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'Tis the Season
By Rosalind Resnick
Question: I'm thinking about buying a bar at a beachfront resort that rolls up its sidewalks in the fall and winter. This means that I'll only have four or five months a year to make most of my money. What are my options for financing a seasonal business like this?
Answer: There's no trick to persuading a bank to lend to a seasonal business except convincing the lender that your financial projections are solid. Lots of seasonal businesses obtain bank credit--tax preparation companies, Christmas tree vendors and stores that sell holiday foods and gift items, for example. Once your bank understands your business' seasonal ebb and flow, you may be able to convince your lender to change the way the loan is repaid--such as accelerating payments during the summer months when cash is rolling in--to give your company some breathing room.
Management consultant Tim Sciarrillo, who has helped raise money for companies ranging from startups to those with $40 million in sales, says the key is to present the bank with a budget and stick to it. "Discipline is critical for a seasonal business to ensure that there is enough money to last through the lean times," he says.
Another option to consider is credit cards--provided, of course, that they are used with discipline, the credit line is big enough and your company's credit history is good.
Rosalind Resnick is founder and CEO of Axxess Business Consulting, a New York City consulting firm that advises startups and small businesses, and author of Getting Rich Without Going Broke: How to Use Luck, Logic and Leverage to Build Your Own Successful Business. Reach her at firstname.lastname@example.org or through her website,http://www.abcbizhelp.com.
The Gift of Giving
This entrepreneur doesn't just sell gifts--she gives them by helping homeless youth off the streets and into careers.
By Lisa Palmer
Taz Tagore has seen the good and the bad. For instance, in her 15 years as a volunteer for youth shelters, she has seen the good that comes from mentoring youth. She has also witnessed the cycle of poverty faced by orphaned young adults living on inner-city streets. Armed with a Harvard MBA, she started a design and gift business in 2005. Today, she uses 100 percent of the profits to fund The Reciprocity Foundation, a New York City-based charity she started to teach homeless youth ages 15 to 23 skills for sustainable careers in media, fashion, design and marketing. Last year, 250 people enrolled in her career prep and college application programs. Many of the graduates started college and several work for her New York City company, Appreciate Design and Gifts, which sells youth-designed yoga wear, T-shirts, gourmet chai tea and gift items.
"Appreciate's vision is to become America's first youth-led design firm," says Tagore, 35. "Our contributions to the nonprofit support high-skill, high-wage opportunities for youth interested in jobs in the creative economy."
In addition to funds from Appreciate, The Reciprocity Foundation receives grants and contributions.
Time for Plan B?
A new ruling may prompt changes to your 401(K).
By Carol Tice
Does your 401(k) plan need an overhaul? A February Supreme Court ruling is expected to prompt major changes in many such savings account plans.
In LaRue v. DeWolff, Boberg & Associates Inc., the Supreme Court ruled that individuals can sue employers and plan administrators if a participant's investment instructions aren't followed. The ruling could open the floodgates for many more suits against businesses with 401(k)-type plans, says Matthew Hutcheson, a professional independent fiduciary who advises retirement plan sponsors. Hutcheson believes that the ruling will prompt changes in the basic structure of 401(k) plans so that businesses and plan sponsors are no longer at risk of being sued over plan performance.
Most current 401(k) plans allow participants to choose from a menu of investment options and switch among them at will. For plaintiff James LaRue, the problem came when he wanted to change his investment choices during a sudden downswing in the market. He claimed plan managers were too slow to execute his wishes, causing him to lose $150,000.
Hutcheson expects retirement plans to become more like pensions, meaning participants won't have the power--or the burden--of choosing from a range of investment options. Instead, they'll simply opt in to the plan, which will be overseen by a professional money manager. Several national retirement consulting firms are already encouraging clients to restructure their plans along these lines.
Hutcheson says that this change would also solve another problem with 401(k)s: Leaving investment decisions to untrained individuals has left many with skimpy retirement funds. "Bob in marketing does not have superior investing skills to professional fund managers," Hutcheson says. So a change would not only protect businesses from retirement plan lawsuits, but it would also likely leave workers with fatter retirement accounts.