Category Archives: Access to Capital

How PPACA Will Affect Your Business The Next 5 Years?

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Tod Covert  By Todd Covert, Executive Vice President of ACA Track

The Patient Protection and Affordable Care Act (PPACA) – also known as the Affordable Care Act or ACA – is the landmark health reform legislation passed by the 111th Congress and signed into law by President Barack Obama in March 2010. The legislation includes a long list of health-related provisions that began taking effect in 2010 and will “continue to be rolled out over the next four years.” Key provisions are intended to extend coverage to millions of uninsured Americans, to implement measures that will lower health care costs and improve system efficiency, and to eliminate industry practices that include rescission and denial of coverage due to pre-existing.

What does it mean for business today?

Business With 50-99 Employees 2015

Key Point #1

Navigating through transition relief to determine the date you need to make sure you are in compliance.

Applicable large employers (ALEs) with fewer than 100 full-time employees, including full-time equivalent employees, may have until 2016 to offer health insurance to eligible employees and their dependents without facing penalties.

This transition relief is available to employers who can certify that they have not reduced their workforce to remain under the threshold and have not materially reduced or eliminated health coverage previously offered. This certification needs to be included with your filing under Section 6056 for 2015.

The IRS will still grant transition relief to employers who reduced their workforce for “bona fide” business reasons.

Key Point #2

If you are over 50 FTE (Full-Time Equivalents) or part of a control group (Parent Company) with more than 50 FTE than you MUST file the 1095-C and 1094-C even if you do not offer coverage.

Key Point #3

Don’t “expect” your payroll company to complete these 1094-C and 1095-C forms.

Why?  Most payroll companies don’t even track the information required to complete these new IRS forms—It is more a benefit enrollment and plan design function than payroll.

  1. Dates of hire and waiting periods determine when employees are in the limited assessment period. Partial months are treated uniquely differently than full months and the series coded will change. Most payroll vendors only track deductions.
  1. Termination, rehire dates and class changes impact offer of coverage and safe harbor designations. Employees with a number of changes during the year can see a variety of different codes appearing on form 1095. Not a payroll function
  1. Offer of coverage determines whether 70% (2015) and 95% (2016) levels are reached or significant penalties are to be paid. Not a payroll function
  1. Safe harbor designations and income drive affordability calculations. Not a payroll function
  1. Transition relief provides the ability to mitigate risk and avoid penalties altogether.  Not a payroll function

Key Point #4

Start balancing culture and cost now because the “Cadillac Tax” is on the horizon in 2018—It’s not a matter of “IF” we hit the Cadillac Tax it’s a matter of “When” we hit the Cadillac Tax.

If health insurance exceeds $10,200 in premiums for an individual or $27,500 for a family. The tax amounts to 40 percent of the cost above that threshold AND its Non-Tax Deductible.

Why do we say “When” we hit the Cadillac Tax?  The insurance cost threshold ($10,200 in premiums for an individual or $27,500 for a family) only increases at CPI each year which is about 3.1% and Healthcare inflation increases close to 8.0% thus the X & Y axis lines are eventually going to cross.

Please join us September 29th for Women Accessing Capital: 5 Things You Need to Know About the New 1094-C and 1095-C IRS Reporting. Register now! 

From The Hill: Dodd-Frank’s Impact on Small Business Lending

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By Jake Clabaugh, WIPP Government Relations

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Women entrepreneurs face unintended consequences of wall-street reform. According to a House Committee hearing yesterday, the Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced in an effort to prevent another financial crisis, is contributing to small businesses’ inability to access capital from banks.

WIPP’s Access to Capital Platform has cited some of Dodd-Frank’s regulations as a contributing factor to the decrease in small businesses lending. Capital access is a lifeline for small businesses. It is essential for entrepreneurs to have access to sufficient capital to found and grow businesses.

DF picThe House Committee on Small Business convened lenders and experts to discuss how Dodd-Frank has affected the ability to provide entrepreneurs with critical capital. Access to private capital, including bank loans is a primary concern to women entrepreneurs as women-owned small businesses receive only 4% of private sector lending dollars. Additional regulatory burdens could be exacerbating this problem.

The hearing touched on many of the difficulties WIPP members have experienced when trying to access to capital. The Committee cited increased administrative burdens as a significant cost for small and community banks, a primary lender to small businesses. These regulations have increased the cost of making loans and therefore made it more difficult for banks and borrowers. The result is less capital for entrepreneurs.

The hearing also cited the direct impacts on borrowers. Many that would have qualified pre-recession are no longer able to obtain loans from banks due to tighter lending standards. WIPP’s platform advocates for modernized credit scoring that would level the playing field for women business owners.

Until Dodd-Frank is fully implemented, its complete impact will remain unclear. WIPP continues to review ongoing regulations as well as work with Congress to scale back unnecessary barriers to capital access for women entrepreneurs.

Introducing Peer-To-Peer Lending: Alternative Funding for Your Small Business

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SBA Advocacy- P2P issue brief

The Office of Advocacy is an independent office within the Small Business Administration that is a great source for small business statistics, as well as a voice for small business owners that can express their views and issues to policy makers in DC. Today, the Office of Advocacy released an issue brief on “Peer-To-Peer Lending: A Financing Alternative for Small Businesses”.

To explain a little more, Peer-To-Peer Lending or P2P is a funding model where individual investors give small personal loans online to individuals. The Office of Advocacy describes P2P as a hybrid of crowdfunding and marketplace lending.

The issue brief released today details the funding model and gives a side-by-side view of P2P and traditional small business financing options. It also shows how it could affect small businesses in the future, giving them more opportunity for financial growth.

Read the brief to learn more.

What We Can Learn from High Growth Women Owned Firms

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By Annie Wilson, Intern

Last year Susan Coleman D.P.S. and Alicia Robb Ph. D published research prepared for the National Women’s Business Council examining the factors affecting access to capital for high-growth women-owned businesses. In their research, Coleman and Robb found that currently in the business community 30% of businesses were owned by women, however they are mostly small:

  • only 12% of women-owned small businesses (WOSBs) employ anyone other than the business owner;
  • 2% have 10 or more employees; and
  • only 2% have revenues in excess of $1 million.

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This new data shows the need to engage and educate women owned businesses on growth strategies that can expand their businesses.

This report delves deeper into the issues relating to capital accessibility specifically for growth oriented firms, which comparative studies have yet to research thoroughly due to a lack of data.

According to the study, access to capital may be more challenging for women-owned firms than for men for a multitude of reasons:

  • In terms of financial capital, there are considerable gender gaps in the amounts of financing across firms. Men start firms with nearly double the amount of capital that women do and, of high growth firms, men use more than double of what women use. Men also indicated to have used six times the amount of financing that women do.
  • For startup capital, women were found to be more reliant on owner equity and insider financing as opposed to men who used outsider equity predominantly. For women owned firms, a very small fraction of startup capital came from outsider equity regardless of where the firm was on the size spectrum.
  • In terms of credit market experiences, women indicated to have similar loan application rates as men even though there are more unmet credit needs among women. Women were more likely to not apply for the necessary credit due to a fear of a denied loan application. Also, credit scores are generally lower for women.
  • While men and women are on par in terms of education levels, men exceed women in degrees in the STEM fields, which is the industry that experiences more growth.
  • By means of industry experience, as women tend to have lower levels of startup experience, team ownership and hours worked compared to men.
  • Women have higher rates of owning businesses that are home-based due to family commitments and research has indicated that being home based is negatively related to growth.

However, when comparing the top ranking female businesses by employment and growth potential, there are some considerable differentiations that set them aside.

  • They had a higher rate of employment from their startup year onwards.
  • They are more likely to be in tech industries.
  • They were more likely to offer services as opposed to products.
  • They were less likely to be based from the owner’s home.
  • They were more likely to be incorporated and as a result yield higher credit scores.

For leadership traits, women business owners of high growth firms also had some unique characteristics:

  • They were likely to have more years of industry experience and more likely to have more startup experience.
  • They started their businesses with much more capital (even more than the male owned firms overall.)
  • They used more outsider equity for startup capital. However, this was typically still less than their male counterparts.

Learning from these success measures, it is clear that increased capital for women entrepreneurs, specifically in the startup phase of their business, has an important correlation to the trajectory of women owned businesses. In order to foster a more successful environment for women, there must be changes in the business environment to give women the support and resources they need to turn this trend around.

It is clear that the financing gap between men and women business owners is a considerable detriment to the vitality of women-owned firms. In order to ensure stronger female entrepreneurship and make strides towards closing this gap, efforts must be made to strengthen the financial capabilities of women entrepreneurs and encourage accessibility to bank and equity financing. Also, providing more visibility and accessibility to successful female industry professionals and providing more opportunity for women to attain industry experience could help bolster the entrepreneurial confidence that women need to compete with their male competitors. Another important step forward would be an increased use of family-friendly policies, which could give women the flexibility to work outside of their homes and in an environment more conducive to entrepreneurial growth.

Take a look at WIPP’s recently launched Access to Capital platform to address funding gaps and the crisis of capital faced by women entrepreneurs.

To read the full report, click here.

How to Boost Women’s Entrepreneurship

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While numbers of women entering labor force are steadily increasing, their participation in entrepreneurship is less favorable. In fact, according to the Kauffman Foundation, an entrepreneurship think tank, women are only half as likely as men to start a business resulting in unrealized potential for their contributions to job creation, innovation, and ultimately economic growth.

UntitledKauffman Foundation released a new study claiming that women would make great entrepreneurs but they often fail to start their own business mostly due to following reasons:

  • Shortage of available mentors;
  • Perception of entrepreneurship as a masculine activity;
  • Additional hurdles maintaining a work-life balance due to parenthood.

However, we can address these barriers as Kauffman highlights 5 ways for policymakers on how to encourage women to start their own business.

  1. Provide more exact, gender based, data on entrepreneurship programs and initiatives to understand how they can better help women entrepreneurs. Collecting data based on gender will help them to make more accurate decisions in assisting women entrepreneurs.
  1. Increase the number of women leading entrepreneurship programs. Women can better lead and support other women entrepreneurs by using their networks for accessing mentors, financial capital, and creating women inclusive events that attract women entrepreneurs.
  1. Increase Small Business Innovation Research (SBIR) awards to women-owned businesses. Although federal agenciesparticipating in the SBIR Seed Fund are encouraging women to engage in federal research/Research and Development, only 15 percent of SBIR awards went to women-owned businesses in 2012. One of the ways to increase this number is to partner with women’s professional organizations and make better effort of reaching out to women entrepreneurs to participate in these programs.
  1. Share stories of successful women entrepreneurs. Celebrating accomplishments of women entrepreneurs will change the false perception that only men are successful entrepreneurs and encourage more women to follow successful women in business.
  1. Decrease the risk of becoming an entrepreneur. Pressure and risks that women as entrepreneurs are facing, especially with young families, can discourage them of starting in the first place. By exploring various policies such as subsidized childcare or preschool, can help alleviate the pressure and create a more favorable environment for women to start their own businesses.

Read the full study here.

WIPP’s Next Battle

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A2C

For the better part of two decades, WIPP championed the effort to help bring women into the lucrative federal market. As many of you know, we accomplished much of what we set out to do with the addition of sole source authority. Since then, however, WIPP’s team in Washington has focused on a statistic that kept repeating in our brains: women receive only $1 out of every $23 that is being loaned to small businesses. How was that possible?

For months WIPP devoted time to researching the landscape of business finance, capital access, and small business lending. What we found was that there are many policy ideas about how to stimulate lending to women – ultimately growing the economy because we all know the economic impact of women-owned businesses.

But we have a long way to go. In 2013, more than two in three loan applications for women-owned firms were denied. WIPP’s annual membership survey regularly finds that women must make multiple attempts to secure bank loans or lines of credit – with a full 40% never succeeding. All this despite women making up one-third of business owners, generating more than $1 trillion annually in receipts, and growing at 1.5 times the rate of average businesses.

The platform WIPP released today, Breaking the Bank: Women Entrepreneurs & the Need for Capital, will hopefully change that. The solutions span three main themes: changing the capital infrastructure, supporting small lending institutions, and strengthening government investment. The platform has four solutions that will change the capital infrastructure. For example, WIPP wants the government lending programs to consider FICO’s alternative credit scoring system. This system modernizes the way credit is calculated to provide new opportunities for women entrepreneurs trying to obtain loans. WIPP also wants to support small lending institutions by pushing for an end to a “one-size-fits-all” approach to regulation. Removing these burdens on small banks will allow them to return their focus to lending.

Changes to government policies are an important part of the platform. WIPP believes a small business seat at the Securities & Exchange Commission will ensure that smaller women-owned firms have an advocate as the next generation of alternative lending, like CrowdFunding, is eventually put into place. Modernizing the Microloan Program, where women are the majority of loan recipients will also make a difference. Women owned small businesses are growing at 1.5 times the rate of average businesses, but they will never get off the ground if they cannot obtain early stage capital.

WIPP does not have a monopoly on good ideas but we have an important voice in public policy. Over time, we may add to this platform to ensure that all policy solutions improving access to funding for women entrepreneurs can become part of the debate in Washington. We ask you today to look through WIPP’s access to capital platform and share it with one other woman you know. If our successes in Washington in the 15 years WIPP has been an organization are any example, we will need a lot of women behind us to make this platform a reality.

6 Women Entrepreneurs Share How They Raised VC Funds

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VCIf you are a woman entrepreneur trying to raise venture capital, this article, written by Vivian Giang, will certainly guide through the majors difficulties. It will let you succeed in the “Jungle” of raising venture capital funds, or at least it is going to give very useful advices. This article (Hyperlink) shares the stories of six women entrepreneurs who have successfully acquired funding in this complicated system.

Sure statistics prove that the method of financing still has some challenges, especially when you think that male entrepreneurs are 40% more likely to get VC funding than female founders, but change is on the horizon, and these entrepreneurs are certainly an example of tenacity and sharpness.

Get to know Nicole Sanchez, founder of luxury hair distribution company, VIXXENN ; Jessica Richman, cofounder and CEO of uBiome, a platform for microbiome sequencing; Mada Seghete, cofounder of developer tool, Branch Metrics; Mona Bijoor, founder and CEO of JOOR, a private online fashion marketplace for wholesale buying; Fern Mandelbaum, entrepreneur, managing partner at Vista Venture Partners and lecturer at Stanford Business School; and Umaimah Mendhro, cofounder and CEO of VIDA, an e-commerce platform that aims to connect designers, artists, producers, and consumers.

Read the article here.