capital has seen some growth in April on our end as well.  The number of opportunities that were submitted for financing is up 20 percent over last April, while the number of those that were approved is up 25 percent (a 0.7 percent increase from March) – indicating that the quality of applicants and perhaps business credit-worthiness is improving.

So what does this mean for the industry?

ELFA President and CEO William G. Sutton, CAE, has said: “April’s new business volume and credit quality metrics appear to provide evidence that the equipment finance sector continues to gain momentum. Recent anecdotal information from ELFA members gathering in Washington, D.C., for a series of leadership meetings in mid-May supports the observation that the demand cycle for capital equipment parallels the broader economy in that both continue to strengthen, albeit slowly.”

Though the economy may still be struggling, the current low interest rates have made equipment financing easier and more attractive for many businesses.  Alternative lenders are making financing even easier, as businesses can avoid jumping through hoops at their local banks, and are much more likely to work with a less than perfect credit score.  With opportunities like this, it’s likely the number of leases will continue to rise.

If you’re ready for equipment financing, be sure to check out the equipment financing programs Direct Capital has to offer.

Have you financed any equipment lately?

At its most basic level, an MCA is just an advance on future credit card receipts, one that allows you to get some money in the here and now in exchange for a daily portion of those future receipts.

I talked to Direct Capital Director of Client Services Scott Lynch, who previously answered questions and debunked myths for traditional working capital loans. What follows are two of the myths he encounters most often when it comes to merchant cash advances and his reactions.

Myth 1: I Can’t Afford It

“Well, yes you can, because it’s based on cash flow daily. Traditional loans require payments regardless of your businesses ebb’s and flows, a cash advance only takes payments WHEN you collect payment from your customer, true point of sale advance.”

You have to know how much is coming out of your daily sales receipts, yes, but this is a great way to remove the hassle and worry from paying off this particular loan. You get an advance on your receipts, and if your receipts roll in nicely, you end up paying it off quickly.

Myth #2: It Takes Too Long

“Fact is, Merchant Advances typically fund in 2-3 business days. As with all commercial financing, the quicker the customer submits info, the quicker they receive their funds.”

We’ve talked before about how working capital loans give you a quick turnaround from application to cash. A merchant cash advance can be even faster, allowing you to take on that project or urgent need and parlay your increased sales into a quick payback on the advance. Hard to argue with that.

Have you ever used a merchant cash advance at your business? If so, let us know what you thought.

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Computers are necessary for data entry, e-mail, word processing, SEO, online marketing, advertising design and a thousand other tasks in between. In today’s modern world, it’s nigh impossible to survive without them.

I can see you nodding along, reader. So why do so many small businesses put off computer upgrades indefinitely?

The Why

For most small businesses, it’s simple. They figure they can get by with older computers, overcoming any slowness and loss of productivity and using that money toward better purposes. There are certainly times where this approach winds up making a lot of sense, especially if you don’t have a lot of money to begin with.

There’s also the piecemeal approach. That’s where you replace machines one at a time, which gives a handful of employees a boost while the other lag behind. Unfortunately, it’s too often the CEO who gets the new computer instead of, I dunno, the tech team. That’s not a smart way to upgrade.

Here’s three good reasons to take care of your computers now, before they get older.

3 Reasons To Upgrade

• The loss of productivity. Every minute you spend waiting for a slow computer to load, for it to unfreeze or just through the processing time is a minute you’re not working. On a really slow computer, you could be talking a half hour a day down the drain.
• The benefits of an upgrade. You can run newer programs, boost employee productivity and communicate more quickly. Those are all benefits when you’re trying to stay ahead of the pack.
• It’s not as expensive as you think. You can snag laptops for your employees that are plenty fast and handle all the basic functions your business needs for $300 or less, and if you’re a really small firm, that means it can cost you as little as a couple of thousand dollars. Why bother fighting with outdated machines when you can make a change for such a small investment?

If you need help financing those upgrades, be sure to check out Direct Capital. How old are your computers?

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The next question for your business before you put your looping signature on the bottom line and enter into a contract that will get you your money and bind you to re-pay it is how long you’ll take to do so. This is an important and oft-overlooked factor.

If it’s an extremely short term, you can pay it down without interest rates creeping up on you or having to remember payments for two years. If it’s a longer term, you can spread out the impact. There are definitely upsides and downsides to both approaches, and it’s helpful to know what they are well before you obtain lending.

Short Terms

• The advantages of a short term loan is that you can pay everything back in short order. If you’re expecting quality cash flow or increased business due to the equipment your loan is getting you, it might be worth pulling the trigger on a shorter term. That means less interest over time and not having it hanging over your head for the long-term.
• On the other hand, a short term means bigger payments and less wiggle room. It’s not a good idea unless you’re certain you can pay off the loan balance quickly.

Longer Terms

• A longer-term loan has the advantage of time. By paying off the loan over the long haul, you may pay more in interest, but you’ll pay less each month. This can be critically important for a business with cash flow challenges, or if you intend to hold on to the equipment for the long haul, as well.
• The disadvantages of longer terms mostly have to do with interest, as you might imagine. Even quality rates can seem oppressive over the course of many years.

Your best bet is to sit down with your team and your finance partner and hash out what term length makes the most sense for your particular business. There’s no one right answer, but there’s also no one wrong answer. Keep that in mind.

If you have questions we haven’t covered here, leave us a question in the comments or call and talk to one of our finance managers today.

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The study, which surveyed 6,000 small business owners all over the country in the span of a two month period, asked each participant to evaluate overall government friendliness toward small businesses and whether they would encourage a fellow small business owner to set up shop in their state.

Idaho, scoring at the top of the list with an overall A+ rating, ranked high in all areas including overall friendliness, ease of starting a business, regulations, health and safety, hiring, well publicized training programs, and low tax rates.  Interestingly, women owned businesses in Idaho felt significantly more supported by the state government than did the male business owners.  Oklahoma came in just below the larger state of Texas, which is home to three of the top five cities (Dallas-Fort Worth, San Antonio and Austin), ranking #3 with the overall “friendliest” score. 

Though ranking high in training and networking programs for small businesses, Rhode Island is the nation’s lowest in overall “friendliness”.  California, home to the three lowest cities on the list (Los Angeles, San Diego and Sacramento), also had some of the worst tax codes, earning it an overall “F” score. Hawaii and Vermont joined Rhode Island and California at the bottom.

  “Asking entrepreneurs to rank state friendliness to their businesses is a powerful resource for helping policymakers understand the needs of business owners and for helping aspiring founders understand the full dimensions of their business environment,” said Dane Stangler, director of research at the Kauffman Foundation.

Interestingly, Florida, a state ranking high on the 2012 Business Tax Climate Index, ranks fairly low in overall friendliness with a “C” rating.  The “unfriendliness” highlights the fact that other factors, like ease of starting a business, hiring costs, and training programs, are just as important to the success of small businesses as low tax rates.

Unfortunately, our area of New England ranked came out as one of the least friendly for small business.  How friendly is your state toward small businesses?

Yet there’s one tax benefit out there, one we absolutely love, that you can get through the end of 2012. In fact, it’s in your best interest to get it, because the amount you’ll be able to get is going to fall precipitously in 2013. It is the mighty Section 179 tax benefit.

We bring this up again and again because we like helping businesses out, and this is one of the biggest aids you can get. Imagine being able to get $139,000 in equipment without having to pay taxes on it. That’s a potentially enormous savings, and it might make the difference between being able to afford that equipment and having to hold off. Most businesses, after all, are operating in a razor thin zone where a few thousand dollars in tax breaks can solve a few problems.

Re-printed below, some of the advantages of Section 179 worth exploring.

The Advantages

• It still can save you a lot of money. Being able to write off up to $139,000 in equipment is significant unless you’re some sort of multi-billionaire small business owner, in which case you don’t exist. That’s down from previous years, but it’s still a lot.
• It’s going through the basement and will keep going next year. If you think $139,000 is a steep drop, wait until 2013, when it plummets to $25,000. It hasn’t been that low since 2002, and that’s basically less than one-fifth of this year. If you’re going to go for equipment, make this the year.
• Many different equipment types are eligible. There’s computers and software, business vehicles, office furniture, and machinery, among others. Chances are if you have an equipment need, you can apply for the deduction.
• It’s not a difficult deduction to figure out. If you have any issues at all, you can turn to our ebook and calculator to fill in the knowledge gaps.

If you’re thinking about getting a piece of equipment but you need financing, never forget that Direct Capital can help you out on that front. Do you intend to chase Section 179 tax benefits before they plummet in 2013?

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The owner of the Beachwod, Ohio Southern comfort food restaurant Phil the Fire, Davis is a cheerful man with a thriving business which draws hungry customers from as far away as Akron, Cincinnati and Pittsburgh, Pennsylvania. He speaks confidently of future expansion to other parts of Ohio and beyond.

It wasn’t long ago that this would have seemed like an impossible dream to Davis, who saw his business come crashing to the ground under very bizarre circumstances.

The Story

In 2001, the first Phil the Fire opened up in Ohio. In Davis’ words, “people started coming from miles around” to sample the all-you-can-eat Sunday buffet. Encouraged by the hot start for the new business, Davis opened a sit-down restaurant in 2002 and a second location in November 2003, bringing his traditional Southern cuisine to more and more people.

In 2004, Davis’ primary investor for Phil the Fire, Kirk Wright, was arrested for defrauding investors which included NFL players of some $185 million. With his investor facing a federal prison sentence, he no longer could afford to keep the locations open and had to fold.

“It was not a fun thing to go through, closing and having to deal with the loss of the livelihood,” Davis said.
For the better part of the next seven years, Davis worked tirelessly to re-open Phil the Fire, attempting to secure the financing he needed and find a new location. In June 2010, those efforts finally paid off when he was able to negotiate for a new restaurant in June 2010.

With financing through Direct Capital, Davis has been able to begin paying down his debt on the new restaurant, which employs about 100 people. Business is already booming, and the financing has allowed Davis to hit the ground running and keep up a sprinter’s pace.

“I have nothing but high marks for Direct Capital,” said Davis, who called Finance Manager Edward O’Donnell “excellent” to work with.

What Lies Ahead

With the good times rolling and Davis feeling battle-tested, you can forgive him for the optimism. After all, he’s got hundreds to thousands of loyal customers who have his back, and a national void for quality comfort food.

“They come from different parts of the country and they’re always asking, ‘when can I get a Phil the Fire in my area,’’ Davis tells me. There’s a pause, and you can almost hear him smiling over the phone. “Soon.”

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For Domino’s, the last couple of years have been hugely successful. That’s what happens when you re-invent your pizza, add menu items and kick off the most effective marketing campaign the franchise industry has seen since Subway first introduced the affable Jared to the American public.

So it’s little surprise that the mood at the 2012 Domino’s Worldwide Rally in Las Vegas, Nevada is bordering on buoyant. The word that seems to be swirling around our correspondents is “growth,” and it’s not hard to see why.

For those who don’t remember, Domino’s re-invention of its pizza came after years of lackluster sales and a waning interest in their core product. The overall made for a tastier pie, and the marketing push that followed helped to create an explosion in the company’s market share and contribute to the growth that has continued ever since.

What Lies Ahead

Our correspondents say the company and its many franchisees expect new stores, an increase in carry out business, a fresh look for Domino’s signage and potentially much more. That’s an ambitious plan for the next seven months, but you won’t see Domino’s thinking it’s anything less than realistic. They have both confidence and the means to back it up in spades.

Will there be more products coming? Given the corporate kitchen’s extreme productivity of late, don’t rule it out. In fact, it wouldn’t even kick my eyebrow up a notch at all if they’re working on something new and exciting as I write this.

The rally wraps up later today, but we’ll hopefully have a full report from our correspondents in the field sometime next week.

What are your thoughts on Domino’s efforts in 2012 and the company’s future?

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Here are some tips to help you get your money faster:

Enforce it.  Set a strict deadline for payment and actually stick to it.  Train your sales staff on what the deadline is and make sure they know that this is serious.

Have standards.  Don’t just do business with any Tom, Dick, or Harry that walks through your doors.  Be sure that your customers are credit worthy and have them undergo a credit evaluation before you hand over your precious goods.

Have a process.  Have a set plan in place of how your company collects payment.  If you don’t have one already, it may be worthwhile to hire an accounts receivable staff member that can solely focus on collecting payment.  You may be surprised at the impact being able to provide direct (and regular) contact with your customers will have on your receivables.

Set expectations. Though strict deadlines are key for most businesses, small businesses may have to be willing to be a little bit flexible.  Knowing when to push your deadline back a week or two and being more willing to work with your customers may mean that you’ll get paid first, before their other debts.

Work with a financial company.  Offering financing to your customers through a financial partner, like Direct Capital, will take the accounts receivable worries entirely out of your hands.  You’ll be able to focus on selling, while the financial company can worry about making sure you get paid.

Cash will always be king when it comes to business, and getting paid quicker by your customers is a sure fire way to get more cash back into your business. 

How do you handle slow payments?

Here’s how:

1.  Plan for it.  Reading this article is a good first step.  Educate the necessary individuals in your organization about the dangers of a data breach and what their roles would be in dealing with it.  PR/Marketing, IT, Human Resources, and Legal are likely going to be the most heavily involved departments.
2. Investigate.  Once a breach occurs it’s important to immediately assess the damage.  Figure out who was affected: Was it your employees? Was it your customers? And determine what was taken (social security numbers and credit card numbers are the most common targets). 
3. Notify.  Once you know the scope of the damage, it’s time to notify the affected parties and in some cases, law enforcement.  Familiarize yourself with your state’s laws and the FTC and PCI guidelines for notification.  The more quickly you notify those affected of the attack, the sooner they can take the necessary steps with their own credit card company and will make damage control much easier.   It may also be necessary for your Public Relations team to craft a press release for full disclosure to the media.   No matter how large, it’s always better to face a data breach head on, rather than attempt to sweep it under the rug.
4. Repair.  It’s time to pick up the pieces.  Identify the point of entry into your system and do whatever is necessary to ensure the safety of your data.  Don’t just focus on repairing the single point of intrusion though, fix all web security vulnerabilities to prevent another attack.  It may be necessary to hire a third party professional to fully analyze your system and give you the green light that you’re good to go.

It’s likely that you will see a security breach in your system at some point, if you haven’t already, but expecting it and planning how you will react to one is a great way to protect your data and your customers.

How do you plan for a data breach?