For many business owners, a business sale is more than a transaction; it’s a major life transition. Their business is often the largest asset that they own, as well as the key part of their financial and estate plans. What’s more — their business has likely played an important role in shaping their daily life and identity. A failure to fully align the sale of a company with their personal plans could potentially undermine the long-term wealth preservation and family engagement opportunities afforded by the business deal. This is especially true for owners with charitable components to their plans.

At a recent forum I attended on the subject of business ownership, the main themes were collaboration and transitions. Preparing for a business sale involves assembling a team of advisors, reviewing financial and estate plans, assessing the transition, and creating a plan of action. This work really needs to begin early in the business formation, because you never know when a transition will occur. Whether it is unexpected happenings like the “5 Ds” (death, disability, disaster, divorce, and disagreements) or the planned changes such as retirement and incorporating the next generation into a family business, the earlier the planning begins with a collaborative team that works with the business owner’s values as its guide, the better chance of success. 

The forum also highlighted the advantages of having people-focused skills and how retaining an advisor with that specialty can be of value. That may mean a psychologist to help coach the business owner on how to have difficult conversations with key employees or a life coach to help plan a purposeful transition into retirement; both areas play a big role in overall success of a business transition if planned and executed well. 

Also, by incorporating effective charitable discernment and planning, business owners can reduce estate tax, avoid capital-gains tax, create a charitable income-tax deduction, reduce tax to heirs and generate charitable resources to help the now former business owners and their family achieve their desired impact. 

How does it work?

In the simplest case, a cash gift to charity can be made either before or after the sale of the business. As long as this is done in the same year as the sale, a tax deduction will help offset the income received. The needed tax deduction is often much greater than the client’s annual charitable giving. Using a donor-advised fund, the gift can be made in the year needed and grants may be distributed from the fund to support charities of the client’s choice for many years into the future.

The cash gift, while simple, does not maximize the tax advantages of gifting. A preferred approach would be to gift stock or ownership shares to a donor-advised fund prior to the business sale. When the sale occurs, the fund receives the proceeds from the sale for its portion. This creates a charitable deduction similar to gifting cash, and also avoids taxation on any capital gains embedded in the ownership because the fund is administered by a tax-exempt public charity.

Using a donor-advised fund at a local foundation also provides ongoing charitable-planning support. Whether it is legacy planning or engaging future generations in giving, there are often extensive resources to deploy. 

There are also more complex planning tools that can be incorporated into a business sale. For example, charitable remainder trusts can be used to create income streams for heirs while ultimately creating a charitable resource. This type of trust planning can be useful for wealth distribution and addressing spendthrift or creditor concerns with heirs. Another tool is the charitable lead trust, which creates an initial charitable resource but allows for tax-efficient transfer of the trust corpus to heirs in the future.

Regardless of your charitable client’s needs, proper planning can result in a more tax-efficient and comprehensive result for their financial and estate plans as well as the inclusion of a steward to their charitable plan.        

Tom Griffith is VP of development at the Central New York Community Foundation. Contact him at tgriffith@cnycf.org or (315) 883-5544.

The United States runs on small business. In fact, small companies made up 99.9 percent of the nation’s total businesses last year. If you own or manage one of these 30.2 million small businesses, you already understand that it’s a big task — it takes time, personal investment, hard work, capital, and the right partners. 

The U.S. Small Business Administration (SBA) exists to assist and protect the interests of American small businesses. When small-business owners need financial assistance, they may look to leverage an SBA loan — its 7(a) loan guarantee program is the most popular one.

Curious to know more about it? Here are four facts about the SBA’s 7(a) loan guarantee program that business owners may be surprised (and excited) to learn.

1. SBA gives rejected business-loan applicants another option.

 It’s understandable that not everyone will be approved for a traditional business loan. This could be due to any number of factors, including a poor credit profile, lack of business history, or inadequate cash flow. It all comes back to the lender being confident in the borrower’s ability to repay the loan over time. 

 However, rejection for a traditional loan doesn’t mean your startup dream is over; another option for entrepreneurs in this situation is the SBA’s 7(a) loan guarantee program. This program is designed specifically to help business owners obtain the funding they couldn’t get through any other means. 

 Among other eligibility requirements, business owners need to exhibit that they cannot obtain the funding they need through other means and that an SBA-backed loan is the only reasonable option left that will work for them. Often, the lender can satisfy this “credit elsewhere” requirement because the borrower has already been declined for traditional financing. 

What makes this program possible is that the loans are backed by the government. The SBA puts a 75 percent guarantee on the debt, therefore reducing the risk for the lender. If the borrower ends up not being able to repay the loan, the financial institution isn’t solely responsible for covering the loss; three-quarters will be covered by the SBA. That is, if the lender has followed all rules and regulations set forth in the standard operating procedure, which is detailed and specific. The idea is to help financial institutions get more comfortable with lending to small businesses, particularly those owned by women or minorities, or in underserved areas. 

2. SBA loans can have high amounts and long terms.

 SBA 7(a) loans can go up to $5 million with terms of up to 25 years. The maximum total loan amount enables small-business owners to accomplish a variety of goals. The longer terms can help ease repayment pressure with lower payments. Funds may be used for just about any business purposes, including the following: 

• Real-estate acquisition

• Business startup

• Renovation/expansion

• Equipment/inventory/supplies purchase

• Business acquisition

• Commercial-debt consolidation

• Working capital

The SBA determines the terms of the loan based on the use of proceeds. Blended terms are available when funds are used for multiple purposes. For the most part, the program follows the terms below:

• Working capital and non-equipment and real estate use: up to 10 years

• Equipment purchases: up to 15 years

• Real estate: up to 25 years

Note that the final term is determined by the lender, based on the cash flow of the business. The repayment period may be shorter than what is listed above, but never longer. 

Another interesting feature about the SBA 7A(a) loan is that borrowers can often receive 100 percent financing for a large-ticket item. For instance, a traditional loan may only finance up to 80 percent of a piece of equipment, with the borrower on the hook for the rest. An SBA-backed loan can finance 100 percent of the purchase price if the lender feels that significant equity is involved in the transaction.

3. The SBA doesn’t directly lend borrowers money.

In 2018, the SBA approved more than 60,000 government-backed loans totaling more than $25 billion in funding. And while the SBA makes it easier for small-business owners to acquire capital, it doesn’t actually provide any of it.

So, where does the money come from? All the funding for an SBA-backed loan comes directly from your bank or other lending partner of choice, whether the loan is for $5,000 or $5 million. The SBA only places a partial guarantee on the loan, which is contingent upon the lender crossing all its “t” s and dotting its “i” s. 

4. You don’t have to get an SBA loan from a traditional bank.
The SBA lending process requires working with an SBA-approved lender to underwrite and provide the funding — but you don’t need to limit yourself to working with a traditional bank. While most of the nation’s thousands of banks may have an SBA program and offer the 7(a) loan, there are only 14 SBA-licensed non-bank lenders in the country. 

These alternative non-bank lenders can often offer more flexible credit requirements or a faster process, compared to a traditional bank. In some cases, you may be able to complete the entire process online or over the phone, saving you time from having to go to a bank.

Owning a small business comes with its own challenges and risks, and funding can often be the biggest hurdle. An SBA loan is a great option for entrepreneurs looking to start or grow their dream business, but can’t obtain a traditional business loan.   

April Brissette is president & chief credit officer at FundEx Solutions Group (FSG), which is one of only 14 licensed non-bank SBA lenders in the country. FSG is a wholly-owned subsidiary of Bankers Healthcare Group, a provider of financing for health-care practitioners and other licensed professionals.

Dear reader: Do you know what time it is? 

If you just looked at a clock and were prepared to tell me “It’s 8:30” or “It’s noon” or some other time, you’re probably just trying to be helpful. But that’s not always the best communications strategy. 

When communicating in business situations — especially when what you’re saying is representing the entire organization — we must practice the following 3-step process: first, really listen to the question that’s being asked; next, answer only the question that is asked; and then, stop talking. 

So, the answer to my first question would be either: yes, or no. What I asked was “Do you know what time it is?” Even though you can probably safely assume that what I really want to know is the actual time, for many reasons, making me ask the follow-up question “Ok, so what time is it?” can be beneficial for you. 

This creates a dialogue. The person asking you the questions may have a brief reaction of frustration after that first response, but by the end of the conversation, she will notice how many of her questions you answered — because you gave her the opportunity to ask more questions. 

If your response makes an assumption about what the person’s question really means, or anticipates what other questions he might ask, then you take away his ability to feel like he was able to ask all his questions. And when they do think of other questions, you have no other information left to share. 

In sensitive or crisis situations, this discipline is critical to managing your message and reputation, and keeping audiences calm, informed, and supportive. 

We also use this strategy with good news. Even if we know all the details of a “good news” story, we may not want to give everything away all at once. This allows you to create a steady drip of continued positive stories and engagement that will last far longer than if you shared all the details of the good news at one time.

There is another risk to oversharing, as well. By providing more information than what the question is asking, you may also be giving away information for which the individual didn’t even think to ask. The danger here is probably obvious for a crisis or sensitive situation. But why would this be a bad thing if you’re sharing good news? By sharing more than you have been asked for (and more than you planned to share), you are robbing yourself of future news to share with your audiences and cutting short the potential longevity of your story.

The next time you are preparing for an all-hands forum with employees, a media interview, or a town-hall meeting with community members, remember to really listen to the questions that are being asked, answer only the question that is asked, and then stop talking. What you don’t say can be as important as what you do say.                      

Crystal DeStefano is president and director of public relations at Strategic Communications, LLC, which says it provides trusted counsel for public relations, including media strategy, media outreach, monitoring, and analysis. Contact DeStefano at Crystal@stratcomllc.com.

This spring, small-business owners across the U.S. said business was booming, with 59 percent expecting their revenue to increase over the next 12 months, 67 percent looking to expand in the year ahead, and 24 percent planning to hire in that same timeframe, according to our Bank of America Spring 2019 Small Business Owner Report. 

According to our survey, which explores the perspectives, aspirations, and concerns of business owners across the country, a majority of business owners believe technology is a key contributor to their growth. Nearly two out of three entrepreneurs report that online reviews specifically are important to the success of their business, and 80 percent say a positive online review has led to a new business opportunity. Word of mouth has long been key to small-business success, and online reviews provide a new, relevant channel to do so. That said, while more respondents say online reviews are more helpful than not, there is also awareness of the damage a negative write-up can have. Of those who have had a negative online review, nearly one-third say it led to a loss of business.

In the digital era, customer compliments and criticisms — whether on social platforms or online review sites — hold tremendous sway. Here are a few tips on making the most of the positive reviews, as well as mitigating the impact of negative ones.

1) Remember, the process starts before a review is even written. Whether good or bad, online reviews stem from everyday customer interactions. As these occur, encourage your staff to keep notes of why an experience was either positive or negative. If customers compliment your business, take advantage of the moment by asking them to share that feedback in a review or on a social platform. If a customer recommends an improvement, write it down and make a point to follow up. By taking notes you’ll have a cheat sheet should a customer comment online, enabling you to respond accurately and quickly. 

2) Have a response plan for negative reviews. According to our survey, a majority of business owners who have had a negative online review believe responding as soon as possible is key to mitigating impact. And the key to a timely response is having a plan. Think about the most likely comments you’d get and write sample responses to keep on file. While every comment scenario will be unique, you’ll at least have a head start on a response and can customize accordingly. To avoid getting into a back and forth, consider a response that addresses the issue and recommends moving the conversation offline.

3) Monitor platforms to track what’s said — and respond. A major benefit of online reviews is that, as a business owner, you can respond directly and in your own voice. Look to engage with comments of all kinds, showing appreciation for positive feedback, and approaching negative reviews with humility and a resolution in mind. 

4) Amplify the positive on social media. A rave review is a huge boon for your business. To extend the reach of these testimonials, create a template including the text of the review and a picture of the product or service to be shared for your social channels. If available, provide a link back to the product or service when posting the review on Twitter, Facebook, LinkedIn, or in your Instagram bio. This type of amplification is essentially free marketing. 

Entrepreneurs must embrace the world of online reviews and learn to strategically use them to their advantage. As small-business owners anticipate a year of steady growth, embracing online reviews as a tool in a marketing kit can be helpful in achieving these plans.                      

Ted Janicki is a VP and upstate New York market manager for the small business banking team of Bank of America. For more than a decade, Janicki has worked with business customers in the Buffalo/Niagara region, and recently transitioned to leading a team of 11 banking professionals across the Buffalo, Rochester, Syracuse, Albany, and Hudson Valley markets.