Is your business presently strapped for cash to pay existing debt, credit cards, etc? Is this a temporary problem?

If so, you may want to consider an ARC loan. This is run under the auspices of the US Small Business Administration (SBA). Signed in February 2009 the program (America’s Recovery Capital) allows small businesses to borrow up to $35,000 from an approved SBA lending bank. You have until September 2010 to apply for this loan or until the allocated funds run out (seems unlikely right now). The loan proceeds can be drawn down over a six month period from approval and be used to make payments on existing debt, credit cards, leases etc . Unfortunately proceeds cannot be used directly for operating expenses but by the nature of the ARC facility this does free up cash flow for such expenses.

After the six months the borrower has a twelve month grace period before starting repayment of the ARC loan over five years. SBA pays the monthly interest on the loan and also guarantees the whole loan. So in most cases no collateral from the borrower is required.

Now for the more complicated bits.

To qualify you must demonstrate to the lending bank that you have a viable ongoing business. Technically you must have been in business for at least two years and have shown a positive cash flow in at least one of the past two years. In addition you must also provide a projection that you are able to meet all your loan repayments and operating expenes for the next two years. Also for the not so good news, many banks are not that enthusiastic about ARC loans loans and you may have to shop around. While the ARC loan is fully guaranteed by the SBA, a bank still has to evaluate and approve the loan. Naturally banks are reluctant to approve the loan where they have doubts on a borrower’s ability to repay since they could be criticized for lower credit standards. Also by their nature the loans are time consuming.

The best way forward.

This is to work with your existing bank and get approval from them if possible. A bank has little incentive to work with an ARC loan applicant if there is no other relationship. Also try to make it as easy as possible for the bank’s credit evaluation. Along with an ARC loan application form, submit full and understandable financial information. Don’t be too optimistic on your forecast for the two years projection since the bank would probably not believe them. In any case banks don’t like surprises. Also a paragraph or two on your current situation and future plans would be very helpful.

With President Obama’s new emphasis on increased lending by banks to smaller companies your chances of getting this loan should be greatly improved.

Tax-free retirement just got a little easier - ROTH conversions

Rules on Income Limts.
The income-eligibility limit on Roth conversions disappear on January 1st 2010 for high earners. The income level of $100,000 will become nonexistent. This is a prime opportunity to convert money into the tax-free Roths for high-earners. Income eligibility limits on contributions remain in effect.

You don’t have to wait until 2010.
For wager earners that make less than $100,000 adjusted gross income, you can actually convert now. With the market being down this might be an excellent time to convert since you will be paying less income tax on the lower account value. By waiting until 2010, you may be having to pay a higher tax bill with market appreciation. If you convert too soon, you can always convert back to a traditional IRA in what is known as a recharacterization by October 15th of the year you convert.

2010 is the year but not the year the tax is due.
While 2010 is the actual year that you will be able to convert, the income to be claimed can be deferred until 2011 and 2012. The IRS has granted you the option to claim 50% of the conversion amount as income in 2011 and the remaining 50% in 2012. Keep in mind that this is only in 2010. After 2010 the taxes will all be paid in full the following year going forward.

If you elect to pay the tax over the two year period, keep in mind that the tax rate is determined for that year only. Example, in 2011 you will pay the tax based on your tax bracket for that year. If your income were to somehow sky rocket in 2012, then you will be paying more in taxes that year for the conversion.

Convert Traditional IRAs and Old 401(k)s.
The 2010 conversion is not limited to just your traditional IRA. If you have any old 401(k)s or any other retirement plans from a previous employer, those will also be allowed to convert as well. Might be a good idea to convert them all.