Capital One Bank Business Banking Advisor INSIDE... GET TIPS, INSIGHT AND ADVICE ON: Give your business a financial checkup Page 1 Follow these strategies to help put your financial house in order. Five tips to help get your business back on track Page 2 Need a fresh start? Here are ways to improve your operations. On track for growth Page 3 Pete and Diana Holzberger are expanding their Maryland child care centers when other businesses are declining. What s their secret? Q&A: How can I improve my credit rating? Page 4 Simple steps can help raise your company s score. New tax exemptions and regulations for 2011 Page 5 Make sure you take advantage of new exemptions and deductions. From the Desk of For more information or if you have questions about Capital One Bank s Products and services, you can reach me at:
Capital One Bank Business Banking Advisor IMPROVING BUSINESS PROFITABILITY WINTER 2011 Improve your financial standing As we welcome the New Year, optimism is building among many in the business community. With Capital One Bank at your side, you will have a dedicated partner who is committed to helping maximize your business opportunities in the months ahead. In this issue of Business Banking Advisor, we offer timely strategies that can help you maintain and expand your operations. Inside, you ll learn how to check your company s financial health, improve your business credit rating and take advantage of new tax incentives. In our Customer Profile, Pete and Diana Holzberger, owners of nine child care centers in Maryland, discuss how they continue to expand their operations when competitors are cutting back. Peter Appello National Sales Executive Business Banking Remember, your success is at the center of all we do. This is why Capital One Bank is committed to providing our business customers with a personalized suite of banking products that can help simplify your financial management. As always, I welcome your feedback on how we can better serve you. Please email me at sbb.sales.support@capitalonebank.com. Thank you for your continued confidence in Capital One Bank. World Olympic Gymnastics Academy (WOGA) Pictured from left to right: Yevgeny Marchenko, Greg Grimm, Valeri Liukin MANAGING YOUR BUSINESS Give your business a financial checkup Challenging economic times call for increased oversight of your company s finances. This close scrutiny is key to anticipating problems and making adjustments to ensure the health of your business. Establishing a habit of consistently and thoroughly reviewing measurement tools can help position your company to succeed in tough times and thrive when times are good. Here are five ways to help track and manage your business for success: Know your financial position You should have a clear sense of where your company stands with regard to expenses and revenues at all times. Understanding this information enables you to determine whether you are in a position to meet your financial obligations. Regular review of your revenues and expenses can also provide you with lead time to procure financing. Work with your financial accountant or Business Banker to determine what tools can make it easiest for you. Evaluate sales data Close scrutiny of the sales in your pipeline can reveal at least two important pieces of information related to anticipating and managing company finances. First, it can foretell potential cash flow crunches. A current busy period can mask a slow period ahead if you don t maintain sales momentum. Second, continued on page 2 1
Give your business a financial checkup continued from page 1 your sales records can reflect your company s ability to retain customers. If new business is outperforming existing business, you may have a customer retention problem. Or, if existing business is outpacing new business, the problem may be a lack of focus on marketing or sales. Review your collections process Many businesses need to adjust their collections processes. Collections should begin when a sale is made and should be given keen oversight to identify issues that might cause financial problems. Consistently gather invoicing requirements when a project commences. Send invoices promptly and follow up when they are not paid on time. Speed up payment by offering a small discount 1% to 3% if customers pay within 10 days. All of these steps can help to ensure that you promptly receive the money owed to your company. Maintain a cash reserve Successful business owners will tell you that a healthy cash reserve is essential to managing vendor price increases, market slowdowns and other unanticipated financial developments. To determine how much you should keep in your reserve fund, examine your cycles during previous years both lean and healthy to assess your need for capital during slower periods. A reserve that covers costs for six months is often recommended. Think strategically Set a schedule to meet with your team, peers or advisors to determine what strategic moves you should make to enhance various aspects of company management. For example, are your prices keeping pace with competitors? Have you recently renegotiated vendor contracts? What incentives do you offer employees to keep pace with the market? Quarterly sessions with your financial advisor can help to identify opportunities to move money to interest-bearing accounts, re-up financing as needed and take proper steps to manage your tax bill. Having expert resources to draw upon is key to your ongoing business success. Your Capital One Bank Business Banker can help you evaluate your company s financial health, or go to www.capitalonebank.com/smallbusiness for access to a variety of online tools and resources. Five tips to help get your business back on track The more successful companies commit to managing the financial health of their businesses: 1. Take advantage of new technology. Make financial management easier with the latest software and tools to help streamline bookkeeping, expense tracking and cash management. 2. Establish access to credit. Having access to funds can help alleviate financial problems should the unexpected happen. 3. Focus on cash flow. Implement processes to keep more cash on hand. Consider early payment discounts and provide customers with electronic payment options such as credit cards and Automated Clearing House. 4. Expand your network. Increase your visibility in your community by attending more business networking events. Don t just make sales presentations but focus on building trust and relationships. Look into social networking sites like Facebook or LinkedIn to improve your online presence. 5. Get a fresh perspective. Review what your main competitors and others in similar industries are doing. Put together a customer focus group to gain a fresh understanding and conduct market research to see what trends are developing. 2
CUSTOMER SPOTLIGHT Child care center stays on track for growth Child care centers across the country have seen declining enrollment because of corporate layoffs, lifestyle shifts and other factors. For the owners of nine centers in Maryland, it s been just the opposite thanks to careful planning. Diana and Pete Holzberger had long envisioned owning their own business. With some hard work, determination and laser focus, they turned that dream into a reality nearly two decades ago when they opened Bright Eyes Child Care in Montgomery County. In 1993, they added a second location before eventually expanding to a total of nine centers across Montgomery and Frederick counties. Fuel business expansion With multiple facilities to maintain, buses to purchase and staff to pay while working under budget pressure, the Holzbergers business has the potential for tight margins. Parents demand highquality child care and experienced staff, but are cost conscious and shop around. Running this type of business successfully is a balancing act that requires careful planning. Our primary goal is to enable parents to go to work each day knowing their children are well cared for, Pete Holzberger said. Providing high-quality child care is of paramount importance to the future of our region. We feel fortunate to be filling a need and at the same time helping to enrich our community. To meet the needs of parents and to continue to fulfill their business vision, the Holzbergers knew they needed some financial flexibility. They turned to Capital One Bank for assistance in 2009 after its acquisition of Chevy Chase Bank. Business owner Pete Holzberger (left) and Business Banker Brian Lewald (right) enjoy afternoon tea. Capital One Bank extended a line of credit that has given us the confidence and the capital to finance our continued business expansion, explained Pete Holzberger. At the time, we were concerned about rising account fees and expenses. Our Capital One banker, Brian Lewald, evaluated our banking needs and saved us significant money using their small business products. Rely on a dedicated partner The Holzbergers said Lewald has been a dedicated partner and valuable business resource from day one, offering everything from specialized money management tools to customized financing solutions and market advice. Brian consistently delivers the insight and professional expertise to help us strategize and expand our business, he said. I can call Brian with a question or concern anytime. He even checks in periodically to see how we re doing. continued on page 4 3
MANAGING YOUR MONEY Q&A Q&A: How can I improve my business credit rating? Q. I know it s important to keep tabs on my company s credit rating, especially in today s credit market. What can I do to improve my rating? writing and keep a copy for your own records. If you see accounts that are not yours or that are closed, contact the information provider to have the data removed. A. Your company s credit rating can affect access to deals, partnerships and credit. It also can influence the payment terms that vendors grant to your business or the interest rates that lenders charge for business loans. Here are five steps to help strengthen your credit rating: 1. Make timely payments. Always pay your bills by their due dates or earlier. This shows your creditors and suppliers that you can be a responsible financial manager. 2. Check your credit report. Review your business credit profile annually or more if you think you may need to ask for a loan or line of credit and verify that the information is current and accurate. Notify the credit bureau of any discrepancies in 3. Keep your debt financing down. If you carry a lot of debt in absolute terms or relative to competitors, you are more likely to be denied access to credit. 4. Demonstrate strong debt management. Use borrowed funds wisely and take on debt only when you are confident you can repay the money on a timely basis. 5. Protect yourself from bad credit risks. Check references of business associates, customers and vendors. Consider accepting credit cards to reduce late payments. Talk to your Capital One Bank Business Banker about additional ways to help manage your credit score. Focus on what s important Customer Spotlight: Bright Eyes Child Care continued from page 3 Today, many small businesses require capital, management support and guidance, and they need these services tailored to the size and scope of their individual organization. With Capital One Bank, we have access to the business banking tools and products that enable us to focus on what s really important providing our customers with quality child care, Pete Holzberger said. What s more, we receive timely, professional advice that enables us to meet the diverse challenges of running a small business and make confident, well-informed financial decisions. Whatever the future holds, we know Capital One Bank will be there every step of the way. Local business growth is drawing more young families to the area. That translates into more opportunities for the Bright Eyes team. We re always evaluating promising new locations where access to quality child care is limited, Pete Holzberger said. Whatever the future holds, we know Capital One Bank will be there every step of the way. Business Banking Advisor is published by Capital One Bank. For more information on any of the topics covered, or to offer comments or suggest a topic for a future edition, e-mail us at sbb.sales.support@capitalonebank.com. Business Banking Advisor is for informational purposes only, does not constitute the rendering of legal, accounting or other professional services by Capital One, N.A., or any of its subsidiaries or affiliates, and is given without any warranty whatsoever. Normal credit qualifications apply. Products and services offered by Capital One, N.A. Member FDIC. 2011 Capital One. All rights reserved. 4
CAPITAL ONE BANK NEWS Learn more about tax incentives this year A number of new government incentives and regulations means numerous changes and potential benefits for small businesses this year. Here s what you can expect, according to information from the White House: Higher expense deduction allowed. Deduction allows businesses to expense up to $500,000 in capital investment and increases the investment limit to $2 million for 2010 and 2011. Bonus depreciation extended. Extensions permit businesses to write off 50% of the cost of new equipment for the 2010 tax year. Business credit carryback extended to five years. Extensions allow some small businesses to carry back their general business credits (GBC) to offset five years of taxes. This regulation applies to sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average gross receipts for the last three years. Businesses may use their GBC to offset the alternative minimum tax (AMT) beginning in 2010. Deduction for start-up costs doubles. Deduction temporarily increases the maximum deduction for start-up expenses from $5,000 to $10,000 (phase-out threshold of $60,000 in expenses) beginning in 2010. Cell phone deduction simplified. Business cell phones will no longer be subject to burdensome recordkeeping requirements retroactive to tax years after 2009. In addition, beginning this year, the IRS will require income from credit and debit card transactions to be disclosed, according to a new rule listed in the Federal Register. If your business receives over 200 payments that total more than $20,000, you may receive a 1099-K form from the financial institution that settles your credit and debit card transactions in January 2012 that lists all gross amount transactions. It s important now to make sure credit card processors have your correct company information and tax identification number. Otherwise, they may be required to withhold 28% of payment card transactions. Capital One Bank does not provide tax advice. Please consult with your tax accountant for more information on how these changes could benefit your business. Sources: White House fact sheet, Oct. 24, 2010, www.whitehouse. gov/the-press-office/2010/10/24/fact-sheet-how-small-businesses-canbenefit-small-business-jobs-act; Federal Register Rules and Regulations, Aug. 16, 2010, http://edocket.access.gpo.gov/2010/pdf/2010-20200.pdf SMALL BUSINESS BAROMETER: Growing number of small businesses plan to hire An increasing number of small businesses expect to hire in the near term, according to Capital One Bank s latest National Small Business Barometer Survey. Of those polled in the third quarter, 30% said they plan to add employees to the payroll over the next six months, 4 percentage points higher than the previous quarter. Still, the majority (66%) plan to keep business development and investment spending at current levels over the same period. The survey also found that most small businesses continue to have adequate access to credit and financing. Nearly three-quarters (73%) said they are able to access the financing they need. Methodology: The findings are from a telephone survey conducted by the opinion research firm Braun Research of Princeton, NJ, which interviewed a nationally-represented sample of 1,901 for-profit small businesses in the U.S., weighted to Dun & Bradstreet counts of all businesses nationwide by employee size and geography. Small businesses are defined as those with less than $10 million in annual revenue. The interviews were conducted September 14-October 5, 2010. 5