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Archives for June 2022

The Right Time to Build a Banking Relationship? Right Now

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If you think about it, running a business is largely about building relationships. And establishing a solid banking relationship is one of the most critical moves you can make as a business owner.

When is the appropriate time to begin forming this relationship? According to CPA Nick Magone, Managing Partner of Magone & Company, “Immediately — before you need the money.”

Get the ball rolling on the relationship

Banks typically offer three levels of financing:

  • Branch level – up to $250K
  • Small business lending – $1-5 million
  • Middle marketing lending – Over $5 million

To get started, reach out to your branch manager, and they’ll introduce you to the correct contact for your future lending needs.

Become the ideal borrowing candidate

What are banks looking for? First and foremost, if your business isn’t profitable, or isn’t able to show a track record of profitability, the bank will not loan you money. Remember, the bank is not your business partner.

Banks also need to have a clearcut understanding of your business and what it brings to the table for them. For example, how many of their services will you use? Will you need their treasury or cash management services in the future? In other words, they are looking for a profitable relationship. Bankers are more than accommodating to get to know you, especially if there is business to be had.

The first meeting

While in-person meetings are preferable, a video meeting can be just as effective for introducing yourself and your business. A typical presentation may include:

  • An overview of your business and management team, including who you are and the number of years in business overall.
  • The market your business serves, including the top 10 suppliers and customers.
  • Your high-level budget for the year, e.g. cost of goods sold, wages, administrative costs, etc.
  • The performance of the budget, as well as the trend for expected revenue and profitability throughout the year.
  • Future plans for growth, acquisition or inventory that may require financing.

The takeaways

Says Magone, “The three main points to keep in mind: Get to know your banker before you need the money; invite your banker to a meeting before you need the money; and, profitability and performance are key to having your loan approved.”

30 years of experience and expertise

In celebration of our 30th year in business, we’re rolling out a series of educational videos to help busy executives, families and business owners meet their accounting and tax needs and achieve their financial goals. Check out the latest on our YouTube channel.

Workers Back On-site? That’s a Green Light for Transportation Benefits

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If all or part of your workforce is once again commuting to the office, they may be looking to save on mass transit expenses. In the past, certain transportation costs were tax-free to employees and deductible by employers, within certain monthly limits — until the Tax Cuts and Jobs Act (TCJA) eliminated the deduction for employers and established other special rules for tax-exempt organizations.

But your company may continue to offer this perk — clearly a plus to incentivize those who’ve been working from home during the pandemic — if you follow the new rules.

Transportation benefits may be provided tax-free, as long as they don’t exceed the current IRS limit of $280 per month. Check out the three main types of transportation benefits that apply:

  1. Mass transit passes. According to the IRS, this includes any pass, token, fare card, voucher or similar item. The pass must entitle someone to ride free of charge or at a reduced rate on mass transit or in a professionally driven vehicle seating at least six adult passengers. Mass transit may be operated publicly or privately by bus, rail or ferry.
  2.  Commuter highway vehicle expenses. A commuter highway vehicle seats at least six adult passengers. At least 80% of the vehicle mileage should be for transporting employees between their home and workplace, and employees must occupy at least 50% of the vehicle’s seats. A tax-free arrangement may also involve several forms of vanpooling. For example, your company might purchase or lease vans so employees can commute together to work. Or you might contract with a third party to provide the vehicles and pay some or all of the operating costs.
  3. Qualified parking fees. This benefit allows employer-provided parking for employees on or near the business premises. It also covers fees for parking on or near the location from which employees commute to work using mass transit, commuter highway vehicles or carpools (for example, at the parking lot of a train station). However, the benefit doesn’t extend to parking at or near an employee’s home.

Put the pedal to the metal

Aside from the three main transportation benefits, employers may offer reimbursements to employees who commute via bicycle. Under the TCJA, you can continue to deduct reimbursements of qualified bicycle expenses as business expenses, but the tax exclusion for employees has been eliminated.

 Check in with the tax experts

Whether you’ve been offering transportation benefits for years, or are just now introducing them, be sure to consider both the tax and non-tax implications they entail. Be sure to consult with your tax or benefits advisor for advice specific to your company’s needs and circumstances.

Don’t have an advisor? Reach out to the NJ CPAs at Magone & Co — we’re here to help.