Category Archives: Finance

2 Problems and 3 Strategies Wall Street Just Isn’t Talking About

The following excerpt is from Mark J. Kohler and Randall A. Luebke’s book The Business Owner’s Guide to Financial Freedom. Buy it now from Amazon | Barnes & Noble | iTunes | IndieBound Let’s get to the heart of why you and I can’t get independent advice from Wall Street advisors: They’re too addicted to the fees and the love of money. And while making moneyis why we own our businesses, consumers need to know the truth about how this industry works and what’s going on behind the curtain.

In the investment industry, there are two cost structures, or powers at work, that consumers know very little about. These two combine to undercut the average investor. This is why you feel like your retirement accounts and any such goal to use Wall Street products is a waste of time and money!

1. Annual fund operating expenses (fund fees)

In America today, there are an estimated 9,500 mutual funds, with more created every day. The internal fees associated with these investments vary just as widely. I’m not bashing fees per se. Certainly, everyone needs to be paid, and no one’s opposed to paying for value. The problem is, most of these mutual funds charge a lot of fees but don’t deliver an equal value The fees taken by the mutual fund managers and companies can be off the chart!

Based on a 2011 Forbes study titled “The Real Cost of Owning a Mutual Fund,” author Tony Robbins summarizes that “If the fund is held in a nontaxable account like a 401(k), you’re looking at total costs of 3.17 percent a year! If it’s in a taxable account, the total costs amount to a staggering 4.17 percent a year!”

The result is that your “carefully chosen” mutual fund, selected by your advisor or broker, can barely exceed the market returns of a no-load index fund. In fact, Robert Arnott of Research Affiliates reports that 96 percent of mutual funds failed to beat the market over a 15-year period in large part due to these excessive fees!

Bottom line: We’re doomed before we even get started when we trust in the investment advice of our so-called “independent advisors.”

2. Administrative fees (plan fees)

If you didn’t think mutual fund fees were bad enough, let’s add talk about the administrative fees of a 401(k) (the vehicle that holds your mutual funds). Again, Robbins exposed this scheme, stating, “You’ve got to hand it to these providers: They’re truly ingenious when it comes to dreaming up different ways to siphon off the money in your 401(k)! Just to be clear, we’re not referring here to the absurdly high fees you’re being charged by the mutual funds in your 401(k) plan. These are the additional fees that you’re also being charged by the plan provider that’s administering your 401(k).” Administrative fees can range from 1.6 to 7.75 percent or more, and again, that’s on top of the actual mutual fund fees.

Three strategies your advisor won’t talk about

You’ll never hear your advisor discuss the following three strategies, at least voluntarily — and if they do, they will downplay, disregard and outright discourage you from considering them. And yet, these three strategies will allow you to build for your future while growing your greatest asset of all: your business.

1. Investing in your own business more aggressively

Your business can be your most valuable asset, at present and/or potentially in the future. We believe it will become the vehicle that drives you to your financial freedom. Why not maximize its value cautiously and carefully? You need to find ways to optimize your business more fully and feed, or “fund,” a diverse array of assets that will give you financial flexibility and ultimate freedom.

Real estate is such an important part of wealth building. More specifically, rental real estate has incredible tax benefits, generates cash flow and builds tax-deferred equity, and it can even do so using leverage and the bank’s money.

Real estate should be included in your portfolio (and I’m not talking about a REIT), but your investment advisor won’t tell you that. They don’t get a commission for recommending you buy a building to rent back to your business operations, a duplex where your child is going to college, a real estate project next to your parents where you travel twice a year or a few houses to rent in an upcoming neighborhood.

3. Self-directing your retirement accounts and investing in what you know best

One of the best-kept secrets on Wall Street is that you can self-direct your 401(k) or IRA assets in vehicles of your own choosing. But, the last thing the large brokers/dealers want you doing is taking over your IRA or 401(k) and investing in what you know best. If Wall Street was really looking out for your best interests, they’d give you this option.

Sometimes you’d be wiser to redeploy your 401(k) or IRA in investments you know more about rather than a mutual fund. That’s right, invest directly inside your retirement account maintaining the structure and continue to make annual contributions within your overall tax strategy.

Here are just a few ideas of what you could do inside your retirement account without taxes, transfer fees or penalties:

  • Purchase a rental property and even borrow up to 60 percent from a bank in a nonrecourse loan. This can ensure cash flow going back into your retirement account with no personal guar­antee with your own credit
  • Invest in a racehorse, ranch or farming operation
  • Buy gold, silver or other precious metals
  • Invest in small business, real estate development or an online business, primarily owned and managed by someone you know personally and trust.
  • Start your own franchise owned by your 401(k) where you are still allowed to work in the business for a salary under the ROBS strategy.                                                                                                                                                                                                                                                                                     Original

The Truth About Your Financial Advisor

The following excerpt is from Mark J. Kohler and Randall A. Luebke’s book The Business Owner’s Guide to Financial Freedom

Wall Street doesn’t understand the small-business entrepreneur. Your business is of no interest to them. Unless your business is driving billions of dollars in annual sales, you’re just too small and inconsequential for Wall Street’s big money strategies. Essentially, to the Wall Street advisor, if you aren’t planning on going public or aren’t able to provide a unique opportunity for a private equity firm to invest in you, they won’t even talk to you.

What’s worse is that the Main Street representative of Wall Street, for example your “local” stockbroker, insurance agent, or financial planner, says they care about you, but it’s only a half-truth. I call them the Main Street representative because they’re on the front lines working for one of the large Wall Street firms selling their products to “help” the average-income American or entrepreneur. But the half-truth is, they’re captive to their employers.

Captive means that they can only recommend their company’s products or services, and if they don’t, they get fired. Do you really think your broker at Northwestern or Merrill Lynch is going to recommend a different product or strategy from Edward Jones, or even a self-directed custodian like Pensco or DirectedIRA?com? Of course not! When it comes to your retirement portfolios, the last thing you think you’re going to get is independent advice that’s best for you.

An Independent Advisor

I chose an amazing financial advisor, who’s also my co-author for this article. His name is Randy Luebke, and he is truly an independent advisor who’s legally required to give the best advice for his clients—not to give advice to enhance his own income.

Randy is what’s known as an Investment Advisor Representative (IAR), and he owns his own Registered Investment Advisory (RIA). While this designation and business arrangement isn’t a guarantee of independence, without it, he or any other financial advisor would find it difficult if not impossible to provide truly independent advice. In Randy’s situation, however, it does mean he’s not associated with a broker-dealer and he doesn’t sell any proprietary mutual funds or other financial products. You may not realize it, but such independent advisors make up only 1.6 percent of all financial advisors in the country. Simply stated, he’s only one of approximately 5,000 independent advisors out of more than 310,000 licensed financial advisors in the country.

Tony Robbins related his own frustration about trying to find independent financial advisors: “How are you supposed to tell which hat they’re wearing at any given moment? Believe me, it’s not easy. I’ve had the experience of asking an advisor if he was a fiduciary and having him look me in the eye and assuring me that he was . . . and he lied to my face.”

Let me explain what this term fiduciary really means, as well as suitability.

Suitability Versus Fiduciary Duty

These two terms are rarely talked about by your rank-and-file advisors because they don’t want to scare you away. Suitability means how appropriate the financial product is for the investor in a broad sense. Essentially, as long as a financial product is within your risk tolerance and they think you can take the hit if it loses, then the advisor can sell it and you can’t sue them for the advice they provided you to buy it.

Fiduciary duty means that the advisor has a duty to recommend and to do what’s best specifically for YOU—not for their employer. The type of advisor held to this standard is licensed as an Investment Advisor Representative, and they work for a Registered Investment Advisory. Now you may think that your local advisor on Main Street is different, but they aren’t. In fact, the local advisor tied to a large brokerage firm or even a small independent shop that’s supervised by a broker-dealer is contractually obligated to sell you their products and only their products. Any recommendations to invest your money otherwise would likely be in violation of their employment agreement.

This would be what’s referred to as selling away, the practice of recommending and selling assets to you that would move your money away from their employer’s/broker-dealer’s firm and investing your money elsewhere. Even though investing in something other than the securities that the firm sells may be in your best interest, the Wall Street advisor cannot recommend it, or they could and would likely be fired.

The sad part is, you can’t exactly blame them. It’s like watching one of those wildlife videos where the lion kills a deer and then getting mad at the lion. You can’t blame the lion. This is what they do. They hunt and kill to survive. Selling you Wall Street’s financial products is what the Wall Street advisor does. You can’t blame them either. It’s what they do to survive.

5 Tips for Financing Your Startup

In any economic climate, it is challenging to find the funds to set up a business. Many entrepreneurs fail because they don’t perform thorough research before venturing into business. It’s important to fully investigate the economic market of the area of business you are about to step foot in, as this helps to determine the degree of difficulty to finance the business. On the other hand, it’s also easy to let overanalyzing and overthinking stop you from taking the leap.

Any entrepreneur will tell you that securing start-up funds can be the toughest part of starting your own business. As Inc. states, “nothing is scarcer than cash (except maybe sleep) when you’re starting out.” While the competition for funds gradually increase each day, your chances of securing investors significantly slims. So, before writing an application for business financing, you need to prepare yourself. Below are helpful tips for financing your small business start-up.

1. Have a Detailed Business Plan

A business blueprint is the foundation of every successful business, as it maps out the course of the enterprise for several years. Without proper business plans, investors will not see the value of investing in your business. Martin Zwilling, Veteran startup mentor, says that “to Investors, Startups Without Business Plans Are Just Expensive Hobbies.” According to Entrepreneur, “one of the quickest ways to kill your credibility and your startup is to offer a poorly written business plan, or none at all.”

If you want to secure sufficient start-up funds from lenders, you must be able to show them a detailed business plan. It uncovers the opportunities you have identified in the market that will bring profits – if funded. Additionally, in the business plan, you should indicate measurable goals that will convince lenders to support your idea. Not sure where to start? Here are some templates to get you going.

2. Seek Advice from Experienced Investors

You should acquire financial advice from experienced investors in your locality. They will show you how they obtained funds to start their own organizations. Additionally, they will direct you to the right lending firms to get business loans at the lowest interest rates. Apart from advising you, expert investors can also offer you resources to start your business. Many successful and philanthropic business magnates are willing to fund viable ideas that are likely to bring profits (think Shark Tank).

3. Maintain a Good Credit Score

good credit score allows you to enjoy numerous benefits. Banks will be more likely to provide you with enough money to start a business, as well as provide you with loans with better terms and lower interest rates.

If you have a bad credit score, you should repair it before approaching financial institutions for loans. Some concrete ways to steadily increase your credit score include simply applying for credit cards, making everyday purchases with them and paying them off immediately… and I mean immediately. A common misconception about credit cards is that you will have to pay interest on every single purchase that you make, but that’s not necessarily true. Typically you will only have to pay an interest rate on a credit card payment if you do not pay your bill on time. That’s why it is inherently important to pay off your bill right after you make a purchase using your credit card, because if you wait until later it becomes easier and easier to forget.

4. Network With the Right People

You’ve probably heard it before, networking with success-oriented individuals will enable you to significantly grow your business. Professional networking is healthy for all sorts of businesses and it can help you acquire the funds to start a new enterprise.

When you’ve done a solid amount of face-to-face networking, you can also take advantage of these networking skills online. You can use a crowdfunding site to raise money to start your business. Set a goal to raise a particular amount of money within a specific period and use the power of the crowd. The Freedom Journal, for example, raised $453k in 33 days on Kickstarter.

5. Make a Budget and Shop for Financing

budget is the financial aspect of your business plan that should guide your new venture. Most of the time lenders demand a detailed budget before releasing funds to their clients. After making a budget, you should approach several financial institutions in your locality. Consider a lender that offers business loans at the lowest interests.

By implementing the above tips before you go out to find investors, you will be able to acquire sufficient money to fund your start-up. The next step after raising the money is to hire competent employees who truly support your idea. Now it’s time to grease those elbows and raise some money.


Why Bartering Can Be Your Untapped Revenue Source

Many small- to medium-size business owners have begun to barter, trade and swap goods and services without any cash involved.

Take the city of Portland for example. Unsurprisingly, the culturally tight-knit and self-proclaimed weird city has given rise to a thriving underground bartering network. A recent Rolling Stone article showcased the colorful personalities and supportive business community that is Portland’s bartering economy. Some of them call themselves “swappers,” others simply identify as community-oriented business owners. All of them share a common bond of exchanging goods and services to help each other grow.

The trouble with traditional bartering like this is that it’s incredibly difficult to scale. The idea of a coffee shop exchanging beans for fresh food from a local grower is nice, but any business looking to expand can’t possibly expect that kind of barter to lead to scalable growth.

 That’s what gave Bob Bagga, CEO and founder of BizX, the idea to create a community that enables businesses to turn their excess capacity into potential capital. Bagga explains, “By using the BizX dollar, businesses are able to turn extra business capacity and assets into cash flow, which can, in turn, be spent at member businesses without any cash involved. The goal for us is to reduce waste, maximize member potential and help companies earn new customers.”
 By creating a complementary currency to power commerce through the sharing of excess goods and services, Bagga and his team have given business owners a chance to create cash-free lines of capital for little more than their incremental cost of goods sold.

Cash-free capital

Most business owners have plenty of great ideas to grow, but lack the capital and cash resources needed for those growth initiatives. Take a restauranteur, for example. Expanding or upgrading the restaurant may be their desired path for generating increased revenue, but the cash required for such an undertaking might not be readily available.

What if that same restaurateur was able to exchange empty seats and excess food for a shared currency that they could then spend at other businesses in the network? While trading one meal with a contractor might not result in enough capital to exchange in return for a major overhaul, many units over time will eventually add up.

That’s precisely why business owners are looking for alternatives to traditional financing and venture capital raising. Those models, though effective, often edge out small- to medium-size businesses in favor of rapid growth SaaS companies or user-heavy business models. As a result, businesses looking at growing should explore growth opportunities that require little to no upfront investment.

The future of B2B commerce

B2B companies often operate at less than their full potential. Bagga pointed out that small businesses in the United States, on average, only run at 80 percent capacity. In many cases, this is simply because connecting with new customers presents a real challenge.

Also, most B2B companies have excess business potential because they offer products or services that could field more customers at a small marginal cost of goods sold. As such, many can afford to accept an alternative form of payment, as long as they can use it for other practical applications.

Cash flow isn’t always confined to exchanged services either. In many cases, these unique partnerships result in cash business resulting from direct referrals from services rendered in exchange for other goods.


8 Lending Terms That Every Entrepreneur Must Know

If you’re just beginning your hunt for business financing, you’re likely knee-deep in unfamiliar terms and lending jargon. And it’s enough to make even the most eager entrepreneur feel overwhelmed. Don’t continue your search without reviewing a few of the essential terms you need to know to make an informed decision about financing your business. We’ve broken down eight must-know terms below.

1. Term loan.

Term loans are a lump sum of cash you pay back, plus interest, over a fixed period of time. Traditional term loans usually offer longer payment terms and lower monthly payments than short-term loans and other forms of emergency financing.

 Securing a term loan, however, requires a high degree of creditworthiness on the part of your business. If your business is very young, has poor credit, or presents any other kind of risk to your lender, you may find it difficult to secure a term loan from a traditional lender.

2. SBA loan.

Small Business Administration loans offer even longer terms and lower costs than traditional term loans, as they come partially guaranteed by the U.S. government. SBA loans are specifically designed to give small business owners the most affordable financing possible as they grow their businesses. (Brace yourself, however, for a long and competitive approval process and lots of paperwork.)

3. Line of credit.

Another popular loan product your lender might offer is a business line of credit. This kind of financing provides a borrower with revolving credit, allowing you to borrow and pay back that borrowed amount over and over while staying within a maximum, as you would with a credit card. Unlike a loan, a line of credit offers you capital as needed, and you’ll only pay interest on what you withdraw.

4. Annual percentage rate.

An annual percentage rate, or APR, is essentially the annual cost of your loan. It’s quoted as a percentage, like your interest rate, but provides a more accurate view of what your loan will cost you. In addition to interest owed, your APR will also include any origination fees, closing fees, documentation fees, etc. The APR offer you receive will vary from lender to lender, based on the loan product you’re seeking and your history as a borrower.

If you’ve been eyeing a loan, be sure to consider its APR before moving forward. The loan’s total annual cost could be higher than you anticipated.

5. Income statement.

An income statement details your business’s net income, revenue and expenses for a specific period, such as quarterly or annually. You’ll come across this term when filling out your loan application. It’s one of the most important components of your application. You might also see it called a “profit and loss statement.”

This document illustrates your business’s financial health and the strength of its bottom line to your lender. You can prepare your statement yourself or with the help of an accountant. Income statements come with their own set of jargon, so it helps to familiarize yourself with their vocabulary before diving in on your own.

6. Collateral.

Collateral describes any asset you pledge to a lender to help secure a loan. This could include real estate, equipment, accounts receivable, inventory — anything a lender could liquidate if you default. Collateral minimizes the risk to your lender should you fail to hold up your end of the bargain.

If you’re considering a secured loan, expect to put up collateral when you apply. Unsecured loans won’t require collateral and typically come with less stringent credit requirements, but also higher rates.

7. Personal guarantee.

If you agree to a personal guarantee when taking out a loan, you commit to being personally responsible for your debt in the event of default. Unlike collateral, this type of security allows a lender to seize personal assets if you can’t pay back your loan — assets like your retirement fund, your car, or your house. Limited personal guarantees put a cap on how much can be collected, while unlimited personal guarantees allow a lender to pursue you until your debt is repaid.

Personal guarantees can be vaguely or confusingly worded, so it’s best to consult with a legal professional before accepting a loan with a personal guarantee.

8. Debt-service coverage ratio.

Your debt-service coverage ratio, also known as the debt coverage ratio, is the ratio of cash a business has available for servicing its debt, which includes making payments on principal, interest and leases. It is computed by dividing a business’s cash flow (more specifically, net operating income) by the debt service payments (loan and lease payments). If your business owes more than it earns, you’ll have a DSCR of less than one. If you’re on top of your debt, you’ll see a DSCR of one or greater. Most lenders want to see a DSCR of 1.25 or above. They want borrowers who can afford to take on new debt, along with some extra cushion.

This is not an exhaustive list by any means. But we hope that it will help point you in the right direction. The more you understand the lexicon of small business loans before you start your search, the better you’ll be able to secure the right loan for you.


The Best Blogs to Help Entrepreneurs Boost Their Personal and Business Finances

The more information you have, the better the decisions you’re likely to make. That goes for everything in life and business, but it’s especially important when it comes to money. Your financial IQhelps determine the best approach to spending, saving and investing your money. This knowledge canmake a massive difference to both your bank account balance and your overall success.

Here’s where blogs come in, as a great source of information for growing your financial IQ. They offer information on trends, issues, solutions and tips that can change your perspective — and the strategies you apply to your business and personal finances. Topics span from credit scores, credit cards and loans to savings, retirement accounts and budgets.

The followinge free financial resources are regularly updated, so you’ll always have something new to read or new insights to apply.

Small Business Administration

While this government agency is known mostly for providing forms and legal information, its blog is a must-read for small business owners.

The Small Business Administration’s financing blog covers a wide range of finance-related topics, including taxes, retirement accounts and business and personal expenses, just to name a few.


The TaxBuzz blog is beneficial for small business owners who need the advice of tax professionals. Taxes can become quite complicated when you’re operating a business; you don’t want to pay too much or get hit with penalties.

The blog has a wide range of blog posts produced by practicing CPAs to guide your tax decisions.


This blog comes from an expert source on personal finance, and it aims to help consumers navigate the credit world while making better and more educated decisions about purchases. Some of CreditSoup’s great advice addresses topics like the credit basics, such as selecting credit cards and using them, spending and saving money, insurance, loans and taxes.

Many of the blog posts can also be applied to the financial decisions you need to make for your business.

The Financial Revolutionist

The Financial Revolutionist invites seasoned Wall Street leaders to share their insights so business owners can understand the ongoing changes in the financial services environment.

This includes fintech and regtech, which impact financial decisions in today’s businesses.

Payments News and PYMNTS

PYMNTS and Payments News both contain a wealth of financial information about money and payments. The posts feature insights about new technology, compliance and regulations, fraud and other issues that impact a business owner’s financial position.

Money Under 30

Money Under 30 may offer advice from millennials and Gen-Zers, but the information applies to people of all ages. Topics run the gamut from home and car-purchase advice to how to reduce your debt load and use credit cards intelligently.

The content offered also includes content relevant to consumers and business owners alike.


This online invoicing and payments company shares tips and recommendations from a team of money experts who share advice on how to budget, save, create a retirement fund and make decisions regarding health care and other expenses.

The Due blog’s small business content extends to business financial issues, including payments, client invoicing, pricing and cash flow.


This blog comes from consumer expert Kerry Taylor. She uses Squawkfox as a platform for sharing advice on creating a lifestyle that’s free of financial stress. The focal point is personal finance topics, but much of the information crosses over to small business owners, whose work and personal lives intersect.

The blog includes multimedia content, including videos.

The Penny Hoarder

Increasing your financial IQ can be particularly effective in finding you ways to be smarter about spending money. There’s no reason to give away what you earn, and The Penny Hoarder shows you how to spend less without compromising on what you get in return.

Topics include money hacks, where to find coupons and free stuff and how to save money on things like utilities, groceries and other common expenses.

Debt Roundup

Blogger Grayson Bell created his blog, Debt Roundup, after figuring out how to pay off an incredible amount of credit card and auto loan debt. It’s more compelling to read advice from someone who’s experienced debt, and his tips show you how to make and save more money than you thought possible.

The blog also offers free money management tools.

Oblivious Investor

Oblivious Investor is brought to you by Mike Piper. Many consumers and business owners are wary of investing, and this blog helps alleviate those fears. Its financial intelligence includes advice for beginning investors, as well as those who are more experienced.

Piper shares insights about different types of investments, changes in the regulatory environment and tools to build the best portfolio.

Afford Anything

Paula Pant’s Afford Anything delivers advice from the female perspective on money management, but in the process attracts both female and male entrepreneurs and business owners for tips on increasing their earnings.

The site’s content covers real estate and income properties, creating businesses around investments and productivity strategies that help you make more money.

Man vs. Debt

This blog is really about man’s (and woman’s) struggle against debt. Adam and Courtney Baker created the blog after figuring out the best strategy for paying off their debt and creating the lifestyle they wanted.

To help others do the same with their own lives, Man Vs. Debt shows people how to not be slaves to material items (and the debt that typically comes with them).

Start reading!

Visit these blogs to determine which ones work for achieving your personal or business goals. Then, you can bookmark the ones you like best, add them to your social media circle to stay updated and subscribe to their feeds.

The more you read, the more you know and the better your financial position will become.


Don’t Let Money Be an Obstacle to Starting a Business — 5 Reasons Why

I’ve found that a surprising number of professionals — the majority, in fact — have dreamed about, or at least considered, the possibility of becoming an entrepreneur. So why aren’t there more self-started businesses out there?

One reason is that people are apprehensive — and understandably so. Starting a business is usually a massive undertaking, requiring significant time and money that people don’t believe they can spare. They might be preoccupied with their current careers, or might prioritize spending time with their family over anything else.

But, more commonly, I observe, people are reluctant to start a business because of the money; they either believe they don’t have enough to start a business successfully, or are scared of the risks involved with putting the money down.

If the financial aspect is your own greatest concern about becoming an entrepreneur, keep these points in mind.

1. Money can usually be saved, if you put in the time.

Most things you’ll buy in a business can be created, for free, with enough investment of time. For example, you could pay a firm or an in-house professional to build your brand through marketing and advertising, or you could spend a few dozen hours learning how to do it yourself. Similarly, you don’t really “need” to hire someone new. You can take on those responsibilities yourself and double your working hours.

Of course, it may not be the wisest or most efficient move to do everything yourself: Not only will your lack of expertise make it harder for you to be effective, but you could put yourself at greater risk of burnout. Still, it’s worth remembering that you can trade money for time in most instances and still succeed.

2. Most things online are free.

Next, don’t forget the enormous number of resources and opportunities that are available online, for free. You can build a website for free (or nearly free) using website builders like Wix or WordPress; and the final product will be reasonably professional-looking. You can create accounts and connect with audiences for free, at any time, on pretty much any social media platform or forum.

You can even post classifieds and upcoming events, using free sites like Craigslist. The internet is full of information and free resources, so if money is an issue, consider taking advantage of them.

3. There are many sources of initial capital.

Let’s say that you’re not willing to invest time instead of money (and for good reason), and that the free resources you’ve found can’t give you everything your business needs. You still need capital, and chances are, you don’t have enough to fund the business yourself.

In that case, it’s important to remember the many potential sources of initial capital. If you’re willing to part with a percentage of your ownership in the company, you can work with angel investors or venture capitalists for an early cash injection. If you’re making something tangible, you could use Kickstarter, or another crowdfunding platform to raise initial funds.

If you have friends and family members who believe in your idea, you could even ask them to contribute. There are multiple possibilities here, so chances are, at least one will pay off for you.

4. Early revenue should provide everything you need.

You might also note that once your business starts generating revenue, you should have everything you need to keep the business running. Assuming you’re able to forgo drawing a salary from the business for the first few months of operation (thereby allocating your time to the business for free), you can redirect all the inbound cash flow you receive to other internal company developments.

Your business doesn’t need to be fully fleshed out to get you your first customer; in fact, you may not even need a website or a brand in place. Go with a minimum viable product, and prioritize the establishment of an early line of revenue. The rest will fall into place.

5. Loans can close the gap.

If you’re still struggling with money, or you start off successfully but run into an obstacle, don’t rule out the possibility of getting a loan. Opening a line of credit is relatively easy and can provide you with all the cash you need to get through rough patches; and if your business doesn’t have enough credit or history to get a loan, you can apply for a secured loan, or a personal loan instead.

I’m not arguing that money isn’t an obstacle, or that money shouldn’t be a concern. In fact, it’s a good thing that you’re fiscally responsible enough to assess the financial straits of entrepreneurship. However, money isn’t the solution to every problem, and starting a business could take less money than you think.


It’s Time We Declared Our Financial Independence

What does financial independence mean to you? For retired Navy Commander Bob Chambers, it means “spending time with family and friends and having a predictable, life-long income that provides a comfortable lifestyle.”

Commander Chambers retired before he turned 50, putting him among a small, but growing, group of super-savers achieving what’s called “FIRE” (financial independence and retire early). Early on, Chambers knew he wanted to attain financial independence, enjoy a comfortable lifestyle and leave a legacy for future generations. (Learn how he did it in his booklet “Financial Independence Made Easy,” available as a free download.)

Financial independence can be defined as being able to handle whatever challenges life throws at you. Yet how many of us have this kind of true financial independence? Only 52 percent of those asked in a recent Bankrate Financial Security Index survey have more money in emergency savings than in credit card debt, and 24 percent have more credit card debt than emergency savings. A recent report by the World Economic Forum calls retirement savings a “global retirement time bomb,” with Americans facing the largest gap between what they’ll need and what they’ve saved. The collective shortfall hit $28 trillion in 2015 and is expected to rise to $137 trillion in 2050. It’s clear to me that Americans need a financial revolution in 2017 as surely as we needed a political revolution in 1776.

Our system of earning, saving and investing money is simply broken. It relies way too heavily on the tag team of government and mega-banks and financial institutions, and way too little on the self-reliance and individualism that made our nation great. Wall Street and other peddlers of financial snake oil have spent fortunes in the effort to convince ordinary, hard-working Americans to place our trust and our financial futures in their hands. Will we never learn?

Market crash after market crash, investment bubble followed by investment burst, our money enjoys no rest from the seesaw, stomach-wrenching ups and downs that result from following the advice of these so-called experts. Not only do tens of millions of us frequently get jarred from our trance-like state to discover we’ve lost a huge chunk of our nest eggs just when we need our money most, but if we look carefully, we also realize that our advisors and money managers have walked off with a sizeable portion of our assets, masked behind the fine print of fees and expenses. The crumbs our advisors leave for us — if they leave any at all — are then subject to additional taxes from our good friends in the U.S. government.

Taken together, the abuses of government and private financial institutions may not rise to the level of misdeeds that our forefathers suffered at the hands of their British overlords. But they do suggest the need for all right-thinking Americans to free themselves — as much as humanly possible– from the tyrannies of today’s financial despots.

Declaring our financial independence.

So, in the spirit of Thomas Paine, Thomas Jefferson, John Adams, John Hancock, Benjamin Franklin and other revolutionary thinkers, I’d like to propose this “Declaration of Financial Independence:”

“We are free and independent citizens who love our country and honor our duty to live in a lawful and responsible manner. However in the course of events it has become necessary for us to dissolve the financial bonds which have therefore led us to rely upon the goodwill and good offices of government and private financial custodians to provide for our financial security, growth and wellbeing.

“We mutually pledge to each other our commitment to remain true to these self-evident principles of financial independence:

“That we will be the stewards of our own financial affairs, including the establishment of accounts and our own systems to safely serve us throughout our lives, including times of ill-health and in retirement.

“That we will resist and rebuff those who preach that risk and volatility are necessary to create wealth and achieve financial growth.

“That we will not be taken in by Wall Street promoters and other button-down hucksters who profit regardless of their performance and often impose well-disguised fees and expenses to lard their pockets.

“That we will make financial literacy a lifelong priority, confident in the belief that no worthwhile financial topic is too complex or too difficult for average citizens to understand, despite the frequent assertions of those who would have us believe otherwise. To be financially independent requires us to become and stay informed.

“That we will work within our communities and at the polls to encourage others to embrace their own financial independence and to live under laws and regulations that allow all Americans to stand squarely on their own two feet in all financial matters.”

Declaring our financial independence is an act of patriotism and very much in keeping with the spirit and intent of our forefathers, who gave their lives, fortunes and sacred honor to secure our liberties — including the freedom to direct our own finances and embrace the principles of self-reliance.


5 Quick Bootstrapping Tips for Entrepreneurs

Bootstrapping your business can be a smart and effective way to go. It gives you an added level of control and independence, as you can follow your own vision (within your financial limits) and not be bound to the opinions of investors.

It will likely require a great deal of patience. Here are a few tips to get the ball rolling.

1. Get acquainted with the term “burn rate.”

Know your budget better than the back of your hand. Many burgeoning entrepreneurs are too optimistic about expenses, often underestimating how much they’re actually spending and finding themselves dealing with severe budget issues.

As you engage in the budget-building process, err on the side of caution, increasing your burn rate estimate by 15 to 20 percent of your initial number. From this point forward, you can monitor your monthly spending until you can gain a clearer picture of your actual burn rate.

Additionally, you can look to cut expenses to line up with your projections. Do this in all aspects of your life, not just in business — as a business owner, your outside financial decisions still impact your overall success.

For example, if you’re paying off a car, look into refinancing your car loan. According to Auto.Loan, there’s a good chance you can lower your monthly payments and interest rates as long as you’ve been on time with previous payments.

2. Become a C corporation.

While becoming a C corporation won’t give you the sexy LLC label, it minimizes the personal risk involved in bootstrapping a startup. As a C corp, you won’t be taxed in conjunction with your business, or rather, you and your business are separate entities.

This way, you aren’t held responsible to pay taxes on everything your startup makes, which, if business is good, can end up being quite a bit. Operating as a C corp gives you a bit more safety and motivates you to keep good track of both individual and business finances.

3. Stay away from credit card debt.

This is where patience really becomes a virtue. Many business owners form an unhealthy reliance on credit card debt as they try to grow. Do whatever you can to avoid this. This debt will stack up, and eventually you’ll have to reckon with it.

As difficult as it can be, you’ll have to learn to operate within the bounds of the money you actually have. This is what makes bootstrapped startups rare, but it is also what makes them special.

4. Focus on becoming well-rounded.

Bootstrapping a business is not for the faint of heart nor is it for the one-dimensional businessperson. In order to successfully bootstrap your startup, you’ll have to wear many hats.

Get ready to become a financial wiz. Be prepared to earn your keep by coming up with a marketing strategy for your product. At least for the first while, it’s going to be your responsibility to fill in wherever there’s a gap.

5. Make connections.

Making a connection doesn’t necessarily mean financially getting involved with an outside party. In this case, making connections can help you find new customers and, more importantly, facilitate the learning process as you associate with established successes.

Remember: Just because you’re funding yourself doesn’t mean you can’t look for help. As you connect with experienced entrepreneurs, pick up as much knowledge from them as possible. Learn what works and what doesn’t. Take their advice on how to apply these lessons to your business. These connections will often prove just as valuable as a financial investment.

Ultimately, you’re responsible for your own success. Bootstrapping your business makes this doubly true. But, if you can patiently navigate the waters of building a startup, it will be worth all the time and effort you put into it.


4 Reasons Online Lenders Are Innovating With Purchasing Cards

Having worked with or for online lenders for the better part of a decade, I know firsthand how difficult it is to remain competitive in an ever-growing marketplace. Cost of funds remains high from upmarket lenders and margins are thinning by the day. Yet consumers and small business borrowers are demanding faster underwriting and quicker speed to funding, and investors continue to demand record-breaking quarterly loan volume.

How are online lenders keeping their heads above water? They are getting creative.

In recent years, Kabbage and others have stepped up to introduce a purchasing card product to their borrowers, and with their early success, many lenders are now following suit for the following four reasons:

1. Staying on top of the customer’s mind

Point-of-sale lenders (lenders who offer a loan at the checkout aisle of the store) are starting to look for new ways to reach the consumer directly and at more than one location. It follows naturally that several lenders are working to roll out a card product for this very reason.

In the small business lending space, Kabbage decided to offer an actual card product to their borrowers to receive loan disbursements, not just putting the company on a customer’s mind, but literally in their wallet as well. As borrowers began to think of Kabbage as their lending source for making purchases, they turned to the brand more often for financing needs. In fact, utilization has increased markedly with those borrowers who have chosen to receive a card.

2. Speaking the language of large corporate partner targets

For point-of-sale lenders, the key is to secure and maintain as many retailers as possible to serve as salespeople for the lender. While many lenders begin with the local retailers in their backyard, most aspire to land a big-box retail account like GreenSky secured Home Depot and Affirm secured Experian. This changes the game for an online lender in terms of revenue but carries with it complicated requirements from the retailer.

Large retailers are not accustomed to receiving funds from a lender via Automated Clearing House (ACH), the leading method for moving money between lenders, borrowers and merchants. These retailers demand that all partners have the ability to pay them in real time and via the same credit card “rails,” or payment method, as they receive all other funds.

“Lenders are looking for ways to improve their bottom line while at the same time improving their borrower’s experience,” explains Omri Dahan, Chief Revenue Officer at Marqeta, a processor of cards for online lenders who announced a partnership with Visa last week. “Whether a small business or point of sale lender, a Marqeta payment card meets both objectives. We continue to focus on online lending to offer our customers the tools they need to stay ahead of the market.”

Introducing a card product — whether plastic, virtual or via digital wallets — allows the lender to send loan funds in real time for goods or services, just as if the purchase was with any other card and without the labor of integrating completely with the retailer’s Point-of-Sale infrastructure.

3. Underwriting use of funds

When lenders make a loan, they are often highly limited in seeing how those loan proceeds are spent. Even with technology integrations with the borrower’s bank account, the lender can only see in-flow and outflow of cash from that bank account, but even this data cannot be tied directly to the loan funds that were distributed. This makes it difficult to ensure that loan funds are being used for their intended purpose.

For small business lenders, use of funds is a very important data point in the underwriting process. Offering a loan for inventory, for instance, is much lower risk than offering financing for marketing, as the inventory can be sold, if necessary, and redeemed for value to the lender. Therefore, many lenders are not willing to offer financing for certain uses. Unfortunately, many borrowers have learned this, through applying for multiple loans, and are even sometimes coached by brokers to lie about use of funds, knowing that the lender is none the wiser.

“Kabbage as a company couldn’t have existed ten years ago because we didn’t have access to the data in real time that we use to help our customers get access to capital,” explained COO Kathryn Petralia. “Using APIs our customers share with us to run their business, from processing data to checking account data, we can make rapid decisions to offer our line of credit product.”

Small business lenders have now begun to use card products to understand the exact spend that is tied to their loan. This helps the lender determine whether the borrower is an accurate risk profile for future loans, and does so in a way that the borrower cannot “fudge the numbers.”

4. Revenue sharing

Ultimately, online lenders are looking for the most attractive way to smooth out their revenue growth curve but cannot do so at the cost of their borrower. This limits the lender from gaining meaningful ground without either finding lower cost of funds or finding more customers (either through new products or new customer acquisition methods).

Cards are quickly entering business plans of lenders because of the new revenue stream they produce for the lender. By offering a card to borrowers, lenders are now able to share in interchange. This can generate incremental revenue for the lender, and in a game where every basis point counts, they are paying attention.

With the crowded and murky competitive landscape in online lending, coupled with the need for lenders to grow quickly, innovations in delivery methods are gaining meaningful ground. Payment cards are now part of the solution.