Knowing these facts, and following them, can help keep your credit score where you want it.

1. Payment History – 35%
   1. A recent late payment could lower your credit score 60 to 100 points.
   2. Late payments damage the score the most at first, with less of an impact as it ages.
   3. A late payment can stay on your credit report for up to 7 years from the date it first went delinquent.
   4. A collection account can stay on your report for up to 7 years from the date it first went delinquent.
   5. Paying a collection account can hurt your score, especially if the account is more than 4 years old and the date of last activity in not currently reporting.
2. Balances on Revolving Accounts (Credit Cards) – 30%
   1. The credit score likes to see low balances and high credit limits on revolving accounts.
      1. Ideally, less than 10% (best case) or next best case of 30% of the credit line.
      2. Balances over 50% of the credit line will begin lowering the credit score.
      3. Balances over 70% is considered maxed out and can lower the score by up to 30%.
3. Paying balances down on revolving accounts will give you points.
4. Do not close the account if you pay off! (This can lower your credit score).
5. Request to be added as an authorized user by your significant other, family member, or a good friend that is willing to help you – preferably to an account that has been open for a few years and with a good payment history.
6. Avoid getting a joint revolving account with your significant other.
7. A line of credit is considered revolving credit.
8. Installment loan account balances have no impact on the credit score.
9. Paying more than owed on an installment loan does not help the credit score.
10. Longevity – 15%
    1. The credit score likes to see active credit files that have been open for a long time.
    2. Closing a credit card account can lower your credit score – the older it is the better it is!
    3. Installment loans that are paid off no longer contribute to the credit score.
11. Mix of Credit – 10%
    1. The credit score likes to see a good mix of credit – you do not need all 3 to have a good score but at least 2 of the 3.

• Mortgage
• Installment
• Revolving

1. Inquires – 10%
   1. Only those inquiries in the last 90 days have the greatest impact on the score.
   2. Inquiries can stay on your credit report for up to 2 years.
   3. Mortgage & auto inquiries count as 1 inquiry within a 30-day period.
   4. Credit card inquiries will hit the score every time.

Angie Horkey of Westbrook seeking support for her new business

The Southwest Initiative Foundation (SWIF) recently endorsed its first project through Kiva Zip, an online crowd-funding tool. Widely known as the international microlending site, Kiva recently started a pilot project called Kiva Zip, the online microlending platform specifically for businesses within the U.S. SWIF was invited to become a Kiva Zip trustee—currently the only one located in Minnesota—which allows the organization to endorse a project.

Crowd-funding is the newest wave in financing small business projects in a unique way by directly involving friends, family, community members or anyone who takes an interest in the business. The idea is based on small loans making a big impact in the lives of business owners and the communities in which they live.

“The Southwest Initiative Foundation is a likely candidate to partner with Kiva,” said SWIF Program Officer Kurt Thompson. “As one of Minnesota’s leading microlending organizations, this is a natural next step to assist entrepreneurs in communities throughout our region.”

SWIF’s first endorsed loan project is located in the small community of Westbrook. Angie Horkey is opening a new restaurant, The Recipe, on Main Street.

“The restaurant is a welcome site for locals who are anxious to have a place to gather for coffee, lunches and special events,” said Bank Midwest Vice President Janet Johnson.

A project must be endorsed to participate through Kiva. Anyone can become a lender by going on the Kiva website and loaning a business $25 at a time—or more, but the idea is to promote that you made this loan through social media and other channels, prompting others to get involved and also support the project.

Lenders can search for The Recipe online at www.zip.kiva.com. The money pledged to Horkey is an interest-free loan that she will pay back during the next 12 months. Kiva and its Trustees, including SWIF, hope lenders will see this as a way to help others and once repaid, would look for another project to fund.

“Anyone can become a cheerleader for Angie by becoming one of her lenders,” said Thompson. “That’s the beauty of crowd-funding.”

This endorsement is being paired with a loan from SWIF’s Microenterprise Loan Program which offers loans of up to $50,000 for starting or expanding for-profit small businesses located within the 18 counties of southwest Minnesota. This program also serves Carver, Stearns and Wright counties. In addition to financing, SWIF provides free technical assistance to all clients who have received a loan through the Microenterprise Program for the life of the loan. SWIF staff and business consultants provide one-to-one business planning, accounting, marketing and other training opportunities that will help entrepreneurs succeed in their venture. The program receives funding assistance from the U.S. Small Business Administration and U.S. Department of Agriculture. For more information, contact SWIF at 800-594-9480, 320-587-4848 or loans@swifoundation.org.

I recently read an article called, “Are You Time Rich?” by Barbara Hoese, Carol Miller and Barbara Williamson. (http://www.inventuregroup.com/download/on-purpose-archive/Volume_9_Issue_3.pdf)

Managers in corporate America were asked what one thing would make them more effective and almost unanimously they indicated, “time management.”  The surprising awareness, however, came when further discussion indicated that the usual approach of having ways to better manage scheduling of calendar items and better prioritizing tasks wasn’t what the managers were referring to.  They didn’t need more solutions for managing time with a clock; that kind of time management just emphasizes the stress of completing to-do lists only to add more to them.  As stated in the article, “Like Buzz Lightyear’s famous saying, our to-do list goes “To infinity and beyond.” Even as we check something off, something else gets added.  We’re all given the same twenty-four hours each day, seven days a week.  What, then do time rich people know and what do they do differently?”

The article suggests that time-rich people make time to look at who they want to BE, not just what they want to DO. They also understand the link between time and energy.  There is a real connection here for entrepreneurs.  When was the last time you looked at what you wanted your business to BE rather than just what needs to get done?  Have you thought about what is really important to you and your company?  What if part of your day included time to refuel your energy?  Would that also reignite your ability to circle back to your dreams for your company?  Some of the best leaders take time to think about where they’ve been, where they are now and what direction they are heading. Consider reading this article.  Perhaps it’s time to put shift some attention beyond those to-do lists!

The Southwest Initiative Foundation microloan program is dedicated to the development and growth of small businesses in Southwest Minnesota.   Many of you may already know this.   How are we different from other small business lenders?   The answer to that question is in the services we provide – free technical assistance in business and financial planning, training in Quickbooks, marketing (including social media advice), and general operations.   The reason we can provide these free services is due to the technical assistance grant funding SWIF receives from SBA and USDA through annual federal appropriations, combined with our own SWIF funding.   If you get a chance to contact your Minnesota  Senators or U.S. Representative – tell them “thanks” for their support of this bi-partisan program, which is a very low cost budget item, that produces high results!

For those currently seeking financing for your startup or expansion, should crowd-funding be a portion of your sources of funds?  The quick answer is maybe.  Lets be honest, crowd-funding is nothing new; it’s been going on for centuries.  But with technology and social media, the scope and sphere of influence is greater than ever.

From a lender’s point of view, using crowd-funding is truly a measure of need and commitment from your community and your pool of potential customers.  Having a broad base of support at the beginning does several things, but most importantly, it shows your lender that you have committed customers who want to see you succeed.

From a borrower’s point of view, it can be very attractive.  Early stage money is critical to any new project – large and small alike.  But lets be honest, using crowd-funding can be a win-win because the money does not have to be paid back right away or in some specific cases, never.  Flexibility is key to using crowd-funding within your financing package and it should at the very least be considered as you look at all of your options.

Here is a list of some of the options available in the marketplace:

Kiva Zip:  Kiva is the international Microlending Site that is now available in parts of the United States.  The Southwest Initiative Foundation is proud to be a Kiva Zip Partner and is available to discuss whether or not Kiva is a good option for you.  For more information on Kiva Zip, follow this link.  https://zip.kiva.org/

KickStarter:  A platform based crowd-funding site that can be promoted through the borrowers social media networks.  http://www.kickstarter.com/

Indiegogo:  A platform based crowd-funding site that can be promoted through the borrowers social media networks.  http://www.indiegogo.com/

As with any financing project, it is the entrepreneur’s responsibility to understand what it is you are signing up for.  Take your time, look around, do a little research, and then move forward.  Crowd-funding is not for everyone, but in certain situations, it can be a powerful tool in financing your new or expanding business.

Kurt Thompson is a Program Officer at the Southwest Initiative Foundation where he leads the Microloan and Entrepreneurship Programs.  He also serves as business coach and mentor to small businesses by offering one-on-one technical assistance to loan clients. 

Creating a well thought out cash flow analysis is a very important part of planning for your business.  This analysis will help you determine the sales volume you will need to cover your expenses and break even.  It will help you determine your net income and when you may be able to start taking an income from the profits.

When preparing your cash flow analysis you need to be realistic when projecting the future revenue.  Prepare the analysis on a monthly basis and take seasonal swings into consideration.  It may be helpful to break the revenue down into several categories based on product types such as product, parts and service.  This will also be helpful when calculating cost of goods sold since each of the categories may be a different percentage of sales.

When determining your fixed expenses, be sure not to leave anything out.  These are the expenses that will be there whether you have sales or not.  They include things like rent, utilities, insurance, payroll and advertising.  By estimating these expenses in the beginning you will have fewer unanticipated fluctuations in your cash flow in the future.

Another suggestion is to do several scenarios of the cash flow. Play with the various revenue and expense breakdowns to determine what mix may work better to give you the returns you are hoping for and the cash flow you will need.  You can also use this analysis as a budget to compare to your actual Profit and Loss reports.  By doing this you will quickly see what is working better than anticipated or what is costing more than you estimated.

Here are eight great tips from the IRS.

Receiving a notice from the Internal Revenue Service is no cause for alarm. Every year the IRS sends millions of letters and notices to taxpayers. In the event one shows up in your mailbox, here are eight things you should know.

1. Don’t panic. Many of these letters can be dealt with very simply.

2. There are a number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.

3. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.

4. If you receive a notice about a correction to your tax return, you should review the correspondence and compare it with the information on your return.

5. If you agree with the correction to your account, usually no reply is necessary unless a payment is due.

6. If you do not agree with the correction the IRS made, it is important that you respond as requested. Respond to the IRS in writing to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the lower left corner of the notice. Allow at least 30 days for a response from the IRS.

7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right corner of the notice. When you call, have a copy of your tax return and the correspondence available.

8. Keep copies of any correspondence with your tax records.

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. For information about penalties and interest charges, see Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

•             Publication 594, The IRS Collection Process (PDF)

•             Publication 17, Your Federal Income Tax for Individuals

•             Understanding Your IRS Notice or Letter

In early August I attended a Social Media Breakfast in Redwood Falls.  I had been hearing the “buzz” and was looking forward to seeing what it was all about.  I knew that I would probably enjoy it since I am learning as much as I can about using social media in the business world.  I got there, grabbed a cup of coffee and settled in. The guest panelists led a discussion of how they implement social media programs in their businesses to market their services and products.  As I said earlier, I knew I would like it but I am happy to say that I loved it!  In one short hour I picked up new tips, learned about apps I could use, and networked with peers.  I walked out of there thinking how it was well worth my time that morning.  Well the “buzz” is growing and there are two new Social Media Breakfast groups starting in southwest Minnesota!  In September you can attend Willmar’s on September 6^th, Redwood Falls on September 7^th (http://rvtechsolutions.com/socialmediabreakfast/) or Lakefield’s on September 21^st (email jfoote@mvtvwireless.com or lori@2smartwomen.com).  I encourage anyone who has an interest in social media to attend one of these.  These are free to attend but registration is required at the link and emails above.  See you there!

You may have heard about some of the recent efforts in Minnesota to build a better, highly-skilled workforce such as Skills@Work (http://www.gwdc.org/initiatives/skills_at_work.html) and the Workforce Assessment. http://www.mnscu.edu/business/workforceassessment/index.html.  I recently attended listening sessions where business executives shared their needs and the challenges they are seeing related to workforce.  Problem-solving, creative thinking, communicating, and teamwork are common skills that are missing.

As far back as 2006, the ITEA (International Technology Education Association), NASA, and the National Science Foundation were pushing for more hands-on, technology education courses to be integrated into the ‘normal’ high school curriculum. These courses are often the first to be eliminated in strained budget cuts and if they do exist, they are electives that compete with the required curriculum (http://www.iteea.org/AboutITEEA/AdvocacyBro.pdf). Add to this the impacts of the Elementary and Secondary Education Act (No Child Left Behind), and our students and teachers are truly challenged to fit in hands-on learning opportunities.

I received an email from a teacher indicating that some current changes in the Minnesota standards (http://education.state.mn.us/MDE/StuSuc/GradReq/index.html) are leading to a high probability that students won’t be able to fit in a specialized course related to environmental science and energy. This is in reference to the standard that requires students in the graduating class of 2015 and beyond to have three science credits that includes one biology credit and one physics or chemistry. As a high school student, I would need to take biology and physics or chemistry. That leaves just one elective in the three credits that might be fulfilled by an Agriculture or Career and Technical Education (CTE) credit. Unless there is a CTE course that also meets the standards underlying the chemistry or physics credit.

It is often the “extra” courses that provide students with the opportunity to have more hands-on experiences, work with team projects, look at things in a different way, and creatively work to solve problems. Technology education courses also enable students to survey areas in which they have an interest, aptitude, or career aspirations and provide an excellent opportunity to learn about industry and technology. These types of courses emphasize learning through hands-on activities coupled with the rigor of other academic areas.

I am thinking back to what I heard our businesses say is missing in young workers and I’m reminded of a Steve Jobs excerpt, “Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new things. And the reason they were able to do that was that they’ve had more experiences or they have thought more about their experiences than other people. Unfortunately, that’s too rare a commodity. A lot of people in our industry haven’t had very diverse experiences. So they don’t have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader understanding of the human experience, the better design we will have.” ~ Wired, February, 1996

Young people having more opportunities to experience many different things through experiential learning could go a long way to developing the next generation of the thinkers, entrepreneurs, and leaders we need in the future.  Just trying to connect my recent discussions and wonder what our business executives think about the requirements of the secondary education system!