You have an idea and want to start a business. You need to borrow money and decide to go to a bank for a business loan.

Well, you may find out there are certain things the bankers will want from you besides just a completed application.

It’s been said that banks only lend money to people who don’t need it. What does that mean?

My interpretation of that is banks lend money to people who are most likely to pay them back.

Businesses all have risks associated with borrowing money, but startup businesses are usually the riskiest. Bankers must look at financial projections and determine whether they appear realistic.

The first thing you may be asked for is a business plan, and three years of financial projections if you are starting a new business. The first year of the projections should include a monthly breakdown of your projected income and expenses, and two subsequent years of just the total income and expenses. In addition to the income statement, you’ll need a balance sheet, cash-flow spreadsheet, a sources and uses-of-funds statement, an amortization statement of your loan request, and a depreciation schedule. Fortunately, resource organizations like the SBDC, SCORE and WISE, which are funded by the U.S. Small Business Administration (SBA), are available to assist you with the business plan and financial projections.

As a rule of thumb, banks will want you to have about 20 percent equity, or “skin in the game” as they refer to it. Equity can be cash, or assets already purchased, that you have when you start the business. Without any equity, or some cash to start, it will be nearly impossible to obtain 100 percent financing for a startup business.

Having a clean credit history, and credit score is extremely important. Again, banks make loans to get paid back with interest, not to repossess assets. So, they want to see how you handled your credit in the past. Credit scores of about 640 or higher are in the range that is most favorable. Certainly, some credit problems have valid explanations and the bank may take that into consideration.

Having collateral, or a secondary repayment source, is another requirement that most banks will seek from a borrower. Usually a lien on “most assets” will be taken, but the value of collateral is not what most borrowers think it should be. The bank may also request that you put up personal assets as collateral. Be aware of the fact that your collateral is not worth the same amount of money you paid for it.

An SBA guarantee may be required on your loan request. The SBA can provide a guarantee of part of the loan proceeds to the bank. Let’s use a 50 percent guarantee on a loan of $20,000. That means the bank will get repaid $10,000 from the SBA if the borrower cannot repay it. This reduces the bank’s exposure to only $10,000 and may induce the bank to make a loan that it otherwise would reject. Regardless, borrowers still owe the total amount borrowed, and a default will negatively impact their credit history.

Business owners also have other lenders to consider besides commercial banks. Credit unions increasingly make loans to small businesses and will especially try to accommodate their own customers.

I would caution anyone looking online for businesses that offer easy money for startup businesses as that could come at a high interest rate and may include some hefty fees as well.

Other forms and information may be requested that can vary from bank to bank, but most lenders will want the items I discussed above.

So, save your down payment, make sure your credit score is in the acceptable range, visit a business advisor, and then talk to your bank. At least now you know what to expect.

Michael Cartini is a business advisor at the Small Business Development Center (SBDC) at Onondaga Community College. Contact him at (315) 470-1973 or email: m.j.cartini@sunyocc.edu

Just what you need, right? One more time-consuming task to be taken care of between now and the end of the year. But taking a little time out from the holiday chores to make some strategic saving and investing decisions before Dec. 31 can affect not only your long-term ability to meet your financial goals, but also your tax bill due next April.

Look at the forest, not just the trees
The first step in your year-end, investment-planning process should be a review of your overall portfolio. That review can tell you whether you need to rebalance. If one type of investment has done well — for example, large-cap stocks — it might now represent a greater percentage of your portfolio than you originally intended. To rebalance, you would sell some of that asset class and use that money to buy other types of investments to bring your overall allocation back to an appropriate balance. Your overall review should also help you decide whether that rebalancing should be done before or after Dec. 31 for tax reasons.

Also, make sure your asset allocation is still appropriate for your time horizon and goals. You might consider being a bit more aggressive if you’re not meeting your financial targets, or more conservative if you’re getting closer to retirement. If you want greater diversification, you might consider adding an asset class that tends to react to market conditions differently than your existing investments do. Or you might consider an investment that you have avoided in the past because of its high valuation if it’s now selling at a more attractive price. Diversification and asset allocation don’t guarantee a profit or insure against a possible loss, of course, but they’re worth reviewing at least once a year.

Know when to hold ‘em
When contemplating a change in your portfolio, don’t forget to consider how long you’ve owned each investment. Assets held for a year or less generate short-term capital gains, which are taxed as ordinary income. Depending on your tax bracket, your ordinary income tax rate could be much higher than the long-term capital-gains rate, which applies to the sale of assets held for more than a year. For example, as of tax year 2015, the top marginal tax rate is 39.6 percent, which applies to any annual taxable income over $413,200 ($464,850 for married individuals filing jointly). By contrast, the long-term capital gains rate owed by taxpayers in the 39.6 percent tax bracket is 20 percent. For most investors —those in tax brackets between 25 percent and 35 percent — long-term capital gains are taxed at 15 percent; taxpayers in the lowest tax brackets — 15 percent or less — are taxed at 0 percent on any long-term capital gains.

Your holding period can also affect the treatment of qualified stock dividends, which are taxed at the more favorable long-term capital gains rates. You must have held the stock at least 61 days within the 121-day period that starts 60 days before the stock’s ex-dividend date; preferred stock must be held for 91 days within a 181-day window. The lower rate also depends on when and whether your shares were hedged or optioned.

Make lemonade from lemons
Now is the time to consider the tax consequences of any capital gains or losses you’ve experienced this year. Though tax considerations shouldn’t be the primary driver of your investing decisions, there are steps you can take before the end of the year to minimize any tax impact of your investing decisions.

If you have realized capital gains from selling securities at a profit and you have no tax losses carried forward from previous years, you can sell losing positions to avoid being taxed on some or all those gains. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 for a married person filing separately) or carried forward to reduce your taxes in future years. Selling losing positions for the tax benefit they will provide next April is a common financial practice known as “harvesting your losses.”

Example: You sold stock in ABC company this year for $2,500 more than you paid when you bought it four years ago. You decide to sell the XYZ stock that you bought six years ago because it seems unlikely to regain the $20,000 you paid for it. You sell your XYZ shares at a $7,000 loss. You offset your $2,500 capital gain, offset $3,000 of ordinary income tax this year, and carry forward the remaining $1,500 to be applied in future tax years.

Time any trades appropriately
If you’re selling to harvest losses in a stock or mutual fund and intend to repurchase the same security, make sure you wait at least 31 days before buying it again. Otherwise, the trade is considered a “wash sale,” and the tax loss will be disallowed. The wash-sale rule also applies if you buy an option on the stock, sell it short, or buy it through your spouse within 30 days before or after the sale.

If you have unrealized losses that you want to capture but still believe in a specific investment, there are a couple of strategies you might think about. If you want to sell but don’t want to be out of the market for even a short period, you could sell your position at a loss, then buy a similar exchange-traded fund (ETF) that invests in the same asset class or industry. Or you could double your holdings, then sell your original shares at a loss after 31 days. You’d end up with the same position, but would have captured the tax loss.

If you’re buying a mutual fund or an ETF in a taxable account, find out when it will distribute any dividends or capital gains. Consider delaying your purchase until after that date, which often is near year-end. If you buy just before the distribution, you’ll owe taxes this year on that money, even if your own shares haven’t appreciated. And if you plan to sell a fund anyway, you may minimize taxes by selling before the distribution date.

Note: Before buying a mutual fund or ETF, don’t forget to consider carefully its investment objectives, risks, fees, and expenses, which can be found in the prospectus available from the fund. Read the prospectus carefully before investing.

Know where to hold ‘em
Think about which investments make sense to hold in a tax-advantaged account and which might be better for taxable accounts. For example, it’s generally not a good idea to hold tax-free investments, such as municipal bonds, in a tax-deferred account (example: a 401(k), IRA, or SEP). Doing so provides no additional tax advantage to compensate you for tax-free investments’ typically lower returns. And doing so generally turns that tax-free income into income that’s taxable at ordinary income-tax rates when you withdraw it from the retirement account.

Similarly, if you have mutual funds that trade actively and therefore generate a lot of short-term capital gains, it may make sense to hold them in a tax-advantaged account to defer taxes on those gains, which can occur even if the fund itself has a loss. Finally, when deciding where to hold specific investments, keep in mind that distributions from a tax-deferred retirement plan don’t qualify for the lower tax rate on capital gains and dividends.

Be selective about selling shares
If you own a stock, fund, or ETF and decide to unload some shares, you may be able to maximize your tax advantage. For a mutual fund, the most common way to calculate cost basis is to use the average cost per share. However, you can also request that specific shares be sold — for example, those bought at a certain price. Which shares you choose depends on whether you want to book capital losses to offset gains, or keep gains to a minimum to reduce the tax bite. (This only applies to shares held in a taxable account.) Be aware that you must use the same method when you sell the rest of those shares.

Example: You have invested periodically in a stock for five years, paying various prices, and now want to sell some shares. To minimize the capital-gains tax you’ll pay on them, you could decide to sell the least profitable shares, perhaps those that were only slightly lower when purchased. Or if you wanted losses to offset capital gains, you could specify shares bought above the current price.

Depending on when you bought a specific security, your broker may calculate your cost basis for you, and will typically designate a default method to be used. For stocks, the default method is likely to be FIFO (“first in, first out”); the first shares purchased are considered the first shares sold. As noted above, most mutual-fund companies use the average cost per share as your default cost basis. With bonds, the default method amortizes any bond premium over the time you own the bond. You must notify your broker if you want to use a method other than the default.

Vicki Brackens, ChFC, is president of Brackens Financial Solutions Network, LLC. She is a registered representative of Lincoln Financial Advisors Corp. Contact Brackens at (315) 428-8484 or email: Vicki.brackens@lfg.com

Author disclosure: Tips were prepared by Broadridge Investor Communication Solutions, Inc. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. Brackens Financial Solutions Network is not an affiliate of Lincoln Financial Advisors Corp.

On Sept. 29, 2016, Governor Andrew Cuomo signed into law a new statute amending the New York Estates Powers and Trusts Law regarding the administration of digital assets.

The New York State Assembly memorandum in support of the legislation explains the need for this legislation as follows:

“The wide use of digital assets has created an urgent need for legislation dealing with the administration of these [digital] assets upon the death or incapacity of the user. As a practical matter, there should be no difference between a fiduciary’s ability to gain access to information from an online bank or other Internet-based business and the fiduciary’s ability to gain access to information from a business with a brick-and-mortar building. This measure . . . amend[s] the EPTL [New York Estates Powers and Trusts Law] to restore control of the disposition of digital assets back to the individual and removes such power from the service provider.

This measure gives fiduciaries authority to gain access to manage, distribute and copy or delete digital assets. It addresses four types of fiduciaries, namely: a personal representative (executor or administrator) of a decedent’s estate; a guardian of a ward or protected person; an agent acting pursuant to a power of attorney; and a trustee.

In the past, where property was mostly in tangible there was little doubt of its ownership and control. Indeed, the law recognizes that when a property owner dies or becomes unable to manage his or her property such owner may appoint a fiduciary to manage the property. The role of the fiduciary subsumes the duty of loyalty, care and confidentiality. The system has worked well throughout our history. This measure does not break legal ground; it merely applies the laws governing fiduciaries to a new type of property.”

What are digital assets? The new statute defines a digital asset as “an electronic record in which an individual has a right or interest. The term does not include an underlying asset or liability unless the asset or liability is itself an electronic record.” Examples that come to mind are email, online banking, and social media. The types of digital assets seem to increase daily.

This is a step in the right direction for fiduciaries dealing with digital assets. It is very important for individuals to review their current wills and powers of attorney and make sure that the disclosure (or nondisclosure) of digital assets is addressed in those documents, because if the individual does not authorize a fiduciary to access digital assets either online or through a will, power of attorney or trust, the fiduciary will not automatically have access to the content of digital assets.

Ami S. Longstreet is a partner at the Syracuse–based law firm Mackenzie Hughes LLP. She is responsible for helping businesses and individuals with estate and trust planning and administration as well as elder law, including asset protection and Medicaid planning, and planning for individuals with disabilities. Contact Longstreet at (315) 233-8263 or email: alongstreet@mackenziehughes.com. This Viewpoint article is drawn from the Mackenzie Hughes Blog, called “Plain Talk.” 

It’s the dream retirement that many people anticipate for decades.

Hang out around the pool all day. Play one round of golf after the other. Finally read that teetering stack of books on the nightstand.

In retirement, every day is Saturday — only without the dread about what Monday morning back at the office might bring.

But is endless recreation enough to satisfy still-vibrant retirees who have both the health and the mental capacity to continue to learn, explore, and contribute to the world?

Maybe not. As people near retirement, they have a great opportunity to map out a strategy to plan and create a fulfilling, rewarding rest of their lives. Studies show that retirees with a plan have the easiest time transitioning into and being the most satisfied in retirement.

For many people, planning for retirement focuses almost solely on the financial aspect. They worry about saving enough so they don’t run out of money.

But retirement also represents a lifestyle change, as people accustomed to heading to a job each day suddenly find themselves without any meaningful reason for getting out of bed. And all that free time, which seems enticing at first, can quickly become boring.

Here are a few factors to consider for those seeking a more fulfilling retirement:

• To work or not to work. It’s not unusual for people to continue to work in retirement, at least part-time. In some cases, the extra income is needed or at least adds a little more security to the retiree’s financial outlook. But some people simply don’t feel fulfilled if they aren’t contributing something by working. Often, I hear people say they’ve been working since they were teenagers and the thought of stopping just makes them uncomfortable.
  
• Volunteering wisely. Plenty of groups need volunteer help, such as charitable organizations, schools, libraries, animal shelters, museums, and more. But beware of letting them take advantage of your availability. You can have your calendar filled before you know what hit you. Pretty quickly, you may end up feeling like you put in a 40-hour work week. I recommend taking the time to identify the causes and issues important to you. Make sure the organization is aware of the skills you have to offer so you aren’t just licking envelopes. And don’t overcommit your schedule. You want to leave yourself some time just to kick back.
• Be a lifelong learner. Retirement can be a great time to take a college class or learn how to play a musical instrument. It’s proven that those who are lifelong learners have a greater sense of optimism and a lower chance of dementia. So if you’ve always wanted to learn more about philosophy, wanted to take a cooking class, or to learn a foreign language, now is the time.

It’s certainly important to have a financial plan for retirement. But to truly have a happy and rewarding retirement, you’ll want to make plans for your ideal retirement lifestyle as well.

Ann Vanderslice (www.annvanderslice.com), president and CEO of Retirement Planning Strategies. Vanderslice holds the registered financial consultant designation from the International Association of Registered Financial Consultants and the chartered retirement planning counselor designation from the College for Financial Planning.