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December 2014 Newsletter

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NEDCO Spotlight: Freckles & Frills Learning Center of Scranton, PA

TARA A. BURNS – JUNE 19 2014, 12:04 PM ET
Northeastern Economic Development Company (NEDCO) is pleased to have partnered with Fidelity Deposit Discount Bank in granting an SBA 504 loan to Freckles and Frills Learning Center of Scranton, Pennsylvania.  In 2011, the funds were put to work on the expansion and development of their facility.  With the help of the SBA and NEDCO, Freckles and Frills was able to secure the credit necessary for the purchase of an additional building and remodeling costs under the direction of Elizabeth Keiper.  The project was completed in September of 2013 and has been a tremendous success for our community.

Since its establishment as a nursery school in 1977, it has grown to become a full service child care and early learning center.  It currently provides high quality child care to children ranging from 6 weeks to 12 years of age.  Freckles and Frills Learning Center has developed an excellent reputation over the past 35 years.  They have grown to become one the of premier child care centers in the greater Scranton area.

“Freckles and Frills is licensed by the Department of Education, the Department of Public Welfare and is a Keystone Star 4 designated site.”  NEDCO is proud to have been a part of positively impacting, perhaps, the most important members of our society and the future of our community: our children.  It is NEDCO’s mission to promote development and cultivate lasting relationships with small businesses in our area.  Let us help you imagine a better tomorrow.  Call NEDCO today (570-457-6726) to receive more information about how we can assist in matching you with an SBA program to service your small business needs.

SBA-gov-logoSBA 7(a) Loan Program: Less Paperwork, Less Hassle

TARA A. BURNS – JUNE 27 2014, 3:37 PM ET

The Small Business Administration (SBA) has announced a new plan to reduce paperwork for SBA 7(a) loans.  This is part of their continuing effort to expedite the loan process and reduce costs associated with the program.  Their goal is to cut out duplicative paperwork and increase utilization of the SBA credit score.  The SBA credit score is derived from a combination of business and consumer data which is obtained though SBA’s E-Tran system.  This new plan will be implemented July 1, 2014 and all applications received on that date and after will be subject to its benefits.  For more information on SBA credit standards and the SBA 7(a) loan program, contact NEDCO at (570) 457-6726.

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Cutting Costs:  The benefits of outsourcing for small businesses

TARA A. BURNS – JUNE 23 2014, 3:43 PM ET

Thinking about hiring some extra help to run your small business?  SBA guest blogger and author, Barbara Weltman, may be able to answer some of your questions.  The decision between hiring an employee or an independent contractor can be difficult.  There are a few key differences between independent contractors and employees that might make you rethink what is best for your business.  Independent contractors are responsible for their own taxes, retirement savings, and insurance.  You are generally responsible for these costs if your worker is classified as an employee.  Before you label your workers, you must evaluate the degree of control you wish to exercise and what the tradeoffs will be.  Here are a few things to consider when classifying your workers:

Employment Taxes
It costs more to hire an employee than to hire an independent contractor.  It requires about 10% of an employee’s salary to cover costs such as taxes, which include FICA (Social Security and Medicare taxes) and unemployment taxes (federal and state).  In some cases you may be required to provide workers compensation insurance as well.

IRS Worker Classification Standards
Various factors are used by the IRS to determine the proper classification of a worker.  Behavioral control is determined by whether you have the authority to tell the worker where, when, and how the work is to be done.  The financial factor is determined by who controls when the payments are disbursed, if there is reimbursement, and who incurs the expense for work materials.  The type of relationship that exists between you and your worker also matters to the IRS.  Factors such as written agreements, permanent arrangements, and a common vision are pertinent to worker classification.  On the other hand, if the IRS finds that you are not in compliance with classification standards, you may face back taxes and other penalties.  To avoid this, you can voluntarily reclassify workers as employees through the Voluntary Classification Settlement Program if you are eligible; otherwise you may be able to look into Section 530 relief.

Employee Benefits
As stated previously, independent contractors are responsible for their own retirement savings.  If you choose to hire an employee it can increase payroll costs by 10%.  If you currently have an employee benefits program, all employees must be included.  Health coverage is not mandatory but may become mandatory in the future.  This will be dependent on how many full-time employees you have.  The IRS includes 30-hour per week employees as full-time.

Federal Mandates
Federal workplace laws protect employees but may only be applicable if your business has a certain number of employees.  Some employee protections include:

  • Age discrimination
  • Disability discrimination
  • Race discrimination
  • Gender discrimination
  • Minimum wage and overtime requirements
  • Family or medical leave requirements

If you are found to be in violation of these laws, you may be subject to government penalties and lawsuits.  Employment laws do not extend to independent contractors.

Making the decision
When weighing the costs and benefits of hiring an employee or independent contractor, every business’ circumstances are different.  This article seeks to provide a few points in support of classifying a worker as an independent contractor; however, the ultimate decision on worker classification is at the discretion of the business owner.  Let this article be a starting point for your research into worker classification and what it means for your small business.  These points suggest that in classifying a worker as an independent contractor, a business will be able to save time and money by foregoing the responsibilities associated with hiring an employee.  As stated by Barbara Weltman, “In figuring the real cost of employment, add 15% and 50% of compensation to your budget for taxes, insurance, and benefits for employees (e.g., a $40,000 employee costs you at least $46,000 and, depending upon the benefits package, as much as $60,000).”  Before adding employees to your payroll, give some thought to evaluating the costs versus the benefits and consider your alternative options.  If you should decide to outsource work to an independent contractor, be sure to follow the rules as to avoid serious penalties.  Weltman suggests that working with an employment law attorney to assist you in conforming to legal requirements may be in your best interest.  For more information on this topic, click here.

SBA Announces Fee Waiver Program ExtensionSBA-gov-logo

REBECCA WHARTON – NOVEMBER 24, 2014, 12:45 PM ET

On Wednesday, October 1, 2014, the U.S. Small Business Administration has announced that it will be extending the fee relief on 7(a) loans of $150,000 or less through September 30, 2015.  The SBA also announced an extension and improvement of the fee relief for SBA Veterans Advantage loans.

According to SBA Administrator Maria Contreras-Sweet, the fees on loans of less than $150,000 to any 7(a) borrower have been zeroed out because they do not want fees to hinder getting capital out to communities. Contreras-Sweet also stated that the SBA owes a debt of gratitude to our service men and women, and the veterans who own small businesses.

In the 2013 fiscal year, the savings for small business borrowers reached almost $19 million. Under the Veterans Advantage, the fee relief savings for small business borrowers reached about $571,000.
As a result of this extension and improvement:

  • 7(a) loans under $150,000 will continue through September 30, 2015.
  • 7(a) loans over $150,000 will carry an annual servicing fee of 0.519 percent of the guaranteed portion of the outstanding balance of the loan. The upfront guarantee fee will depend on the amount and maturity of the loan.
  • SBA Veterans Advantage loans will continue for the 2015 fiscal year with the zero upfront guaranty fee on all SBA Express loans to veterans of $150,000-$350,000.
  • Non “SBA Express” loans of $150,000-$5 million will see a 50 percent reduction in the upfront guaranty fee. Loans over $150,000 will not see a reduction on the annual servicing fee.

For more information on the SBA fee relief extension and the SBA 7(a) loan program, contact NEDCO at (570) 457-6726 or click here for the original article.

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