15 Creative Financing Methods for Startups

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For many would-be business owners, financing is one of the most intimidating and challenging parts of the startup process. Some entrepreneurs may not have the cash they need on hand when they want to launch, and bank loans or investments can be difficult for brand-new small businesses to obtain.

If you can't bootstrap your business, there is a wide variety of both traditional and innovative funding sources you can draw from to help you get started. Whether your goal is to open a local boutique or to launch a tech startup, one of these options is likely to be the perfect fit for your next business.

Small Business Administration loan. The Small Business Administration (SBA) offers two types of loans that can help entrepreneurs get the capital they need to start their business: the 7(a) guarantee small business loan and the 504 fixed-asset small business finance program. The 7(a) guarantee loans are more common for small businesses. Prospective borrowers can apply for these loans at banks that participate in the SBA loan process. But this may not be the right choice for you if you don't have a proven track record. Chuck Evans, co-founder of Prudent Lenders LLC, noted that the SBA typically looks for applicants who are two years into the business cycle and generating cash flow.

Traditional SBA loans typically take 60 to 90 days for approval and are distributed in amounts of $150,000 or more. Some programs, such as the new SmartBiz loan program by Better Finance Inc. and Golden Pacific Bank, offer approval for loans of $5,000 to $150,000 in just one week. 

"Because bank funding typically takes so long or is unavailable for [smaller amounts], most small business owners turn to alternative, more expensive lending sources —like merchant cash advances or credit cards —to fill the gap," said Mark Quinn, San Francisco SBA district director. "[Programs like] SmartBiz offer affordable monthly payments and [fill] a significant void in the marketplace, offering an enormous opportunity to better serve small business owners with easy online access to a low-interest-rate SBA loan."

The SBA also offers special business loan programs for military veterans and their spouses. One program, the Patriot Express, offers veterans loans of up to $500,000, restricted to a maximum of 2.25 percent interest over seven years. More options and resources are available through the U.S. Department of Veterans Affairs' Veteran Entrepreneur Portal, which offers a financing wizard and other tools to connect small business owners with government and private resources.

Editor's Note: Need help finding a Small Business Loan? Fill in the following form for a quote.

Online lending. Recently, online lending services such as OnDeck and Kabbage have become a popular alternative to traditional business loans. Online lenders have the advantage of speed: An application takes only up to an hour to complete, and a decision and the accompanying fundscan be issued within days. In contrast, the traditional loan process can take weeks, or even months, to complete.Because of this, former U.S. Treasury Secretary Larry Summers said at the 2015 Lend It conference that he expects online lenders to eventually reach more than 70 percent of small businesses.

Factoring/invoice advances. Don't want to take out a loan? Services like factoring and invoice advancing may help ease growing pains for small businesses. Through this process, a service provider will front you the money on invoices that have been billed out, which you then pay back once the customer has settled its bill. Eyal Shinar, CEO of small business cash flow management company Fundbox, says these advances allow companies to close the pay gap between billed work and payments to suppliers and contractees.

"By closing the pay gap, companies can accept new projects more quickly," Shinar told Business News Daily. "Our goal is to help business owners grow their businesses and hire new workers by ensuring steady cash flow."

Product presales. Selling your products before they launch is an often-overlooked and highly effective way to raise the money needed for financing your business. Entrepreneur Priska Diaz was able to raise $50,000 for her company Bittylab with a presale of her Bare air-free baby bottles. The money Diaz was able to raise helped her pay for inventory, and also helped to open some doors in retail and learn about her website's visitors. Though Diaz was able to benefit greatly from this means of financing, there were still some difficulties to overcome.

"The biggest challenge was in coordinating the inventory delivery times from our supplier so that we could start fulfilling orders," Diaz said. "Another challenge was forecasting the number of units we were going to presell, resulting in a shortage. We've now passed the presale stage and sold more than originally anticipated, resulting in back orders."

Friends and family. If you have a friend or relative with some spare cash, you have another potential way to finance your business. Borrowing from friends and family presents an interesting alternative to traditional forms of financing, and can have some unique advantages, including low- or no-interest payments and avoiding the hassles of bank contracts.

Debra Doran, managing partner of the Seattle branch of financial consulting firm CTC Consulting | Harris myCFO, recommended open, frequent communication with potential friend and family lenders to avoid damaging relationships.

"Having a well-thought-out game plan will increase the odds of family members and friends agreeing to be your financial partners," Doran said. "Business success is not assured, but by professionally approaching your family and friends to support your efforts, and communicating frequently on the progress of the business, the chances of maintaining good relationships are significantly higher."

Side business. New business owners can try "double-dipping" as a means of funding their startup. Entrepreneur Alex Genadinik used his revenue from tours he organized on ComeHike.com to launch Problemio.com, which builds mobile apps for planning and starting a business. After receiving donations for some of the free hikes he led, Genadinik began to charge for events, where he marketed his new site to hikers.

"I tried everything else before that, including monetizing with ads and becoming an affiliate reseller for outdoor gear, but it didn't quite work," Genadinik said. "This allowed me to work on my project without the distraction of looking for investors."

Home equity loan. For homeowners who have equity —the home's value minus what you owe —a home equity loan is a great option for financing a small business. These loans generally offer interest rates that are both flexible and lower than traditional commercial rates.

"Home equity loans are very cheap, rate-wise," said Al Engel, executive vice president of consumer lending at Valley National Bank. "It is a low-cost form of borrowing that is very controllable by the entrepreneur as far as when he pays funds and redraws funds. The flexibility is tremendous. The risk is, you are putting your home on the line. If the business fails, or you fail to maintain the terms and conditions of the home equity loan or line, you risk foreclosure."

Selling assets. Sometimes, you may have a financing method and not even realize it at first. That was the case for entrepreneur Hamid Saify, who was able to fund his opinion-sharing community, ChoicePunch, by selling a car he had wanted to pass along to his children. Though it was a tough decision, Saify was able to make $30,000 from the sale of the car. That money, in turn, went toward some very important aspects of the fledgling startup.

"I used some of that money to help with the last payments to our design and development contractors," Saify said. "The rest I put into our account and used to help support marketing during our beta launch months."

Credit cards. Business credit cards are among the most readily available ways to finance a startup, and can be a quick way to get your business up and running.

"One of the few advantages is that the minimum payment on a credit card is very low," said Ken Nickel, senior vice president of community lending at Valley National Bank. "If you are a new business who is just starting out and you don't have a lot of money coming in, or you don't have a ton of expenses, you can put it on a credit card and pay the minimum payment."

However, there are some serious drawbacks to consider before using plastic to fund your startup, Nickel said. If a new business gets started and then has trouble making the payments, the interest rates and costs on the cards can build very quickly, and carrying that debt can be detrimental to a business owner's credit.

Angel investors. Those looking to finance their business can always look to an angel —an angel investor, that is. Angel investors have helped to start up many prominent companies, including Google, Yahoo and Costco. This alternative form of investing generally occurs in a company's early stages of growth, with investors expecting a 20 to 25 percent return on their investment.

"The principal advantage of an angel investor is generally that you have a friendlier atmosphere and a quicker decision-making circumstance for a smaller amount of [money]," said Mark DiSalvo, CEO of private equity fund provider Semaphore. "You are likely to get an investor who has strategic experience, so they can provide tactical benefit to the company they are investing in."

Venture capitalists. For small businesses that are beyond the startup phase and already have revenues coming in, a venture capital investment may be appropriate. Fast-growth companies with an exit strategy already in place can gain up to tens of millions of dollars that can be used to invest, network and grow their company quickly.

Brian Haughey, assistant professor of finance and director of the investment center at Marist College, said that because venture capitalists focus on specific industries, they can generally offer advice to the entrepreneur on whether the product is going to fly or what they need to do to bring it to market. However, venture capitalists have a short leash when it comes to company loyalty and often look to recover their investment within a three- to five-year time window.

"They have to make a return and usually have a five-year time horizon," Haughey said. "If you have a product that is taking longer than that to get to market, then venture-capital investors may not be very interested in you."

Winning a contest. Sometimes, businesses can benefit from a bit of luck. That was the case for Roberto Torres and Luis Montanez, who funded a portion of their startup costs for apparel company Black & Denim with winnings from a business-plan competition.

"We utilized the funds to purchase manufacturing equipment that allowed us to scale our products and meet demand," the owners said. "This advantage gave us the opportunity to increase our production and get into bigger players like Stein Mart and Walt Disney World. The competition also gave us access to business experts that asked us the tough questions while allowing us to retain our equity —a perk that would have been very difficult to obtain otherwise."

Renting out your home. Cutting out liabilities is another creative way for new business owners to fund their startups. For Fay Johnson, founder and editor of deliberateLIFE magazine, that meant renting out her apartment. Johnson was able to do this by placing her San Francisco apartment on Airbnb and renting it out for anywhere between five nights and a month at a time. The decision has been successful for Johnson, who has used the money raised to fund the costs of the first few issues of her magazine. Though the move has allowed Johnson to finance her startup, it has not come without its share of headaches, including tight time restraints.

"As an entrepreneur, time is one of your most valuable resources," Johnson said. "When renting, I have to keep in mind that I need to clean and reclean the apartment, and since I work from home, I also have to find a place to work during those days."

Crowdfunding. Crowdfunding on websites like Kickstarter and Indiegogo can give a big boost to the financing aspirations of small businesses. These sites allow businesses to pool small investments from a number of investors instead of forcing companies to look for a single investment. Many sites allow companies to raise money in exchange for rewards or products. Others have an equity-based model in which businesses give up a bit of their share. 

Before choosing a crowdfunding platform, be sure to read all the fine print and know what you're getting into. Certain sites require businesses to raise their full stated goal in order to keep any money raised on the platform. Other sites will allow companies to keep any money they raise. Additionally, sites can claim a percentage of any money raised on the site. Sites often also charge a payment-processing fee for money raised.

Grants. If your business focuses on a scientific or research-oriented field, grants from the government may be able to help fund your company. The SBA offers grants through the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. Grant recipients are required to meet federal research and development goals, and to have a high potential for commercialization.

Shinar said there are not many downsides to a truly no-strings-attached grant. However, you should carefully read the fine print because grants may require that you give up part of the IT or other intellectual property, Shinar noted. Grants also can be time-consuming, and depending on the sector, the ratio of time expenditure to the odds of payout may be too high. Nonetheless, if your company could be eligible, it is wise to review the options.

Precautions and next steps

While the plethora of lending options may make it easier than ever to get started, responsible business owners should ask themselves how much financial assistance they really need. Companies that receive more income than they truly need should be prudent in how it is used. Shinar urged such companies to make — and stick to — a disciplined budget.

"It's hard to go back later and try to exert fiscal discipline," Shinar said. "It's better to start from the beginning with good corporate governance."

Companies that have received a large cash infusion may benefit from bringing in an experienced partner or board member to help ensure accountability, Shinar added.

As an alternative, bootstrapping your company — building it with existing resources and earned revenue — offers companies a low-risk way to test out their product. If you and your partners are able to work toward creating a functional product in your spare time, you may be able to begin to sell that product with minimal or no cash.

"The advantage of bootstrapping is that you stay the boss," Shinar said. "More importantly, you get relatively quick validation from the market about whether you have a good business plan. Bootstrapping helps imbue a company with operational discipline."

Owners who bootstrap retain exclusive control over their company for a longer time, allowing them to better influence its culture and goals. As your company grows, funds can be put directly back into enhancing the business, rather than into servicing your loans. In addition, they avoid less-than-favorable conditions and terms that might be imposed by lenders or additional partners.

If you bootstrap, however, be prepared and open-minded about moving to the next step. If you remain without external funding for too long, you may be unable to take advantage of market opportunities. Moreover, you risk creating a business that has failed to integrate more experienced minds.

"At a certain point, you need smart partners around the table, and those partners are commonly investors," Shinar said. "If you want to grow really fast, you probably need outside sources of capital. And if you are only bootstrapping, you are missing some of the advantages of corporate governance. You may also miss some lifestyle advantage — you can go on bootstrapping for years without making money. So taking on debt may actually mean that your company can move forward."

More information

Additional information about funding sources is available from the following resources:

• Loans and Grants (U.S. Small Business Administration)
• Small Business Lending Fund (U.S. Treasury)
• Access Financing Wizard (USA.gov)
• 5 Ways to Fund Your Small Business (Kiplinger)
• How to Raise Money for Your Business (Entrepreneur)
• How to Get Funding From Angel Investors (The Wall Street Journal)

Editor's Note: Need help finding a Small Business Loan? Fill in the following form for a quote.

Originally published Nov. 30, 2011. Updated May 4, 2015. Additional reporting by Business News Daily assistant editor Nicole Fallon and social media specialist Dave Mielach.

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Regulation A+: What It Means for Crowdfunding

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After a lengthy holdup in Congress, it's official: Nation-wide policies allowing any interested person to invest in a business through equity crowdfunding will go into effect this summer.

On March 25, the U.S. Securities and Exchange Commission announced its final set of new rules that will make it easier for smaller companies to access investor capital through crowdfunding, and provide investors with more investment choices. These rules, known as "Regulation A+," update and expand the existing Regulation A, and are mandated by Title IV of the Jumpstart Our Business Startups (JOBS) Act passed in 2012.

According to the SEC fact sheet, nonaccredited investors — meaning anyone with cash to spare — will be allowed to annually invest up to 10 percent of their income or net worth, depending on which amount is greater. Prior to this, only accredited investors (or nonaccredited investors in a state with its own equity crowdfunding provisions) were allowed to invest in startups through equity crowdfunding. 

Alex Feldman, CEO and founder of crowdfunding review site CrowdsUnite, said that this new rule will allow a much greater percentage of private startups to receive investment money. Angel investors and venture capitalists invest in companies to make money, he said, and since many small businesses don't have the types of exit opportunities these investors look for, they're often passed over for funding opportunities.

"With the new rules, [more] businesses will be able to receive equity funding," Feldman told Business News Daily. "I believe that investments in ... a business like a local diner, for example, will be driven by the community and customers who want to keep the business running and believe in it beyond the financial incentive. This will be a huge shift in the traditional funding paradigm that will change how small businesses raise money."

Additionally, eligible U.S. and Canada-based companies will be able to offer and sell up to $20 million (Tier 1) or $50 million (Tier 2) of equity in a single year, up from a previous limit of $5 million. Any company seeking equity funding will also be allowed to publicly market their offerings via their websites, social media, etc.

Both tiers must follow a set of basic disclosure rules, but Tier 2 companies are no longer required to register their offerings in each state where they sell securities. However, unlike Tier 1, the Tier 2 companies will be held to additional requirements, including audited financial statements and regular reports to investors.

"These new rules provide an effective, workable path to raising capital that also provides strong investor protections," SEC Chair Mary Jo White said in a statement accompanying the fact sheet. "It is important for the commission to continue to look for ways that our rules can facilitate capital-raising by smaller companies."

For startups and small businesses that plan to take advantage of Regulation A+, Alex Castelli, a partner with CohnReznick LLP, advised crowdfunders to consider how they will manage their investor groups.

"Be prepared to have a large number of small-dollar investors ... [and] act like a public company," Castelli said. "This means being transparent. Hire experienced professionals to help guide you and make sure you stay in compliance with the rules and regulations."

Feldman noted that any nonaccredited investors who are interested in backing your business should be well-educated about equity crowdfunding.

"Investing in private companies is extremely risky, and is not liquid investment," Feldman said. "The business doesn't want to have hundreds or thousands of shareholders who are not happy and want to take their money out."

The provisions of Title IV will go into effect 60 days after publication in the Federal Register. For more information on the JOBS Act and its regulations, visit sec.gov. If you are unsure of how any of these rules will affect your fundraising plans or if you have questions about them, please consult a legal professional.

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Trading Stocks Online: A Guide for Beginners

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Stock trading, once the sole domain of Wall Street, has become easily and affordably available to all in the last 20 years, thanks to online brokerages. Prior to online trading, people relied on the services of a stock broker, who would make buy and sell orders on the customer's behalf. Today, individuals are able to execute buy and sell orders themselves in a fraction of a second using computerized trading services.

While buying and selling stocks — which are shares of ownership in a company — can make you a fortune, it's just as easy to lose that money. To become a successful trader, it is crucial that you become familiar with the tools of trading, the theory behind it and the daily reports that drive market shifts.

Stock market basics

Like all businesses, the stock market operates on a system of supply and demand. When you purchase stock, your hope is that other traders become more eager to own a share of that company over time. When the stock's popularity increases, traders will compete to own it and bid up the sale price. In theory, a rising share price is the result of improvements in the firm's value and potential, also known as its fundamentals. In reality, stock prices change for any number of reasons, only some of which investors are able to predict.

Researching and choosing stock

There are two main schools of thought regarding how to choose stocks. The first, called fundamental analysis, relies on the use of a company's financial reports and public statements to analyze the health of the business. Balance sheets, income statements, yearly and quarterly earnings, and news releases from the company are all important tools for a fundamental analysis. Fortunately, those reports are easily searchable online, as are tutorials on how to read them, such as those offered by the SEC. Market and industry trends, media publications and historical analysis also play a role.

The second school of investing is called technical analysis. Technical analysts believe that swings in stock prices follow patterns that traders can learn to detect and profit from. Technical analysis is not as widely accepted or practiced as fundamental analysis. However, many traders use a combination of the two techniques to choose stocks. Choosing a company with sound fundamentals and then occasionally trading on a technical indicator is a safer strategy that relying only on technical indicators.

Before deciding to buy or sell any stock, you should thoroughly research the company, its leadership and its competition. Sites such as Yahoo! Finance offer excellent compilations of news stories, financial statements and stock price histories (called charts) that provide insight into the company. Stock sites also display professional analysts' ratings of a given stock, indicating whether that analyst advises a trader to buy, hold or sell a stock. Examining the records of those analysts may help you assign value to their opinions.

Personal stock-trading services

Before you can begin buying and selling stocks, you need to decide which online trading service you want to use. Rob Beauregard, director of public relations for Fidelity Investments, says choosing your brokerage partner carefully can directly affect your bottom line.

"The best piece of advice for an online trader is to choose your brokerage partner with open eyes," Beauregard told Business News Daily. "Know their pricing, service, investment choices, education and research resources, and securitypractices. No one should just rely on their gut instincts or the tip from their friend or neighbor anymore. The resources easily accessible to them to generate and validate investing decisions are too valuable not to utilize."

When you're looking for an online broker, consider the costs of each service the brokerage provides and the level of support you will need from qualified brokers. Business News Daily's sister site  offers an overview of a number of trading services, with ratings for their fees, research tools, mobile access and investments offered.

As a beginning trader, you may wish to start with a company that can provide personal advice for your investments. As your skills grow, you may wish to ensure that the brokerage offers tools to engage in advanced trading, including short selling and margin trading. The following are popular services known for the quality of their services and support:

• E-Trade
• ShareBuilder
• Fidelity
• Scottrade
• TD Ameritrade

Some companies, such as ShareBuilder, also offer functions similar to banks, with ATM cards that give you access to noninvested money, or the option to invest your cash in a money market fund to earn a slightly higher return than a traditional savings account.

If you prefer to be a do-it-yourself trader, you can make use of discount online broker services. These services allow you to buy and sell not only stocks, but also options, mutual funds, exchange-traded funds, fixed income funds, bonds, certificates of deposit, retirement accounts and more. You ultimately get to make the final decision on each investment and whether or not to buy or sell, and you don't need a large sum of money to start.

Practice your skills

Learning to trade begins with education. Reading the news and financial websites, listening to podcasts and watching investing courses are all excellent ways to gather information. Joining a local investment club will give you the opportunity to discuss your education with more experienced traders. A list of some recommended resources is available at the end of this article.

However, reading is no substitute for experience. A zero-risk way to practice your new skills is with an online stock simulator, such as those available through Investopedia, MarketWatch and Wall Street Survivor.

Another option is to practice trading in the penny stocks market. Many companies offer stock shares valued at a penny a share, which makes it easier to practice leveraging the trends of the market and making a profit.

Tips for beginning investors

Online stock trading may be daunting for beginning traders, but with the right foundation and a gradual investment of funds, you can expect to see significant returns. Here are a few tips to help you make smart investment decisions.

Do not invest money you cannot afford to lose. Make intelligent decisions about what you can afford to invest, and begin slowly. Once you have realized gains from one or two stocks, you can begin to reinvest those gains — which have now become your principal — into other stocks and funds.

Diversify your investments. While stocks offer the attraction of seemingly easy money, they are unreliable sources of income. Consider investing at least a portion of your money in an electronically traded index fund, which holds many stocks. ETFs can be purchased and traded like stocks, but because they are diversified, losses in a given sector may be cancelled out by gains in another.

Don't trade if you don't have time to research. Stock trading should be approached as a part-time job. Like any job, your skills will suffer if they are not frequently practiced. In this case, "practice" means reading the latest news and financial reports on companies in which you are considering investing. If you do not have time to practice, consider investing in an index fund instead, or hand your investments over to a qualified professional.

Make a plan. Irrationality is the enemy of stock trading. Before buying a stock, consider what circumstances would lead you to sell it. For example, you can decide that you cannot risk more than 20 percent of your investment. Many brokerages have the ability to schedule buy and sell orders based on predefined criteria, such as a percentage drop (or increase) in your original investment. Scheduling limit orders takes the emotion out of your finances.

"Have a plan and stick with it," Beauregard said. "Know why you are buying a particular security, how much to invest, what your expected return is, and have an exit strategy."

Don't buy high. Stock may be trending upward at an extreme pace, in which case you shouldn't always jump to buy stock. Wait for opportunities to get a lower entry point.

Don't give in to fear. Something many beginning stock traders deal with on a daily basis is the fear of losing money invested. While you may see stock values plunge for a company, don't despair or pull your money out. Stock trading is a long-term investment and requires patience and perseverance.

More information

Remember, reading online articles does not make you qualified to trade. Set aside six months to practice trading with real-world data before investing your money. Read the classics of investment literature. Watch or participate in a class on finance and investing on YouTube or through a massive open online course (MOOC). Further information for beginning traders can be found in the following books and articles:

• "The Intelligent Investor" by Benjamin Graham (HarperBusiness, 2006)
• "What You Need to Know Before You Invest" by Rod Davis (Barron's Educational Series, 2003)
• "Contrarian Investment Strategies" by David Dreman (Free Press, 2012)
• "The Art and Science of Technical Analysis" by Adam Grimes (Wiley, 2012)
• Investment MOOCs (MOOC List)
• Stocks and Bonds: Risks and Returns (Stanford)
• 5 Mutual Funds for Socially Responsible Investors (Kiplinger)

Additional reporting by Ryan Goodrich, Business News Daily contributor.

Originally published May 17, 2013. Updated March 19, 2015.

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Should Your Small Business Accept Mobile Payments?

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In October 2014, Apple launched its highly anticipated mobile wallet solution, Apple Pay. Although the ability to make purchases through a smartphone app was not a brand-new concept, the business world viewed Apple Pay as the product that would finally push near-field communication (NFC) and contactless payment technology to the forefront of retail.

"Apple raised visibility [of payments as] something you can and should be able to do with a mobile device," said Gregory Mann, chief marketing officer of mobile wallet solution LoopPay. "It took the conversation out of B2B partners ... and brought it to consumers' dining room tables. The average person out there [now knows] this is something you can do with your phone."

While consumers may find it convenient to pay for their morning coffee or weekend shopping trip with their smartphones, is an NFC point-of-sale system really worth the investment for small businesses? Kaz Nejatian, co-founder and CEO of mobile payment system Kash, noted that many smaller merchants are hesitant to accept mobile payments because of the associated equipment purchases and fees.

"Every mobile payment app increases retail costs and reduces [the retailer's] margin," Nejatian said. "If you accept [a system like] Apple Pay, you have to invest in POS [point-of-sale] systems and contracts, and your fees go up."

But over the last decade, huge strides have been made in mobile technology, and the near ubiquity of smartphones and tablets among American consumers indicates that mobile payments will eventually become a standard POS option, Mann said. Merchants recognize where this trend is going, he said; it's a matter of determining how fast it's going to occur, and at what point a business owner needs to jump in. 

"In [a small business], the decisions you make today affect you years from now," Mann told Business News Daily. "You have limited funds and watch every dollar. You have to decide when and where to make an investment."

Who needs mobile payment options, and why?

For service-based businesses, accepting payments via a customer's smartphone may not make much sense at this point. But brick-and-mortar shops and restaurants that want to speed up transaction times — and ultimately, improve customer turnover rates — might find it helpful to offer this option to consumers. 

"While mobile payment technology is limitlessly employable, [it is] especially great for quick-serve food and retail locations due to the speed and convenience they allow at checkout," said Suneera Madhani, CEO and founder of credit card processing company Fattmerchant.

One advantage of mobile-based payments is a decreased fraud liability for merchants. This is an especially strong selling point in light of the numerous high-profile retail credit card breaches that occurred over the past couple of years.

"The security of ... contactless [payment] technologies is an added benefit," Madhani said. "There are safeguards against fraudulent transaction attempts, like Apple's Touch ID and unique codes for each transaction. And since the merchant isn't processing and collecting the customer's information themselves, the liability for the business decreases."

Next steps

If you think your business could benefit from offering mobile payment options, there are a number of factors to consider before deciding on a technology and/or service provider. Mann said business owners need to think about not only the cost of the equipment and associated fees, but also whether their customers would be interested. [

Nejatian advised looking for a system that allows you to do more than just accept a payment. He cited the Starbucks mobile app as an example of a successful mobile payment strategy.

"The Starbucks app wins because it does something ... other than provide convenience for customers," Nejatian said. "It's faster to pay [via the app] than with a credit card, but [customers] also get things — the loyalty program is embedded. The average app user spends more [because of this]."

Madhani noted that, if budget is a concern, you can shop around and ask service providers about terminal exchange programs. However, if the costs ultimately outweigh the benefits for your business, don't feel pressured to implement a mobile POS system right now. Traditional forms of payment aren't going extinct just yet, and you won't lose a sale by only accepting cash or credit.  

"Paying with a phone is faster and cooler, but it needs to make sense," Nejatian said. "Mobile payments will win when it makes sense for both [consumers and retailers]."

Still need help deciding, particularly about Apple Pay? Visit our pros-and-cons list for businesses here. 

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Small Business Taxes 2015: Everything You Need to Know

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Following the most wonderful time of the year is a season that strikes fear in the hearts of many small business owners: tax time. 

Shelling out a substantial percentage of the year's income is stressful enough, but tax season also brings with it a great deal of complexity and confusion. Tax laws are constantly changing and being revised, and it can be difficult for small business owners to keep up. And what adds even more stress to tax filing is that even innocent mistakes or oversights can lead to big penalties. 

In preparation for the April 15 tax deadline, Business News Daily consulted small business tax experts to find out what business owners should be paying attention to now. Some of these issues involve recent tax changes, while others are issues small businesses should be watching for the future. 

Tax extenders

Two important tax breaks for small business have been extended. They are Section 179 and bonus depreciation. Section 179 allows businesses to deduct the full price of any qualifying equipment or software purchased or leased during the year. The tax-extension bill continues the $500,000 maximum deduction for new and used equipment that was purchased in 2014. Bonus depreciation allows business owners to depreciate 50 percent of the cost of new equipment purchased in 2014. The two tax incentives can be used together. 

Although the act's passage was a relief for business owners who purchased equipment in 2014, many others had to scramble to make equipment purchases in the final two weeks of the year or missed out on purchases while waiting for Congress, said Miguel Farra, chairman of the tax and accounting department at public accounting firm Morrison, Brown, Argiz & Farra LLC.

"These are great tax incentives," Farra said. "If everyone knew about them during the course of the year, they could have acted."

Also, because the incentives were extended only through the end of 2014, small business owners have no way to know whether these purchases will apply to business purchases made in 2015 until much later this year, said Dennis Brager, of Los Angeles-based Brager Tax Law Group, which specializes in helping companies that are in tax trouble. 

Brager advised business clients to buy the equipment they need this year without waiting to find out if the tax breaks will be extended again. 

"I always tell my clients to make sure the tax tail isn't wagging the dog," he said. "It's great to save on taxes, but you shouldn't be making decisions based solely on taxes. If you need new equipment, then spend the money. And if the tax savings come along, that's a bonus." 

Other notable tax breaks that were extended include the research credit, energy production tax credits, and a deduction for local and state sales tax.

The Affordable Care Act 

The Affordable Care Act (ACA) added an estimated 2,400 pages to the U.S. tax code, further complicating the tax landscape for businesses of all sizes. The most notable issue for many businesses is that they could face tax penalties for failing to provide health insurance to employees or for failing to report to the IRS what type of coverage they have provided for employees. 

As of Jan. 1, 2015, businesses with 100 or more employees must provide health insurance to 70 percent or more of their full-time equivalent employees, or they'll face a tax penalty of up to $2,000 per employee, said Janemarie Mulvey, former chief economist for the U.S. Small Business Administration's Office of Advocacy. Mulvey, who has published a reference guide for small businesses called "Health Reform: What Small Businesses Need to Know Now!" said that beginning Jan. 1, 2016, businesses with 59 to 99 employees will be required to offer health insurance.

Businesses should also understand the reporting requirements that come along with ACA, Mulvey said. ACA requires employers to report the cost of the health coverage they provided on each employee's W-2 form. A breakdown of what the employer and the employee each paid is required in Box 12 of the form. Failing to report this information could lead to fines of $200 per employee, Mulvey said. Even though the deadline for reporting those figures is not until Feb. 28, 2016, she said, employers should start keeping track of health coverage costs now. 

"Because the IRS is now the gatekeeper for insurance coverage, they are going to start collecting info from employers about what kind of insurance they provided," she said. "It's going to be a big regulatory nightmare."

Farra agreed that the ACA insurance and reporting requirements could be burdensome to small businesses. He recommended consulting an accountant or insurance expert now to make sure the coverage you provide meets the minimal essential coverage. In many cases, he said, a skilled insurance agent can also help businesses determine whether it is a better financial decision to provide insurance to employees or just pay the tax penalty.

The New Republican Congress

Republicans now control both the Senate and the House, and that could have an impact on tax reform in 2015, said Zach Olson, founder and CEO of Tax Alli, which provides tax accounting software and services for small businesses. Sen. Orrin Hatch, the new chairman of the Senate Finance Committee, recently released a lengthy report related to tax reform and has said he believes there is "real momentum" for the U.S. tax code to be overhauled this year. If Congress does take up tax reform in 2015, Olson said, almost everything will be on the table. Small business owners should follow news on this closely to find out how that reform might impact their tax burden, he said. 

Taxation of online sales 

The Marketplace Fairness Act stalled in the 2014 session of Congress, but it is expected to be addressed again in 2015, Olson said. The legislation attempts to level the playing field between online merchants and brick-and-mortar stores by allowing states to require online sellers that gross more than $1 million per year to collect and pay the state sales tax. Not surprisingly, the move is supported by brick-and-mortar stores but faces major opposition from online retailers. 

Tax Tips for Small Businesses

Just because tax law can be complicated doesn't mean you have to let yourself get overwhelmed. Here are some tips on how to manage your taxes year-round.

• Think about taxes all year long. Small business owners should not treat taxes as a once-a-year event, Olson said. Rather, tax planning should be a year-round activity. Waiting until the last minute makes tax preparation more complicated, and it limits your money-saving options. 

• Hire a pro. A knowledgeable tax attorney or accountant is well worth the expense, experts say. Tax laws are complex, and they're difficult for many busy small business owners to weed through. A professional can identify tax breaks and deductions you might otherwise miss. 

• Be aware. Even with the help of a skilled professional, it is the job of a small business owner to keep up with news related to laws. Read the business papers and keep up with Congress' work on tax laws, said Brager, who is also a former IRS trial attorney. 

• Don't make assumptions. Tax planning, to some extent, is a gamble, Farra said. Although historically, Congress has always passed the tax-extender bill at the last minute, there are no guarantees. Never make business decisions assuming that tax breaks will pass. 

Links and Resources

For additional help with your small business taxes, here are some resources:

• The U.S. Small Business Administration is hosting a free webinar to help small businesses understand the Affordable Care Act this Thursday, Jan. 29. Click here for information on how to participate. 
• The IRS website has more information about how the ACA affects small business owners' taxes here.
• This Tax Foundation blog offers a complete list of all tax breaks extended by Congress in December 2014. 

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Is Your Small Business Wasting Money on Security?

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Technology and software are among the most important investments a company can make nowadays, especially when it comes to security. The growing demand for IT services and security solutions prove that business owners know the threats that are out there, and want to do something to guard themselves against increasingly cunning cybercriminals.

You might have purchased a well-rounded security solution with all the recommended features a business might need, but was the investment really worth it? A forthcoming report from security solutions provider Trustwave found that organizations of all sizes are wasting their security dollars, and none more so than small businesses.

According to Trustwave's survey of 172 IT professionals, small businesses spent an average of $157 per user last year on security software, compared with $73 per user in larger companies. Nearly 30 percent of that investment ended up underutilized or never used due to non- or misuse of security controls and features. And yet, companies still increased their spending from 2013 by 44 percent.

Why did businesses end up letting their security software go partially to waste, despite significant increases in IT spending? Many organizations cited a lack of resources: 35 percent of respondents said their IT staff was too busy to implement their security solutions properly, while 33 percent said they simply didn't have the manpower to do so.

With the alarming number of high-profile corporate breaches in 2014, businesses of all sizes are aware that they need to invest in top-of-the-line solutions. The Trustwave survey found that IT professionals expect a 43 percent increase in their use of cloud-based or managed security services this year. But the financial constraints many small companies face can prove to be an obstacle to proper security. Here are a few IT-related tips to help you save money, which can then be reallocated toward the technological and staffing resources you need to protect yourself.

• Track any IT/software purchases you make to ensure you're staying within your budget.
• Carefully monitor your software usage and eliminate any solutions that aren't being used.
• Seek out products that are designed for small business — some companies offer free or discounted versions of their product to very small companies.

For more advice, check out Business News Daily's list of ways to cut your IT budget here.

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9 Tips For Improving Your Bookkeeping in the New Year

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Doing a less than stellar job keeping track of your business finances? Maybe your New Year's resolutions should be to get your financial house in order

To help, Greg Jones, CEO of BookKeeping Express, a franchise bookkeeping services offers the following financial tips for business owners to financially prepare for the New Year.  

• Review bank statements and credit card statements— These statements should always come to the business owner or card holder unopened.  Review them thoroughly before passing them to the bookkeeper or other employee, thereby preventing unauthorized checks or credit card usage.  These are the biggest losses within a small business.
• Set up a petty cash box—Set up a petty cash fun for small purchases rather than charging a credit card or personally paying for the smaller items in order to gain control of the small charges that can add up to big expenses.  Using a metal cash box, add in currency and coins that total $50.00 or $100.00 as a starting point.  When a small item needs to be purchased, use the money from the petty cash box and replace the money with the receipt, keeping the value of the box at the starting amount.  When all of the cash in the box is gone, replenish it by writing a check to cash and expensing all the receipts.

 

• Have a storage box—Keep all records for one year in one box, including  the tax return for the year, bank statements, cancelled checks, paid bills, financial statements and any other backup files in case you are asked to review your books.
• Switch to computer systems—When switching from paper books to computer software or switching between accounting software packages, do so at the end of the quarter.  Run both systems for the next quarter simultaneously to make sure both systems are equal before disposing of the old method.
• Maintain daily records—If you don’t have time to do a little bookkeeping each day, when will you find time to record a month’s or a year’s worth of records?  Different people have different systems, what matters most is that you have a system and use it daily.
• Don’t over-categorize—When categorizing expenses, don’t make it harder than it needs to be.  For example, when categorizing office supplies, you don’t need to separate fax paper, copy paper, letterhead, printer cartridges, etc.  All of these items can be listed under ‘office supplies’.
• Keep separate accounts—Have a separate checking account and credit card for your business.  Not only will you be able to track expenses more efficiently, but, in the event that something goes wrong or the IRS wants to review your books, you will only need to review the one account.
• Save all Receipts—The IRS may only need receipts for expenses over $75.00; however, by not tracking the smaller items, you could be losing potential expenses that can be written off.
• Properly classify employees—The proliferation of independent contractors, consultants, and freelancers has made it difficult to determine who is on staff and who is not. This results in misfiling when it comes to filing taxes, since there are different rules and regulations for employees and non-employees.

Follow David Mielach on Twitter @D_M89 or BusinessNewsDaily @bndarticles. We're also on Facebook & Google+.  

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FreshBooks Review: Best Accounting Mobile App for Business

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After much research and analysis of accounting mobile apps, we recommend as the best accounting mobile app for small businesses.

Ready to choose an accounting software? Here's a breakdown of our complete coverage:

• Accounting Software Buyer's Guide
• Roundup: The Best Accounting Software
• REVIEW: Best Accounting Software for Small Business Overall
• REVIEW: Best Free Accounting Software for Small Business
• REVIEW: Best Accounting Software for Really Small Businesses

Mobility is key for busy small business owners. If you're always on the go, having to set aside time to sit down at a computer to do your accounting is both inconvenient and inefficient. Being able to access your accounting software on your mobile phone or tablet, however, lets you manage your finances wherever you go, anytime you need to.

The problem with most accounting mobile apps, however, is that they lack many of the functions business owners need. They typically offer the bare minimum features, limiting capabilities to  just a few accounting tasks like creating and sending invoices, tracking expenses and viewing customer information. FreshBooks solves this problem by offering many of the same time-saving featureson its mobile app as those in its nonmobile version, making it our top choice for the best accounting mobile app for small business.

Why FreshBooks mobile app?

A comprehensive accounting mobile app  

Just because a software goes mobile doesn't mean it has to compromise on the features business owners need the most. Although the majority of accounting software products have mobile apps, what makes FreshBooks stand out is that it offers a comprehensive set of time-saving accounting tools. FreshBooks mobile lets you perform a wide range of accounting tasks on your phone or tablet, such as create and send invoices and estimates, track and organize expenses, record hours, view and edit customer information, manage projects, generate reports and more.

Read on to find out why the FreshBooks mobile app is our top pick for the best accounting mobile app for small business.

Ease of use

FreshBooks describes itself as a "simple and intuitive" cloud-based accounting software that is easily accessible across all your devices. To see just how easy it is to use the app, we decided to find out for ourselves.

Downloading and installing the FreshBooks mobile app was a breeze, and we were able to set up our account in just a few minutes. We liked that the signup doesn't require a credit card — simply enter your company name, first name, last name, email address and password.

We were also impressed with the app's dashboard. It features a very clean, no-fuss layout that immediately shows you the most critical information and functions right when you log in. For instance, the top bar highlights your outstanding balance, and below that are icons for the most frequently used tasks: invoices, clients, time tracking and expenses. Other features like project management, estimates and reports are on the next page.  

Overall, we found the FreshBooks mobile app to be as easy and intuitive to use as the company claims. And because it offers such a user-friendly interface, its many functions can help you save time both in terms of its offered capabilities and how easy it is to navigate the app.

To try the FreshBooks mobile app yourself, sign up for a free 30-day trial. You can also learn more by checking out these tutorial videos or attending one of their free webinars.

Time-saving features

When we asked small business owners what they sought most in accounting software, the general consensus was that it should save time and take the stress out of managing finances. FreshBooks accomplishes this with its cloud-based software and applies the same principle to its mobile app.

Besides being able to do your accounting anytime, anywhere that's convenient for you, here are four other ways that we found the FreshBooks mobile app helps save time and makes accounting as stress-free as it can possibly be.

1.    Invoicing - Easily create, send and manage invoices on the go, straight from your phone and tablet. Start by adding your client's name, line items and any terms or notes. When we spoke with a FreshBooks sales rep, we discovered that you can also set additional options and information, such as discount rates, issue date, invoice numbers and more.

2.    Get paid faster - The sales rep also told us that FreshBooks makes it easy to receive funds from clients, and the same capabilities are also available on the app. When you create an invoice, you can also toggle an option to accept credit card payments so clients can pay online directly from the invoice. Another payment option is PayPal, which you can set up under the Settings menu. Each invoice can also track how much clients have paid and any outstanding balances, so you don’t have to manually keep track yourself.

3.    Expense logging - Quickly track expenses wherever you are. The app also lets you categorize expenses, as well as link them to any associated clients and vendors. One handy feature we liked is the ability to take a photo of receipts and attach it to the corresponding expense — this is both convenient and helps you stay organized by going paperless.

4.    Seamless integration with your phone and across functions - The FreshBooks mobile app can also save you time by working together with your device and streamlining the different functions. For example:

• Need to add a new client? Skip manual data entry and import the information directly from your phone's contacts.
• Did a client accept a project estimate? Don't create a new invoice from scratch — just go to the estimate and convert it into an invoice.
• Want to know how much to charge for a project? Let the app do the number crunching for you. Create a new project from the Projects section, input your rates, and then automatically link billable hours to each project or task using the Time Tracking function. If you have expenses, you can also attach them to invoices to automatically add these costs to the client's bill.
• Need to view or edit a recent invoice, client, expense or other information? No need to open each function. Just tap on "Recent Activity" at the upper left corner to easily find what you're looking for.

Customer service

If you need help using FreshBooks' mobile app, customer support is easily accessible. Tap on the "Help" link at the upper-right corner and immediately get access to all of the company's support contact information. This may not seem like such a big deal, but it's a breath of fresh air compared with other providers that require you to dig through their website for a phone number or email address to reach a real person.

FreshBooks offers both phone and email support. Its customer support representatives are friendly and knowledgeable, and they were able to answer our many questions with patience and without pushing the product or pressuring us to upgrade our trial account. Keep in mind, however, that support is only available Mondays through Fridays from 8 a.m. to 8 p.m. EST. This is an important detail, particularly if your business doesn't stop after regular business hours.

In addition to one-on-one customer support, FreshBooks offers a collection of helpful resources so you can find answers and learn more about the product yourself. This includes a Quick Start Guide, FAQ section, a blog with helpful accounting and business tips, tutorial videos and free webinars.

Limitations

Although FreshBooks offers the best accounting mobile app, it isn't without its drawbacks. Two major limitations we came across have to do with its reporting capabilities and app availability.

When we tested the app, we found that to view reports, you'll have to leave the app. After selecting the reports function from the main menu, the app lists a few of the more than 20 types of reports the software can generate, including profits and losses, tax summary, expense reports and revenue by client. But it also tells you that "reports look best on your computer." To view these reports, you'll have to choose whether you'd like receive them by email or launch Safari to access them on the mobile Web version of the software. As a user, you may find that this defeats the entire purpose of having a mobile app, even if it does give you access using your mobile browser.

Another chief drawback of using the FreshBooks mobile app is its availability. Currently, the FreshBooks mobile app is only natively available on iOS and Android. Windows Phone and BlackBerry users will have to use third-party clients — such as FreshBooks 7 for from the Windows Store and ReportAway! for FreshBooks from the BlackBerry Store — to access FreshBooks on their mobile devices.

Cost

FreshBooks offers some of the most competitive pricing models for accounting software, making it an affordable option for small businesses. The sales representative we spoke with confirmed that the mobile app is free to download, though you'll have to purchase a FreshBooks subscription to use it for your business.  There is no separate plan just for mobile accounting, however. Pricing to use the app is included in the monthly subscription, which gives you access to both the software and the mobile app under one monthly fee.

FreshBooks' pricing is primarily based on the number of clients and number of users. Plans start at $9.95 per month, but is limited to five clients and a single user. If you're just starting out, the $19.95 per month plan may be a more suitable option, as it gives you a higher limit of 25 clients.

For most small businesses, however, the sales rep recommends the $29.95 per month plan, which includes an unlimited number of clients, project management, team capabilities and an access for one additional staff member.

We chose Freshbooks from a pool of the dozens of payroll services we considered. To read our full methodology and for a more comprehensive list of accounting software, visit our best picks page here.

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4 Year-End Payroll Mistakes to Avoid

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For a small business owner, year-end tax preparations are just one more headache to add to the already-busy holiday season. When you're trying to do your own payroll, it can be even more difficult to keep track of all the documents to file, deadlines to meet and regulations to follow. But mistakes on your payroll, whether intentional or not, can really cost your business.

"There are many hard deadlines related to tax deposits and filings," said Phil Noftsinger, CPA and president of business services provider CBIZ Payroll. "All of these come with painful penalties for noncompliance, so employers doing payroll in-house should make sure they are very comfortable with all of the deadlines and reporting requirements for year-end."

"There can be hefty fines attached to incorrect filings, along with payroll audits," added Shelley Ng, vice president of product management at payroll and HR solution provider Ceridian.

Noftsinger and Ng outlined four common but costly errors small business owners should avoid as they wrap up their payroll for 2014.

Improperly handling taxable gifts and rewards. Taxable business expenses, such as company property and life insurance, are typically reported at the end of the year, but other items, such as reward trips and employee gifts, should be taxed more closely to the time they were received.

"Tangible items provided as holiday gifts, or even items provided related to contests [employees] may have won throughout the year, fall into this category," Noftsinger said. "[Also] tripping up many employers are the new 'points websites that allow employers to deposit points into an associate's account for him or her to spend through the website as they see fit. Once employees select an item for which to use their points, this becomes a taxable event and should appear on the associate's payroll stub."

Not researching legislative changes. Federal and state governments frequently change their tax legislation, rates and forms throughout the year, so it is critical that you understand these obligations, Ng said. She advised employers to research legislative changes and ensure that they've downloaded the latest versions of tax forms. 

Ng noted that cloud- and Web-based payroll software are updated automatically through the service provider, but if you have local software installed, be sure that you have the latest version that reflects the legislative changes.

Missing ACA-related regulations. The rules regarding year-end reporting for health insurance have become more complex with the passage of the Affordable Care Act. Employee and employer portions of health insurance costs must now be reported on associates' W2 forms — a rule that Noftsinger said employers may miss.

Incorrect employee classifications and calculations. The IRS has been cracking down on employers that knowingly or accidentally misclassify employees as independent contract workers. Ng emphasized the importance of providing everyone on your payroll with the proper tax filing form for their classification, whether it's a W2 (employee) or 1099 (contractor/freelancer). Ng also noted that, for companies with out-of-state employees or multistate locations, employers need to be in compliance with state-specific filing rules and tax calculations.

"Set up your employees properly in their current state to ensure state taxes and unemployment insurance are properly calculated, and the appropriate tax form is generated for each employee," Ng said.

If you're considering outsourcing your payroll processing to an outside firm, Noftsinger advised finding a processor that you can trust.

"Hold them accountable to making sure your relationship is important enough to them to provide a quality service," Noftsinger told Business News Daily.

Most important, as you take your business into the new year, be sure to maintain good habits and keep up your records and files right from the start.

"Don't treat year-end as an event," Ng said. "If you have good payroll, housekeeping and reconciliation processes in place throughout the year, you will mitigate headaches at the end of the year."

Crowdfunding Goes Mainstream: Trends and Tips for 2015

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Whether it's through Kickstarter or an equity platform, startups that have launched a crowdfunding campaign show how effective it can be to raise money through small contributions from a large number of people. As the popularity of crowdfunding continues to grow, startups and small businesses will be able to take advantage of the various trends that emerge in this space in the coming years. Here are three to watch in 2015.

Crowdfunding will go mainstream. In years past, crowdfunding as a means of financing a business was a novelty, a rare exception to the traditional methods of bank loans, venture capital and borrowing money. Today, announcing your crowdfunding campaign is just as common as any of these other options, if not more so.

"Many major news organizations are now highlighting noteworthy campaigns," said Bill Clerico, CEO of WePay, a payment service provider for crowdfunding, marketplace and small business platforms. "That's not just good for the campaigns, but it also normalizes the behavior and leads to more people [giving to] crowdfunding [campaigns]."

Nonprofits will benefit more from crowdfunding. The nonprofit and charity sector has particularly benefited from the growth of crowdfunding.

"This entire industry is being disrupted with the introduction of crowdfunding of donations," said Anisa Mirza, CEO and co-founder of charity crowdfunding platform Giveffect.

"Charities are seeing a twofold benefit from crowdfunding," Clerico added. "First, it's proven to be an extremely efficient way to solicit and manage donations compared with other methods. Second, the additional social and viral potentials of crowdfunding campaigns can give smaller charities a cost-effective way to create awareness for their cause."

Equity crowdfunding will grow (in states with crowdfunding exemptions). In 2012, Congress passed the Jumpstart Our Business Startups (JOBS) Act to bring equity crowdfunding to the forefront. A federal crowdfunding exemption under the JOBS Act is currently stalled, meaning that true, nationwide crowdfunding is not possible. However, Jonathan Wilson, an attorney at Taylor English Duma LLP, noted that about a dozen states have adopted their own in-state regulations for business crowdfunding.

"These intrastate offerings have had some success raising funds for real-estate projects, especially for construction financing and rehabilitation financing in deals where a bank loan would be difficult or not well-suited to the deal," Wilson said.

Gus Schmidt, attorney with Gunster law firm, noted that unless you're in a state with such crowdfunding rules, you can't truly take advantage of the proposed federal benefits of equity crowdfunding.

"Sites like GoFundMe and Kickstarter aren't true equity financing websites," Schmidt said. "You pre-sell products, and once the company gets up and running, the people who contributed will get the product. But they're not buying shares in the company. Once the SEC rolls out [a final] version of the JOBS Act, we'll see if it becomes something mainstream."

If you're hoping to launch a crowdfunding campaign in the New Year, you'll want to read the fine print on the platform or site you want to use. Not all crowdfunding platforms are created equal, and before you launch a campaign, you should know the ins and outs of each platform before you make your account.

"Truly understand the platform you are choosing," Mirza said. "From traditional crowdfunding venture firms like BrightSpark to platforms like AngelList, or even general platforms like Indiegogo and Kickstarter, there are a myriad of options. And chances are there is one that is better than others for your startup."

You'll also need a solid marketing plan to get your campaign off the ground.You may have a great idea that people are willing to fund, but if they don't know about it, you'll never see a dime of their money. Clerico reminded campaigners that crowdfunding is a challenging marketing exercise, and you need a strong, well-executed plan to raise the capital you require.

"Calculate how many people need to give at a specific amount to achieve your goal, and then devise a marketing plan to reach that many people," Clerico told Business News Daily. "Be sure to identify early champions, those who can rally their network to help you reach your goal.  Reaching out to media outlets and blogs can help your campaign get distribution as well."

Wilson agreed, noting that, although communicating with potential investors is easier than ever before, you need an organized campaign to make it work.

"Campaigns fail that don't have their business plans fully baked before they launch," Wilson said. "Invest the time to complete a business plan and all of the related contracts before trying to tell [your] story through crowdfunding."

While crowdfunding may never fully replace traditional funding options, Clerico said that small businesses, especially those outside of the tech industry, will continue to benefit tremendously from this method of raising capital.

"Crowdfunding is here to stay," Clerico said. [According to the World Bank,] "by 2025, the global crowdfunding market potential could be between $90 billion and $96 billion. Crowdfunding will grow dramatically as a way to finance nontech businesses that have been traditionally financed by bank loans and friends and family. The opportunity here is enormous, and crowdfunding has barely scratched the surface of the small business financing opportunity."

3 Retirement Plan Options for Small Business Owners

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Whether you work for a large company or for yourself, a retirement plan is important. Having your own retirement plan (or offering retirement plans for your employees) may seem out of reach, but there are actually a lot of options to choose from.

"Independent professionals may assume that they do not have access to the same types of retirement savings plans offered at large corporations," said Terry Dunne, managing director of automatic rollovers at financial services company Millennium Trust. "Similarly, small business owners may feel less capable of offering attractive retirement plan options when they are looking to attract talented hires to their organization."

However, Dunne explained that this is not the case.

"In reality, there are a number of choices available for both [independent workers and small businesses], as well as a range of service providers that offer the supporting tools and guidance necessary to select the best options to meet a range of retirement saving needs," he said.

So what are your options? Here are the three main plans available for small business owners and self-employed individuals.

Self-directed or personal IRAs

"In a self-directed IRA [Individual Retirement Account], the account owner directs all investment decisions on behalf of the retirement plan, while a qualified trustee or custodian holds the IRA assets on behalf of the IRA owner," Dunne explained.

Dunne noted that, often, individuals who have left a job and want to move retirement funds from their former employer's 401(k) plan typically choose to roll over their assets into an IRA plan.

When considering a self-directed IRA, you need to know that there are two types: traditional and Roth. What's the difference?

• "The traditional IRA allows annual tax-deductible contributions that depend on the individual's modified gross adjusted income," Dunne said. "Withdrawals are taxed. However, earnings on principal and interest accumulate tax-deferred until funds are withdrawn from the account penalty-free after age 59 and a half. Minimum required distributions are mandatory after age 70 and one-half."  

The traditional IRA is a good choice for individuals whose tax strategy is to defer taxes until after retirement, or for those who anticipate that tax rates during their retirement will be lower than their current rate, Dunne said.

• Roth IRAs have distinct tax benefits, Dunne said, noting that contributions are not tax deductible, but can be made past age 70 and one-half.

"Earnings from a Roth IRA accumulate tax-free, and unlike a traditional IRA, withdrawals are free of tax and penalties, provided certain conditions are met," he said.

Solo 401(k)s

Solo 401(k) plans are similar to self-directed IRAs in that there are traditional and Roth types. However, Dunne said that they're a lesser-known retirement plan option. Why? They don't cover employees.

"These plans are suitable only for single-employee businesses," Dunne said. "Only the business owner and their spouse may participate and make contributions to the plan."

Because of this, these plans work well for working professionals like attorneys, CPAs (certified public accountants) and real estate agents. These types of plans are ideal for those businesses' structures, Dunne said. The plans also offer more generous annual contribution limits than any of the other options; tax-deferred contributions can be up to three times that offered by other plans, Dunne explained.

Employer-sponsored IRAS

Employer-sponsored IRAs are the least-familiar retirement option plan, Dunne said. These plans work for small business owners who would like to offer retirement benefits to current employees, or to potentially attract new hires through benefits packages.

There are two options for employer-sponsored IRAs: Simplified Employee Pension IRAs (or SEP IRAs) and Savings Incentive Match Plan IRAs (SIMPLE IRAs). So how do they work?

• SEP IRAs allow employers to make contributions to their employees' retirement accounts of up to 25 percent of the employee's compensation, or a maximum of $52,000 in 2014, whichever is less, Dunne said. They are also funded 100 percent by the employer; employees do not contribute.

"The employer is not required to make a contribution every year but must contribute the same percentage for employees that they may contribute for themselves in a given year," he said.

• SIMPLE IRAs enable employers with fewer than 100 employees to establish an IRA for each participating employee, Dunne said.

"The SIMPLE IRA has requirements similar to a traditional IRA," he said. "However, with a SIMPLE IRA, employees can make salary deferral contributions of up to 100 percent of their compensation, not to exceed $12,000 in 2014 and you, as their employer, must also contribute to their accounts."

You can either match your employees' contributions dollar for dollar for up to 3 percent of their compensation, Dunne explained, or contribute 2 percent of each eligible employee's compensation.

"Before deciding on a plan provider, it is import for individuals and small business owners to determine what kinds of investment options they would prefer to have," Dunne said.

Dunne also advised employers to ask themselves these questions before they decide on a retirement plan:

• Do you prefer simple administration?
• Do you expect to have employees?
• Is it critical that your employees be able to contribute to the plan?
• Will it be important to attract and keep good employees?
• Do you want to maximize your contributions?
• Will you want to contribute every year?
• Do you want plan contributions to be deductible as a business expense?

Your answers to these questions can help you better evaluate which plan works best for your business.

You've Been Funded! Now What?

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Your crowdfunding campaign was a success, and you can finally get your startup off the ground. Now what do you do?

Whether your business was backed by equity crowdfunders or potential customers on a site like Kickstarter, you owe it to your investors to keep them in the loop about your company as it grows. After all, a business that says "good riddance" to the people who got it where it is now likely won't get very far.

While the Securities and Exchange Commission (SEC) does require annual financial reports from an equity crowdfunded business, maintaining real, genuine relationships with your backers goes beyond showing them the numbers.

"A key success factor for crowdfunded companies is the recognition of and delivery to the needs of its investors, who want to be connected to the company and feel like they are part of the entrepreneurial team bringing a new business to life," said Ron Miller, CEO of small business accelerator StartEngine. "It is important to build and keep strong relations with investors to engage them as brand ambassadors to promote the company."

Rowan Gormley, CEO of customer-funded winery NakedWines.com, noted that strong investor relationships can also be a company's saving grace during a crisis, especially when your business is backed by customers.

"When you have a great relationship with the [backers], they support you when things go wrong," Gormley told Business News Daily.

If you want to create and maintain good relationships with your crowdfunding investors long after your campaign ends, here are a few best practices to keep in mind.

Communicate consistently. If your only post-campaign contact with your investors is an annual financial report, they'll likely feel disconnected from your business. Judd Hollas, CEO of equity crowdfunding platform EquityNet, advised consistent communication (at least once per quarter) to keep backers informed about how your company is doing.

"Updating and engaging your investors will help to extract more value from their experience and mentoring," Hollas said. "Most importantly for a young business, [it will] engender better investor confidence and familiarity with the business, which can lead to additional investments and mentoring support by investors."

Take advantage of social media. Most modern companies know that social media is now a necessary tool for success. If you're able to establish strong relationships with your backers by communicating and engaging with them via social media, they in turn can become brand advocates for your company.

"As conventional media including print, broadcast and even Internet banner advertising becomes less effective, social media will become the most powerful means by which millennials gather information and form beliefs about products and brands," Miller said. "The ability of a crowdfunded company to engage the social media networks of its investors gives a crowdfunded company a clear, competitive advantage in marketing and brand awareness."

Be honest and upfront. Honesty is always the best policy, and this is especially true of crowdfunded businesses. Making promises you can't keep is bad enough when you're dealing with a couple of investors, but letting down hundreds of backers who put their faith and their money behind you can ruin your company. Sometimes your business doesn't always take the path you planned, and it's not always your fault, but in either case, don't try to cover it up.

"Customers only fund projects that they believe in, and that deliver what they say," Gormley said. "If you try to pull the wool over people's eyes, you lose their trust and then you lose their business."

Shark Tank Survival: 20 Investment Tips for Entrepreneurs

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Do you watch "Shark Tank"? The hit ABC reality show gives entrepreneurs the chance to pitch their businesses to famous investors, or "sharks," like QVC-TV star Lori Greiner and Dallas Mavericks owner Mark Cuban, in the hopes of making a deal.

With the premiere of the show's newest season airing tonight (Sept. 26 at 8 p.m. EST), a whole new crop of entrepreneurs will enter the shark tank. But the real question is: What would you do if you were in their shoes? We asked investors and entrepreneurs for their best advice for businesses seeking investments.

These tips should make it easier for you to swim with the sharks:

Make sure it's what you want

Make sure you want other people's money and interests mingling with your business. Taking on investors means giving away control and potential profit. Investor relationships can be very beneficial to the entrepreneur, but they also take time and management. Some investors are very hands off and make themselves available when your team needs them. Others will want to be in the mix with you, and your job is to diplomatically field their emails and phone calls. —Kelly Trumphour, founder, See Jane Invest

Don't over- (or under-) value your business

Understand your worth. As a new business owner, you are not worth more than $75,000 your first year. If I'm looking through your financials, and you're paying yourself more, you're mismanaging funds. Yes, you're working hard and many hours, and paying yourself first is important, but until your business is financially stable, you can't afford to make more. — Nicole L. Royer, entrepreneurial coach

Have a positive attitude

Be happy and hire happy people. Any investor will want to know that, A) you're passionate and motivated, and B) you've surrounded yourself with people who are, too. [Hire] happy people at every level, from truck team members to corporate staff. A positive team means a motivated and ambitious team that will help drive success. — Brian Scudamore, founder and CEO, 1-800-GOT-JUNK?

Try to keep your equity

Exhaust all sources of funds before giving away equity. It may seem like equity is cheaper — there is no interest, right? But you will pay your equity partners forever. While debt may seem riskier, if you believe in your business, you should take on as much debt as you can stomach before giving away any equity. — Ian Jackson, managing partner, Enshored

Gain traction first

If you already have a working product, obtain and showcase as much traction as you possibly can. In the investment world, traction is the magic word. Traction can be many things. It can be registered users, paying customers, press articles, having a large audience, letters of intention, partnerships or even a very small group of people who couldn't live without what you are offering. Traction is the most effective way to prove that your solution creates interest and is monetizable. — David Arnoux, co-founder and head of growth, Twoodo

Test your product

Do test your product at the POC (proof of concept) level with a few test customers through a Joint Development Program. This helps to create faith in investors that there is demand and also helps you build a product that will see quick adoption from the market. — Dr. Som Singh, founder, Unspun Consulting Group

Discuss demand

It is really important to articulate that the product or service that you are pitching is solving an actual need. Many times, entrepreneurs immediately start to explain their ideas, technologies, or approach to delivering better or more efficient service to the market. They gloss over whether or not there is an actual need in the marketplace for what their company is offering. — Charlie Haray, venture capitalist and professor of entrepreneurship, Syms School of Business

Work hard

Be prepared to work super overtime, break the results down into specific foreseeable levels and not stop until you can provide clear results on every level for all interested parties. Easier said than done, but after it's done, you'll make it look easy. — Stephanie Adams-Nicolai, founder and CEO, GODDESSY Organics

Control your risk

Determine what percentage of your account that you want to invest on any given trade. [If you were to] divide your portfolio into slices of pie, make sure to have a large portion left if an investment goes against you. It doesn't make sense to over-allocate or use leverage if the negative consequences are catastrophic to your account. Many professionals never risk more than 3 to 5 percent of their account, so when they are incorrect, in excess of 95 percent of the account is intact. — Alan Knuckman, chief options strategist, Barchart.com

Research the competition

Know your competition inside and out. Know their strengths and weaknesses, know who the main game players are, know everything. Always be ready for a plan of attack when things don't go your way. — Michael Bolger, co-founder and CEO, hovelstay.com

Come prepared

Be very prepared to answer every single question an investor might have. That will show that you have done your homework and thought everything through. If you hesitate, it will give your investor a chance to hesitate to invest [in] or fund you. — Jenny Feterovich, co-founder, Parliament Studios

Think long term

Think through the trajectory of your business. Investors want to know that you have thought about your future and that their investment will have a long-term positive impact. — Shemiah Williams, president, Modern Graffiti Marketing Group

Learn from negative feedback

The prevailing advice is to ignore [naysayers]. Not so. Their negative comments should help guide your homework, the goal being to know more than the naysayers and to possibly overwhelm their stuck-in-a-rut adherence to the past, enabling out-of-the-box reinvention. — Lloyd Shefsky, author and clinical professor of entrepreneurship, Kellogg School of Management

Be honest

Always be upfront and truthful about anything in your past — the good, the bad, the ugly. If you think it is irrelevant or will not be discovered, you will get burned. Nothing is worse than the cover-up. Investors will appreciate your candid recap of events (whatever they may be) and will respond accordingly. If something is uncovered that you did not disclose, the lie or lack of disclosure about the incident is worse than the incident itself. — Ken Springer, president, Corporate Resolutions

Go all in

Really believe in yourself. Every entrepreneur will say they believe in [themselves]. … But ask this: Are you willing to get a second mortgage on your house to fund your venture? Are you willing to cash in your 401k or live on credit cards? Yes? Then you truly believe in yourself and your venture, and I will believe, too. No? Then I'm not about to cut you a check. If you're not willing to go all in, it's a hobby with a safety net, not a business. — Bill Balderaz, angel investor and president, Fathom Healthcare

Try networking

Attend events where you meet potential investors such as Global Entrepreneur Week and the Hatchery's Hatch Match. These are ideal events to network and present your business and ideas. — Ian Aronovich, president and co-founder, GovernmentAuctions.org

Split your funding

Split investments between now money and strategic money. Why? Now money allows you to keep the momentum going strong, while strategic money allows you to take your business to the next level. — Brian J. Marvin, co-founder, Bringhub

Ask your family

Raise money first from family and friends. Odds are that none of them want to give you money, but you've got to try. If your business idea can't raise money from people who know you and trust you, you're going to have an even harder time raising money from strangers. — Mark LoCastro, co-founder and CEO, DealNews

Explore your options

Understand all your funding options before going to market. [The] sort of assets underlying the business, where it is in terms of lifecycle, etc. will have a huge impact on what sort of investors would be attracted to the business and, just as importantly, what sort of terms you'll have to give on. Many people seem to have difficulty effectively fundraising, in no small part because they are talking to the wrong sort of investors. — Colin Darretta, founder, WellPath Solutions

Wait until it's finalized

Never consider the investment a done deal until the deal is actually completed. So many times, a business owner thinks they have a deal and then makes decisions based on that deal being consummated. When it doesn't happen, or the investor drags their feet, the results can be disastrous. — Bill Watson, founder and director, Advanced Business Group