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https://www.investopedia.com/terms/m/manufacturing-resource-planning.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-manufacturing-resource-planning"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Manufacturing Resource Planning? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Manufacturing Resource Planning (MRP II) is an integrated information system used by businesses. Manufacturing Resource Planning (MRP II) evolved from early <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mrp.asp">Materials Requirement Planning (MRP)</a> systems by including the integration of additional data, such as employee and financial needs.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> The system is designed to centralize, integrate, and process information for effective decision making in scheduling, design engineering, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inventory-management.asp">inventory management</a>, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cost-control.asp">cost control</a> in manufacturing.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Both MRP and MRP II are seen as predecessors to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/erp.asp">Enterprise resource planning (ERP)</a>, which is a process whereby a company, often a manufacturer, manages and integrates the important parts of its business.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> An ERP management information system integrates areas such as planning, purchasing, inventory, sales, marketing, finance, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/humanresources.asp">human resources</a>. ERP is most frequently used in the context of software, with many <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/110614/top-tools-erp-enterprise-resource-planning.asp">large applications having been developed</a> to help companies implement ERP.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div>
<span class="heading-toc" id="toc-understanding-manufacturing-resource-planning-mrp-ii"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Understanding Manufacturing Resource Planning (MRP II) </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> MRP II is a computer-based system that can create detailed production schedules using real-time data to coordinate the arrival of component materials with machine and labor availability. MRP II is used widely by itself, but it's also used as a module of more extensive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/erp.asp">enterprise resource planning (ERP)</a> systems.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_13-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_14-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Manufacturing Resource Planning (MRP II) is an integrated information system used by businesses.</li><li>MRP II is an extension of materials requirement planning (MRP).</li><li>Both MRP and MRP II are seen as predecessors to Enterprise resource planning (ERP).</li></ul></div></div></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> MRP II is an extension of the original materials requirements planning (MRP I) system. Materials requirements planning (MRP) is one of the first software-based integrated information systems designed to improve <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/productivity.asp">productivity</a> for businesses.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> A materials requirements planning information system is a sales forecast-based system used to schedule raw material <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/delivery.asp">deliveries</a> and quantities, given assumptions of machine and labor units required to fulfill a sales forecast.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> By the 1980s, manufacturers realized they needed software that could also tie into their accounting systems and forecast inventory requirements. MRP II was provided as a solution, which included this functionality in addition to all the capabilities offered by MRP I.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-subheading__text"> Real-World Examples of MRP II Software </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The following are a small sampling of some popular MRP II software providers, as of early 2020:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> <li>IQMS</li><li>Fishbowl</li><li>FactoryEdge</li><li>Prodsmart</li><li>abas</li><li>Oracle Netsuite Manufacturing Edition</li><li>Epicor</li><li>S2K Enterprise</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-subheading__text"> MRP I vs. MRP II </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> For all intents and purposes, MRP II has effectively replaced MRP I software. Most MRP II systems deliver all of the functionality of an MRP system. But in addition to offering master production scheduling, bill of materials (BOM), and inventory tracking, MRP II provides functionality within logistics, marketing, and general finance.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> For example, MRP II is able to account for variables that MRP is not—including machine and personnel capacity—providing a more realistic and holistic representation of a company’s operating capabilities. Many MRP II solutions also offer simulation features that allow operators to enter variables and see the downstream effect. Because of its ability to provide feedback on a given operation, MRP II is sometimes referred to as a closed-loop system.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> MRP I included the following three major functionalities:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> <li>master production scheduling</li><li>bill of materials</li><li>inventory tracking</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> MRP II includes those three, plus the following:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> <li>machine capacity scheduling</li><li>demand forecasting</li><li>quality assurance</li><li>general accounting</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> MRP II systems are still in wide use by manufacturing companies today and can either be found as stand-alone solutions or as part of an enterprise resource planning (ERP) system. Enterprise Resources Planning (ERP) software systems are regarded as the successors of MRP II software.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> ERP suites include applications well outside the scope of manufacturing. These can include everything from human resources and customer relationship management to enterprise asset management.
</p></div> | ## What Is Manufacturing Resource Planning?
Manufacturing Resource Planning (MRP II) is an integrated information system used by businesses. Manufacturing Resource Planning (MRP II) evolved from early [Materials Requirement Planning (MRP)](https://www.investopedia.com/terms/m/mrp.asp) systems by including the integration of additional data, such as employee and financial needs.
The system is designed to centralize, integrate, and process information for effective decision making in scheduling, design engineering, [inventory management](https://www.investopedia.com/terms/i/inventory-management.asp), and [cost control](https://www.investopedia.com/terms/c/cost-control.asp) in manufacturing.
Both MRP and MRP II are seen as predecessors to [Enterprise resource planning (ERP)](https://www.investopedia.com/terms/e/erp.asp), which is a process whereby a company, often a manufacturer, manages and integrates the important parts of its business.
An ERP management information system integrates areas such as planning, purchasing, inventory, sales, marketing, finance, and [human resources](https://www.investopedia.com/terms/h/humanresources.asp). ERP is most frequently used in the context of software, with many [large applications having been developed](https://www.investopedia.com/articles/investing/110614/top-tools-erp-enterprise-resource-planning.asp) to help companies implement ERP.
## Understanding Manufacturing Resource Planning (MRP II)
MRP II is a computer-based system that can create detailed production schedules using real-time data to coordinate the arrival of component materials with machine and labor availability. MRP II is used widely by itself, but it's also used as a module of more extensive [enterprise resource planning (ERP)](https://www.investopedia.com/terms/e/erp.asp) systems.
### Key Takeaways
* Manufacturing Resource Planning (MRP II) is an integrated information system used by businesses.
* MRP II is an extension of materials requirement planning (MRP).
* Both MRP and MRP II are seen as predecessors to Enterprise resource planning (ERP).
MRP II is an extension of the original materials requirements planning (MRP I) system. Materials requirements planning (MRP) is one of the first software-based integrated information systems designed to improve [productivity](https://www.investopedia.com/terms/p/productivity.asp) for businesses.
A materials requirements planning information system is a sales forecast-based system used to schedule raw material [deliveries](https://www.investopedia.com/terms/d/delivery.asp) and quantities, given assumptions of machine and labor units required to fulfill a sales forecast.
By the 1980s, manufacturers realized they needed software that could also tie into their accounting systems and forecast inventory requirements. MRP II was provided as a solution, which included this functionality in addition to all the capabilities offered by MRP I.
### Real-World Examples of MRP II Software
The following are a small sampling of some popular MRP II software providers, as of early 2020:
* IQMS
* Fishbowl
* FactoryEdge
* Prodsmart
* abas
* Oracle Netsuite Manufacturing Edition
* Epicor
* S2K Enterprise
### MRP I vs. MRP II
For all intents and purposes, MRP II has effectively replaced MRP I software. Most MRP II systems deliver all of the functionality of an MRP system. But in addition to offering master production scheduling, bill of materials (BOM), and inventory tracking, MRP II provides functionality within logistics, marketing, and general finance.
For example, MRP II is able to account for variables that MRP is not—including machine and personnel capacity—providing a more realistic and holistic representation of a company’s operating capabilities. Many MRP II solutions also offer simulation features that allow operators to enter variables and see the downstream effect. Because of its ability to provide feedback on a given operation, MRP II is sometimes referred to as a closed-loop system.
MRP I included the following three major functionalities:
* master production scheduling
* bill of materials
* inventory tracking
MRP II includes those three, plus the following:
* machine capacity scheduling
* demand forecasting
* quality assurance
* general accounting
MRP II systems are still in wide use by manufacturing companies today and can either be found as stand-alone solutions or as part of an enterprise resource planning (ERP) system. Enterprise Resources Planning (ERP) software systems are regarded as the successors of MRP II software.
ERP suites include applications well outside the scope of manufacturing. These can include everything from human resources and customer relationship management to enterprise asset management.
| What Is Manufacturing Resource Planning?
Manufacturing Resource Planning (MRP II) is an integrated information system used by businesses. Manufacturing Resource Planning (MRP II) evolved from early Materials Requirement Planning (MRP) systems by including the integration of additional data, such as employee and financial needs.
The system is designed to centralize, integrate, and process information for effective decision making in scheduling, design engineering, inventory management, and cost control in manufacturing.
Both MRP and MRP II are seen as predecessors to Enterprise resource planning (ERP), which is a process whereby a company, often a manufacturer, manages and integrates the important parts of its business.
An ERP management information system integrates areas such as planning, purchasing, inventory, sales, marketing, finance, and human resources. ERP is most frequently used in the context of software, with many large applications having been developed to help companies implement ERP.
Understanding Manufacturing Resource Planning (MRP II)
MRP II is a computer-based system that can create detailed production schedules using real-time data to coordinate the arrival of component materials with machine and labor availability. MRP II is used widely by itself, but it's also used as a module of more extensive enterprise resource planning (ERP) systems.
Key Takeaways
Manufacturing Resource Planning (MRP II) is an integrated information system used by businesses.MRP II is an extension of materials requirement planning (MRP).Both MRP and MRP II are seen as predecessors to Enterprise resource planning (ERP).
MRP II is an extension of the original materials requirements planning (MRP I) system. Materials requirements planning (MRP) is one of the first software-based integrated information systems designed to improve productivity for businesses.
A materials requirements planning information system is a sales forecast-based system used to schedule raw material deliveries and quantities, given assumptions of machine and labor units required to fulfill a sales forecast.
By the 1980s, manufacturers realized they needed software that could also tie into their accounting systems and forecast inventory requirements. MRP II was provided as a solution, which included this functionality in addition to all the capabilities offered by MRP I.
Real-World Examples of MRP II Software
The following are a small sampling of some popular MRP II software providers, as of early 2020:
IQMSFishbowlFactoryEdgeProdsmartabasOracle Netsuite Manufacturing EditionEpicorS2K Enterprise
MRP I vs. MRP II
For all intents and purposes, MRP II has effectively replaced MRP I software. Most MRP II systems deliver all of the functionality of an MRP system. But in addition to offering master production scheduling, bill of materials (BOM), and inventory tracking, MRP II provides functionality within logistics, marketing, and general finance.
For example, MRP II is able to account for variables that MRP is not—including machine and personnel capacity—providing a more realistic and holistic representation of a company’s operating capabilities. Many MRP II solutions also offer simulation features that allow operators to enter variables and see the downstream effect. Because of its ability to provide feedback on a given operation, MRP II is sometimes referred to as a closed-loop system.
MRP I included the following three major functionalities:
master production schedulingbill of materialsinventory tracking
MRP II includes those three, plus the following:
machine capacity schedulingdemand forecastingquality assurancegeneral accounting
MRP II systems are still in wide use by manufacturing companies today and can either be found as stand-alone solutions or as part of an enterprise resource planning (ERP) system. Enterprise Resources Planning (ERP) software systems are regarded as the successors of MRP II software.
ERP suites include applications well outside the scope of manufacturing. These can include everything from human resources and customer relationship management to enterprise asset management.
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https://www.investopedia.com/best-asset-management-software-5090064 | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body">
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<div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0">
Businesses in the digital age must manage and track more <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-asset.asp">assets</a> than ever before. With mobile devices flooding the workplace, increasingly complex cloud technologies, licensed-based software, and more frequent updates, managing and tracking IT assets has become much more complicated. And frequent employee turnover raises data security issues.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1">
This is where asset management software (AMS) comes in. It allows businesses to monitor their assets and effectively manage them to ensure their optimum utilization while reducing IT and software costs. They provide a holistic view of an asset's lifecycle—from its procurement and implementation through its renewal and disposal. Though a business could use a simple spreadsheet to track its assets, an AMS allows it to analyze data specific to each asset, enabling it to make more informed decisions about managing its assets.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-2">
In this roundup, we reviewed 20 AMS programs, comparing factors such as price, configurability, special features, ease of implementation, remote capabilities, and user experience to arrive at the best in six different categories.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block -->
<div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0">
<span class="heading-toc" id="summary-list"></span>
<h2 class="summary-list__title">
The 6 Best Asset Management Software Options
</h2>
<ul class="summary-list__content">
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best Overall:</strong>
<a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://appwiki.nl/link/brand/Dy5oJvPF8aBPbnXPrCKF1HLLGLW5NPty" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> ManageEngine AssetExplorer</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Small to Medium Businesses:</strong>
<a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://appwiki.nl/link/brand/qxyVkVpeDE419QvCXu72nPGLsyNq5xAE" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> InvGate Assets</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Custom Reporting:</strong>
<a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.ivanti.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Ivanti IT Asset Management</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best Value:</strong>
<a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.assetpanda.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Asset Panda</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Mobile Applications:</strong>
<a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.pulseway.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> MMSoft Pulseway</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Tracking Physical Assets:</strong>
<a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://gocodes.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> GoCodes</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
</ul>
</div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list -->
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Best Asset Management Software</span><!-- end: comp mntl-toc__heading-text mntl-text-block -->
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<div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Asset Management Software" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0">
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Best Asset Management Software</span><!-- end: comp mntl-toc__heading-text mntl-text-block -->
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<ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0">
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<a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-ManageEngine AssetExplorer" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-ManageEngine AssetExplorer" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-manageengine-assetexplorer" rel="nocaes"> <span class="link__wrapper">ManageEngine AssetExplorer</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-InvGate Assets" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-InvGate Assets" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-small-to-medium-businesses-invgate-assets" rel="nocaes"> <span class="link__wrapper">InvGate Assets</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Ivanti IT Asset Management" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Ivanti IT Asset Management" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-custom-reporting-ivanti-it-asset-management" rel="nocaes"> <span class="link__wrapper">Ivanti IT Asset Management</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Asset Panda" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Asset Panda" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-value-asset-panda" rel="nocaes"> <span class="link__wrapper">Asset Panda</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-MMSoft Pulseway" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-MMSoft Pulseway" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-mobile-applications-mmsoft-pulseway" rel="nocaes"> <span class="link__wrapper">MMSoft Pulseway</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-GoCodes" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-GoCodes" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-tracking-physical-assets-gocodes" rel="nocaes"> <span class="link__wrapper">GoCodes</span>
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See More (3)</li><!-- end: comp toc-items__chop mntl-text-block -->
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<a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Final Verdict" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-final-verdict" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">Final Verdict</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link -->
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<a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Frequently Asked Questions" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-frequently-asked-questions-35888749-cf68-4469-a4fe-36a46f5c9759" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Frequently Asked Questions</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link -->
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<li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2">
<div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2">
<a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link -->
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<div class="loc article-body__inner article-body__inner">
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0">
<span class="heading-toc" id="toc-best-overall-manageengine-assetexplorer"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best Overall</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> ManageEngine AssetExplorer</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 489px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="ManageEngine" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/NbOCHot_nNDw035zfmGJQMwn_R4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/ManageEngine-2e9fa1d2f4bb46f58444563b2081d48a.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/>
<noscript>
<img alt="ManageEngine" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/NbOCHot_nNDw035zfmGJQMwn_R4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/ManageEngine-2e9fa1d2f4bb46f58444563b2081d48a.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0">
<span class="figure-article-caption-owner"><p>ManageEngine</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-1">
<li><strong>Trial Period:</strong> 30 days</li><li><strong>Starting Price: </strong>$995 per year for 250 IT assets</li><li><strong>Tech Support: </strong>24/7</li>
</ul><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-2">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at ManageEngine" data-retailer-type="other" data-tracking-container="true" href="https://appwiki.nl/link/brand/Dy5oJvPF8aBPbnXPrCKF1HLLGLW5NPty" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
</div>
<div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard">
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1">
<span class="tabbed-sc-block__text">Why We Chose It</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4">
With its mature toolkit and abundance of advanced features, including top-notch reporting, unique relationship maps, and support for both physical and virtual assets, ManageEngine AssetExplorer is our choice as the best overall asset management software.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2">
<span class="tabbed-sc-block__text">Pros & Cons</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2">
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-6">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Feature-rich tool set with mature technology</p></li>
<li><p>Easy setup</p></li>
<li><p>Reasonably priced</p></li>
<li><p>Familiar Windows-style user interface</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>No mobile application</p></li>
<li><p>Not for small businesses with limited IT staff</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3">
<span class="tabbed-sc-block__text">Overview</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8">
ManageEngine AssetExplorer is a web-based solution packed full of tools and features to handle all aspects of asset management, including inventory management, software license administration, compliance review, and more. With its mature technology, ease of setup, and reasonable price, ManageEngine AssetExplorer is our choice as the best overall asset management software.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9">
For businesses new to asset management, ManageEngine AssetExplorer's feature-rich tool set may seem a bit overwhelming. However, if you start with its 30-day free trial, you can shorten the learning curve. The setup can appear incredibly daunting with its excessive number of tabs and drop-down menus. But ManageEngine AssetExplorer includes an excellent Quick Links feature to help you stay focused on the tasks you need to complete.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10">
It also helps that the interface has a Windows look and feel. Adding devices can also seem daunting due to the sheer number of choices. But the Windows Agent Configuration simplifies the process when using installed Windows Agents on new devices.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11">
ManageEngine AssetExplorer's mature technology shines through with its reporting capability. In addition to a few dozen pre-built reports, the system can export reports in multiple formats to include all past queries. You can also easily create completely customized reports. In addition to scheduling reports to run, you can schedule email delivery to specific recipients.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12">
One significant downside to ManageEngine AssetExplorer is the lack of a mobile application. Though you can access the program on a mobile browser, its somewhat complicated user interface (UI) can make navigating on mobile devices more difficult. It's OK for more straightforward tasks, such as handling repair tickets and troubleshooting on the road.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13">
The starting price for ManageEngine AssetExplorer is $995 per year for 250 IT assets, but you have to contact ManageEngine for a detailed quote.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14">
All ManageEngine AssetExplorer users have access to 24/7 technical support, which is another key differentiator. Its support for virtual hosts and virtual machines is also a rarity. The only downside is there is no support if you're managing a lot of mobile devices, though there is support for voice-over IP (VoIP) phones.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1">
<span class="heading-toc" id="toc-best-for-small-to-medium-businesses-invgate-assets"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Small to Medium Businesses</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> InvGate Assets</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-15" style="--imgWidth: 205px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="InvGate" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/tRBlp84V3EEEu2krUj6qm8TE2kE=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Invgate-d5c61d2857a149f082c0c6f7797f8057.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/>
<noscript>
<img alt="InvGate" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/tRBlp84V3EEEu2krUj6qm8TE2kE=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Invgate-d5c61d2857a149f082c0c6f7797f8057.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1">
<span class="figure-article-caption-owner"><p>InvGate</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16">
<li><strong>System Compatibility:</strong> Windows, MacOS, Linux</li><li><strong>Support Features:</strong> Unlimited access by phone and online for subscribers</li><li><strong>Pricing:</strong> Available only by request</li>
</ul><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-17">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at InvGate" data-retailer-type="other" data-tracking-container="true" href="https://appwiki.nl/link/brand/qxyVkVpeDE419QvCXu72nPGLsyNq5xAE" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
</div>
<div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard">
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1">
<span class="tabbed-sc-block__text">Why We Chose It</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19">
We chose InvGate Assets as the best asset management software for small to medium-size businesses with limited IT staff because it checks all the boxes, including easy setup, ease of use, advanced reporting, and remote desktop, all at a reasonable price.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2">
<span class="tabbed-sc-block__text">Pros & Cons</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2">
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-21">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Quick and easy setup</p></li>
<li><p>Straightforward and easy-to-follow navigation</p></li>
<li><p>Alarms can quickly show problems with assets</p></li>
<li><p>Reasonably priced for small to mid-size businesses</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Limited reporting</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3">
<span class="tabbed-sc-block__text">Overview</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-23">
InvGate Assets covers all the essential software and hardware bases for tracking assets and inventory and doing so with an easy installation and easy-to-use interface, making it our choice for the best asset management software for small to medium-size businesses.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24">
Out of the box, InvGate Assets allows businesses to track their assets with features such as advanced reports, network discovery, remote desktop, change management, license management, software deployment, and software metering. InvGate shortens the user learning curve with a straightforward and easy-to-follow UI. The navigation for getting reports is as simple as conducting a regular search and then exporting the data to Microsoft Excel.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25">
InvGate's alert system is easy to set up, and it quickly notifies users of any problems with assets. It also uses a straightforward approach to getting assets into the system with a simple agent install on any machine or device to be tracked. The system supports clients using Windows, MacOS, and even Linux.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26">
The price you pay for InvGate Assets depends on the number of nodes you want to support. Nodes are only counted if an agent will be installed for the InvGate Assets application. Other access points, such as IP phones, printers, routers, and fax machines, aren't included in the nodes count.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27">
InvGate offers three plans—Insight, Service Desk, and Assets—but pricing is not readily available on its website. To get a quote, you must request it by filling out a form and having the company contact you.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28">
InvGate support is ideal for businesses with limited IT staff that might need more hand-holding. Subscribers receive unlimited access to phone support and a web support portal that includes a self-service knowledge base. Users have access to documentation and can request assistance with problem reporting throughout the license period.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2">
<span class="heading-toc" id="toc-best-for-custom-reporting-ivanti-it-asset-management"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Custom Reporting</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> Ivanti IT Asset Management</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-29" style="--imgWidth: 591px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:66.6%;">
<img alt="Ivanti" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/ny_jHBV46O1x_PjfvldZyWsTetM=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Ivanti-47b2969743be44f48a658dba18adb379.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-2" width="1500"/>
<noscript>
<img alt="Ivanti" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/ny_jHBV46O1x_PjfvldZyWsTetM=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Ivanti-47b2969743be44f48a658dba18adb379.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2">
<span class="figure-article-caption-owner"><p>Ivanti</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30">
<li><strong>System Compatibility:</strong> Windows</li><li><strong>Support Features:</strong> 24/7 access for subscribers</li><li><strong>Pricing:</strong> Available only by request</li>
</ul><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-31">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Ivanti" data-retailer-type="other" data-tracking-container="true" href="https://www.ivanti.com/" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
</div>
<div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard">
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1">
<span class="tabbed-sc-block__text">Why We Chose It</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33">
For businesses wanting more flexibility in tracking key data points, Ivanti IT Asset Management offers many pre-built reports, which can be further customized based on personal queries. That makes Ivanti IT Asset Management our choice for the best custom reporting.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2">
<span class="tabbed-sc-block__text">Pros & Cons</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2">
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-35">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Mobile and desktop workspaces</p></li>
<li><p>Familiar Windows-style interface</p></li>
<li><p>Easy wizard setup</p></li>
<li><p>Workflows and processes can be customized</p></li>
<li><p>Several tech support options</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Does not offer a cloud-based service</p></li>
<li><p>Lengthy, hardware-heavy installation process</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3">
<span class="tabbed-sc-block__text">Overview</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37">
There are several reasons to like the feature-rich Ivanti IT Asset Management Suite. But the one that stands out for enterprises that want to quickly and explicitly highlight key data points is its reporting capability. With many pre-built reports available and the opportunity to build more queries, Ivanti IT Asset Management is our choice as the best custom reporting AMS.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38">
Ivanti offers everything a business needs to accurately track and efficiently manage IT assets through their complete lifecycle, including asset discovery, financial management, software compliance, and license management. The setup uses a Windows-based interface, making it more intuitive for Windows users. The wizard follows a straightforward path to get you to your initial network scan for assets, with steps along the way to learn configuration and administration. After the initial scan, you can install agents on those machines.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-39">
Although Ivanti can tap into both mobile and desktop workspaces, it does not offer a cloud-based service, which means a more involved installation with minimum hardware requirements. For businesses that can manage an on-site installation, the upside is a faster response time for asset discovery and report generation. As previously mentioned, the reports quickly return information, even after manipulating queries to see more data.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-40">
Like many AMS providers, Ivanti's pricing is based on the number of nodes that need support, and similar to InvGate Assets, Ivanti counts only the number of agents installed. So IP phones, routers, and other network devices that can't install an agent are not included in the asset count for determining the price. Ivanti does not publish its pricing but instead asks interested parties to contact them for an estimate.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41">
Ivanti also offers a free trial of the Asset Management Suite. But because the trial software must be installed on a local server, you will need to confirm that your machines meet the minimum hardware requirements.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42">
An Ivanti subscription includes access to technical support, including phone support, a web portal, and online self-service. For a premium, Ivanti offers a dedicated technical account manager's support. There is 24/7 phone support for critical issues, but this is only available with premium enterprise-level support.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3">
<span class="heading-toc" id="toc-best-value-asset-panda"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best Value</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> Asset Panda</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-43" style="--imgWidth: 223px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:66.6%;">
<img alt="Asset Panda" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/ORlW6eBUEM-wV24nxzCgJS-d0Dg=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Asset_Panda-6eb447c9d7114b2e87b0768a9fc16d18.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-3" width="1500"/>
<noscript>
<img alt="Asset Panda" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/ORlW6eBUEM-wV24nxzCgJS-d0Dg=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Asset_Panda-6eb447c9d7114b2e87b0768a9fc16d18.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3">
<span class="figure-article-caption-owner"><p>Asset Panda</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44">
<li><strong>Pricing:</strong> $1,500 per year for 500 assets</li><li><strong>Trial Period: </strong>14 days</li><li><strong>Support Features:</strong> Online knowledge base access and free training</li>
</ul><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-45">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Asset Panda" data-retailer-type="other" data-tracking-container="true" href="https://www.assetpanda.com/" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
</div>
<div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard">
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1">
<span class="tabbed-sc-block__text">Why We Chose It</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47">
Asset Panda prices out at 500 assets for $1,500 per year, including unlimited users, free applications with barcode scanning, customizable CSV import with field mapping, "premium" technical support, and custom reporting, making it our choice as the best value for asset management software.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2">
<span class="tabbed-sc-block__text">Pros & Cons</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2">
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-49">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Highly configurable dashboard</p></li>
<li><p>Feature-rich mobile app with barcode scanning</p></li>
<li><p>Can include images, videos, and voice recordings in data files</p></li>
<li><p>Solid technical support</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Longer user learning curve</p></li>
<li><p>No network discovery</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3">
<span class="tabbed-sc-block__text">Overview</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-51">
Asset Panda is a cloud-based asset management system suitable for businesses of any type or size. Though it looks and feels like a turnkey solution, AMS is anything but that. In addition to offering premium features such as unlimited users and custom reporting, Asset Panda can easily be configured to meet any business's niche requirements, all for $1,500 per 500 assets, making it our choice as the best value for asset management software.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52">
Asset Panda is as complete a package as any business needs to track and manage its assets. Its inventory management module combines inventory and asset management on one platform and includes the ability to manage assets at multiple locations and move between locations. Designated users may customize workflows for managed assets and inventory, which they can easily track using UPCs or serial numbers.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-53">
Asset Panda also offers the ability to add photos, documents, and videos to asset data files, and users have access to some solid reporting options with built-in reports that allow for customization as needed. It also has a mobile app to scan barcodes and add assets on the fly, and it is completely integrated with the web application. The app can generate reports and also features mobile audit and GPS tracking. That's an unusual amount of features for a mobile app.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54">
The downside to Asset Panda is that its greater capacity to configure and customize comes with a steeper learning curve. Companies that don't have internal IT support can find it more difficult. However, the good news for small to midsize businesses is that everyone is treated as a premium user, with complete access to phone support. Users also have access to a web portal and an online knowledge base. Free training is included.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-55">
The 14-day free trial is short compared to others offering 30 or 45 days.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4">
<span class="heading-toc" id="toc-best-for-mobile-applications-mmsoft-pulseway"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Mobile Applications</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> MMSoft Pulseway</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-56" style="--imgWidth: 145px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="MMSoft Pulseway" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/xUD8kIdy0zwZq-k1AWTvXF4ke9Y=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Pulseway-9ef115964ae84a52877ae52937010d81.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/>
<noscript>
<img alt="MMSoft Pulseway" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/xUD8kIdy0zwZq-k1AWTvXF4ke9Y=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Pulseway-9ef115964ae84a52877ae52937010d81.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4">
<span class="figure-article-caption-owner"><p>MMSoft Pulseway</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57">
<li><strong>Reporting Options:</strong> On-screen and by email</li><li><strong>Trial Period:</strong> 14 days</li><li><strong>Starting Price:</strong> Starting at $22 for 20 workstations</li>
</ul><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-58">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Pulseway" data-retailer-type="other" data-tracking-container="true" href="https://www.pulseway.com/" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
</div>
<div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard">
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1">
<span class="tabbed-sc-block__text">Why We Chose It</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-60">
We chose MMSoft Pulseway as the best asset management software for mobile applications because it excels at its primary focus as a leading cloud-first remote monitoring and management (RMM) software.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2">
<span class="tabbed-sc-block__text">Pros & Cons</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2">
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-62">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Robust and easy-to-use mobile client</p></li>
<li><p>Modern, intelligent user experience</p></li>
<li><p>iPad app provides access to full feature set</p></li>
<li><p>Easy connections to cloud and locally deployed physical and virtual infrastructure</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Limited reporting</p></li>
<li><p>Managed assets must be networked</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3">
<span class="tabbed-sc-block__text">Overview</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-64">
MMSoft Pulseway is a powerful, user-friendly mobile system for monitoring and managing assets. Unlike other remote monitoring and management software, Pulseway is mobile-first, with the ability to perform any administrative task straight from any smartphone or tablet. That's why Pulseway is our choice as the best AMS for mobile applications.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-65">
As you might expect with a mobile-first system, Pulseway provides users with an ultra-modern and intelligent user experience regardless of the device or platform in use. Users can access the entire range of system functionalities through a simple and attractive interface, and machine connectivity is nearly instant.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-66">
Although there's also remote desktop access into Windows machines, the Pulseway mobile application capabilities include troubleshooting cloud-based servers and other operating systems. It can kill processes, restart, log out, suspend, and lock non-Windows-based assets from the mobile client.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-67">
The real game-changer is the availability of real-time status updates from the mobile app. Notification options are very detailed, allowing you to select services and schedule tasks that need managing.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-68">
A significant downside to Pulseway is its limited reporting capabilities. Relative to other options, there are a small number of pre-built reports and no way to edit them or create new ones. The reports can be viewed on-screen and sent by email.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-69">
Pricing for Pulseway's Professional plan starts at $22 for 20 workstations. There is also a full-featured 14-day trial.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5">
<span class="heading-toc" id="toc-best-for-tracking-physical-assets-gocodes"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Tracking Physical Assets</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> GoCodes</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-70" style="--imgWidth: 0px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="GoCodes" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/mUUTgzH5zBpfF3QEsnH3wFnWAU0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Go_Codes-a18962de1d3140ef9655396203828834.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-5" width="1500"/>
<noscript>
<img alt="GoCodes" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/mUUTgzH5zBpfF3QEsnH3wFnWAU0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Go_Codes-a18962de1d3140ef9655396203828834.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5">
<span class="figure-article-caption-owner"><p>GoCodes</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-71">
<li><strong>Number of Reporting Capabilities:</strong> Less than 20</li><li><strong>Number of Plan Tiers:</strong> 5</li><li><strong>Starting Price: </strong>$500 per year for 3 users and 200 assets</li>
</ul><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-72">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at GoCodes" data-retailer-type="other" data-tracking-container="true" href="https://gocodes.com/" id="button_1-0-5" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
</div>
<div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard">
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1">
<span class="tabbed-sc-block__text">Why We Chose It</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-74">
Using secure QR stickers, GoCodes has built a robust, mobile-capable physical asset tracking system that's also affordable, making it our choice as the best AMS for tracking physical assets.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2">
<span class="tabbed-sc-block__text">Pros & Cons</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2">
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-76">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Ease of setup and use</p></li>
<li><p>Reasonably priced</p></li>
<li><p>Secure, physical stickers with detailed information</p></li>
<li><p>Locates powered-down assets online or from mobile devices</p></li>
<li><p>Tracks networked and non-networked assets</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>No software usage tracking or automated detection of assets</p></li>
<li><p>Limited reporting</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
</div>
<div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3">
<span class="tabbed-sc-block__text">Overview</span>
</div>
<div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3">
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-78">
GoCodes is a web-based asset and inventory tracking software program suitable for businesses of any size that need to manage physical assets. We chose GoCodes as the best AMS for tracking physical assets because of its effective use of QR codes to track assets easily and quickly through any computer or mobile device. The simplicity of a physical sticker is attractive to businesses that aren't technology-driven.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-79">
It really is as easy as placing a barcode sticker on an asset to check it into GoCodes with details such as asset type, subtype, serial number, and who is assigned the asset, as well as any additional data tracked using customizable, user-defined fields. Asset data files can include documentation, such as invoices, repair records, photos, and videos. A mapping feature allows managers to track the location of an asset. GoCodes tracks service requests, repairs, and maintenance of that particular asset.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-80">
With GoCodes, calculating <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-asset.asp">depreciation</a> is automatic, using the most common calculation scenarios of fixed assets. Pre-built depreciation reports showing calculation data are included and can be exported for more detailed depreciation management.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-81">
GoCode's general reporting capabilities are limited, with less than 20 customizable reports available in the Enterprise plan with optional reporting functions in the other plans.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-82">
GoCodes offers five plans: Standard, Premium, Premium Elite, Professional, and Enterprise. All plans include any number of employees, an unlimited number of mobile apps, custom data fields, GPS tracking, and an inventory module.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-83">
The Standard plan starts at $500 per year and includes three users, 200 assets, and email support. The Premium plan costs $1000 per year and consists of five users with up to 500 assets. Premium Elite users pay $1,750 a year for 10 users and up to 1,000 assets. The Professional plan, which includes 20 users and up to 2,000 assets, starts at $2,500 per year and provides custom reporting.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-84">
Premium, Premium Elite, and Professional plan users have access to phone support during business hours. Pricing for the Enterprise plan is available upon request.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div>
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
</div>
<div class="article-outro article-container">
<div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0">
<span class="heading-toc" id="toc-final-verdict"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Final Verdict </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1">
We recommend ManageEngine AssetExplorer as the best overall asset management software for its mature toolkit and abundance of advanced features, including top-notch reporting, unique relationship maps, and support for both physical and virtual assets. The software solution features a number of tools for simplifying its learning curve, making its sprawling array of capabilities and processes accessible even to new asset management businesses. It is also an outlier among the rest in that it features 24/7 tech support as well as support for virtual hosts and machines.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-2">
<span class="heading-toc" id="toc-frequently-asked-questions-35888749-cf68-4469-a4fe-36a46f5c9759"></span>
<h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0">
Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block -->
<ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0">
<li class="accordion__item js-accordion-item is-active">
<div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1">
<h3 class="accordion__title">What Is Asset Management Software?</h3>
</div><!--end accordion__header-->
<div class="accordion__body">
<div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0">
<div class="faq-accordion__item-answer">
<p>Businesses use asset management software (AMS) to optimize asset efficiency while minimizing the cost of lost or underutilized assets. Asset management software automatically collects all assets data and compiles reports the business can use to optimize their use. A well-implemented asset management software system provides the business with in-depth visibility into every asset inside its environment.</p><p><br/></p>
</div>
</div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content -->
</div><!--end accordion__body-->
</li><!--end accordion__item-->
<li class="accordion__item js-accordion-item is-active">
<div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1">
<h3 class="accordion__title">How Does Asset Management Software Work?</h3>
</div><!--end accordion__header-->
<div class="accordion__body">
<div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1">
<div class="faq-accordion__item-answer">
<p>Asset management software collects and compiles data on all assets for tracking through their entire lifecycles. As an asset moves through its lifecycle, AMS tracks its location, who's using it, as well as its downtime and uptime. Automated reports provide management with critical data and an analysis of each asset.</p>
</div>
</div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content -->
</div><!--end accordion__body-->
</li><!--end accordion__item-->
<li class="accordion__item js-accordion-item is-active">
<div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1">
<h3 class="accordion__title">Why Is Asset Management Software Important?</h3>
</div><!--end accordion__header-->
<div class="accordion__body">
<div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2">
<div class="faq-accordion__item-answer">
<p>Without tracking their assets, businesses can't know what they own and what it costs them. When implemented properly, AMS can lower the administrative costs of tracking assets, reduce human errors, and save the business time and resources that can go toward revenue-generating functions. It can also provide the framework for holding employees accountable for the proper handling of assets as well as deep insights into business performance.</p>
</div>
</div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content -->
</div><!--end accordion__body-->
</li><!--end accordion__item-->
<li class="accordion__item js-accordion-item is-active">
<div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1">
<h3 class="accordion__title">How Much Does Asset Management Software Cost?</h3>
</div><!--end accordion__header-->
<div class="accordion__body">
<div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3">
<div class="faq-accordion__item-answer">
<p>Pricing for asset management software varies depending on the features offered and the pricing method. Some AMS providers base their pricing on the number of users, while others base it on the number of assets or a combination of the two. So it depends on what you are looking for in an AMS system. </p>
</div>
</div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content -->
</div><!--end accordion__body-->
</li><!--end accordion__item-->
<li class="accordion__item js-accordion-item is-active">
<div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1">
<h3 class="accordion__title">How Does Asset Management Software Help With Audits?</h3>
</div><!--end accordion__header-->
<div class="accordion__body">
<div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-4">
<div class="faq-accordion__item-answer">
<p>All organizations—private and public—must keep accurate asset records. Asset management software provides businesses with a streamlined process for tracking assets with efficient data management. AMS delivers complete visibility into asset costs, usage, and return on investment for improved business performance insights. It can also track depreciation for tax purposes and determine the useful business life of an asset. </p>
</div>
</div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content -->
</div><!--end accordion__body-->
</li><!--end accordion__item-->
</ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion -->
<!--end accordion -->
</div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block -->
<span class="heading-toc" id="toc-methodology"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-3"> <span class="mntl-sc-block-heading__text"> Methodology </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-4">
Choosing the right asset management software can be daunting. There are many moving parts within an AMS program, and programs can vary widely in their feature sets and pricing. Your challenge begins with having to choose from more than two dozen AMS providers.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5">
To narrow your choices to the best AMS programs, we considered several key factors, including ease of setup, ease of operation, standard features, mobile capabilities, reporting, and pricing. Ultimately, you should choose the right AMS program based on these key factors and, more importantly, whether the program applications are suitable for your specific business needs.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block -->
</div>
<figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0">
<div class="primary-image__media">
<div class="img-placeholder" style="padding-bottom:66.6%;">
<img alt="best-asset-management-software-5090064" class="primary-image__image mntl-primary-image--blurry" height="1000" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/ovUQPSa2yuq4Ib3hpt9t2BC-ty4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/_AssetManagement_Andrey-Suslov-54d43ff6d934460d99a8d97f59903b51.jpg" srcset="https://www.investopedia.com/thmb/u5lalzkmLIxoPgW9_v5kE4J1OWY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/_AssetManagement_Andrey-Suslov-54d43ff6d934460d99a8d97f59903b51.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="1500"/>
<noscript>
<img alt="best-asset-management-software-5090064" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/ovUQPSa2yuq4Ib3hpt9t2BC-ty4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/_AssetManagement_Andrey-Suslov-54d43ff6d934460d99a8d97f59903b51.jpg" srcset="https://www.investopedia.com/thmb/u5lalzkmLIxoPgW9_v5kE4J1OWY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/_AssetManagement_Andrey-Suslov-54d43ff6d934460d99a8d97f59903b51.jpg 750w" width="1500"/>
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</div> </div>
<figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0">
<span class="figure-article-caption-owner"><p>Getty Images / Andrey Suslov</p></span>
</figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image -->
</div>
</div>
</div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base -->
</div>
</span>
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Businesses in the digital age must manage and track more [assets](https://www.investopedia.com/terms/b/business-asset.asp) than ever before. With mobile devices flooding the workplace, increasingly complex cloud technologies, licensed-based software, and more frequent updates, managing and tracking IT assets has become much more complicated. And frequent employee turnover raises data security issues.
This is where asset management software (AMS) comes in. It allows businesses to monitor their assets and effectively manage them to ensure their optimum utilization while reducing IT and software costs. They provide a holistic view of an asset's lifecycle—from its procurement and implementation through its renewal and disposal. Though a business could use a simple spreadsheet to track its assets, an AMS allows it to analyze data specific to each asset, enabling it to make more informed decisions about managing its assets.
In this roundup, we reviewed 20 AMS programs, comparing factors such as price, configurability, special features, ease of implementation, remote capabilities, and user experience to arrive at the best in six different categories.
## The 6 Best Asset Management Software Options
* **Best Overall:**
[ManageEngine AssetExplorer](https://appwiki.nl/link/brand/Dy5oJvPF8aBPbnXPrCKF1HLLGLW5NPty)
* **Best for Small to Medium Businesses:**
[InvGate Assets](https://appwiki.nl/link/brand/qxyVkVpeDE419QvCXu72nPGLsyNq5xAE)
* **Best for Custom Reporting:**
[Ivanti IT Asset Management](https://www.ivanti.com/)
* **Best Value:**
[Asset Panda](https://www.assetpanda.com/)
* **Best for Mobile Applications:**
[MMSoft Pulseway](https://www.pulseway.com/)
* **Best for Tracking Physical Assets:**
[GoCodes](https://gocodes.com/)
Best Asset Management Software
Expand
Best Asset Management Software
* [Our Top Picks](#summary-list)
* [ManageEngine AssetExplorer](#toc-best-overall-manageengine-assetexplorer)
* [InvGate Assets](#toc-best-for-small-to-medium-businesses-invgate-assets)
* [Ivanti IT Asset Management](#toc-best-for-custom-reporting-ivanti-it-asset-management)
* [Asset Panda](#toc-best-value-asset-panda)
* [MMSoft Pulseway](#toc-best-for-mobile-applications-mmsoft-pulseway)
* [GoCodes](#toc-best-for-tracking-physical-assets-gocodes)
* See More (3)
* [Final Verdict](#toc-final-verdict)
* [Frequently Asked Questions](#toc-frequently-asked-questions-35888749-cf68-4469-a4fe-36a46f5c9759)
* [Methodology](#toc-methodology)
### Best Overall
:
ManageEngine AssetExplorer
---
![ManageEngine]()
:fill(white):max_bytes(150000):strip_icc()/ManageEngine-2e9fa1d2f4bb46f58444563b2081d48a.jpg)
ManageEngine
* **Trial Period:** 30 days
* **Starting Price:** $995 per year for 250 IT assets
* **Tech Support:** 24/7
[Learn More](https://appwiki.nl/link/brand/Dy5oJvPF8aBPbnXPrCKF1HLLGLW5NPty)
Why We Chose It
With its mature toolkit and abundance of advanced features, including top-notch reporting, unique relationship maps, and support for both physical and virtual assets, ManageEngine AssetExplorer is our choice as the best overall asset management software.
Pros & Cons
Pros
* Feature-rich tool set with mature technology
* Easy setup
* Reasonably priced
* Familiar Windows-style user interface
Cons
* No mobile application
* Not for small businesses with limited IT staff
Overview
ManageEngine AssetExplorer is a web-based solution packed full of tools and features to handle all aspects of asset management, including inventory management, software license administration, compliance review, and more. With its mature technology, ease of setup, and reasonable price, ManageEngine AssetExplorer is our choice as the best overall asset management software.
For businesses new to asset management, ManageEngine AssetExplorer's feature-rich tool set may seem a bit overwhelming. However, if you start with its 30-day free trial, you can shorten the learning curve. The setup can appear incredibly daunting with its excessive number of tabs and drop-down menus. But ManageEngine AssetExplorer includes an excellent Quick Links feature to help you stay focused on the tasks you need to complete.
It also helps that the interface has a Windows look and feel. Adding devices can also seem daunting due to the sheer number of choices. But the Windows Agent Configuration simplifies the process when using installed Windows Agents on new devices.
ManageEngine AssetExplorer's mature technology shines through with its reporting capability. In addition to a few dozen pre-built reports, the system can export reports in multiple formats to include all past queries. You can also easily create completely customized reports. In addition to scheduling reports to run, you can schedule email delivery to specific recipients.
One significant downside to ManageEngine AssetExplorer is the lack of a mobile application. Though you can access the program on a mobile browser, its somewhat complicated user interface (UI) can make navigating on mobile devices more difficult. It's OK for more straightforward tasks, such as handling repair tickets and troubleshooting on the road.
The starting price for ManageEngine AssetExplorer is $995 per year for 250 IT assets, but you have to contact ManageEngine for a detailed quote.
All ManageEngine AssetExplorer users have access to 24/7 technical support, which is another key differentiator. Its support for virtual hosts and virtual machines is also a rarity. The only downside is there is no support if you're managing a lot of mobile devices, though there is support for voice-over IP (VoIP) phones.
### Best for Small to Medium Businesses
:
InvGate Assets
---
![InvGate]()
:fill(white):max_bytes(150000):strip_icc()/Invgate-d5c61d2857a149f082c0c6f7797f8057.jpg)
InvGate
* **System Compatibility:** Windows, MacOS, Linux
* **Support Features:** Unlimited access by phone and online for subscribers
* **Pricing:** Available only by request
[Learn More](https://appwiki.nl/link/brand/qxyVkVpeDE419QvCXu72nPGLsyNq5xAE)
Why We Chose It
We chose InvGate Assets as the best asset management software for small to medium-size businesses with limited IT staff because it checks all the boxes, including easy setup, ease of use, advanced reporting, and remote desktop, all at a reasonable price.
Pros & Cons
Pros
* Quick and easy setup
* Straightforward and easy-to-follow navigation
* Alarms can quickly show problems with assets
* Reasonably priced for small to mid-size businesses
Cons
* Limited reporting
Overview
InvGate Assets covers all the essential software and hardware bases for tracking assets and inventory and doing so with an easy installation and easy-to-use interface, making it our choice for the best asset management software for small to medium-size businesses.
Out of the box, InvGate Assets allows businesses to track their assets with features such as advanced reports, network discovery, remote desktop, change management, license management, software deployment, and software metering. InvGate shortens the user learning curve with a straightforward and easy-to-follow UI. The navigation for getting reports is as simple as conducting a regular search and then exporting the data to Microsoft Excel.
InvGate's alert system is easy to set up, and it quickly notifies users of any problems with assets. It also uses a straightforward approach to getting assets into the system with a simple agent install on any machine or device to be tracked. The system supports clients using Windows, MacOS, and even Linux.
The price you pay for InvGate Assets depends on the number of nodes you want to support. Nodes are only counted if an agent will be installed for the InvGate Assets application. Other access points, such as IP phones, printers, routers, and fax machines, aren't included in the nodes count.
InvGate offers three plans—Insight, Service Desk, and Assets—but pricing is not readily available on its website. To get a quote, you must request it by filling out a form and having the company contact you.
InvGate support is ideal for businesses with limited IT staff that might need more hand-holding. Subscribers receive unlimited access to phone support and a web support portal that includes a self-service knowledge base. Users have access to documentation and can request assistance with problem reporting throughout the license period.
### Best for Custom Reporting
:
Ivanti IT Asset Management
---
![Ivanti]()
:fill(white):max_bytes(150000):strip_icc()/Ivanti-47b2969743be44f48a658dba18adb379.jpg)
Ivanti
* **System Compatibility:** Windows
* **Support Features:** 24/7 access for subscribers
* **Pricing:** Available only by request
[Learn More](https://www.ivanti.com/)
Why We Chose It
For businesses wanting more flexibility in tracking key data points, Ivanti IT Asset Management offers many pre-built reports, which can be further customized based on personal queries. That makes Ivanti IT Asset Management our choice for the best custom reporting.
Pros & Cons
Pros
* Mobile and desktop workspaces
* Familiar Windows-style interface
* Easy wizard setup
* Workflows and processes can be customized
* Several tech support options
Cons
* Does not offer a cloud-based service
* Lengthy, hardware-heavy installation process
Overview
There are several reasons to like the feature-rich Ivanti IT Asset Management Suite. But the one that stands out for enterprises that want to quickly and explicitly highlight key data points is its reporting capability. With many pre-built reports available and the opportunity to build more queries, Ivanti IT Asset Management is our choice as the best custom reporting AMS.
Ivanti offers everything a business needs to accurately track and efficiently manage IT assets through their complete lifecycle, including asset discovery, financial management, software compliance, and license management. The setup uses a Windows-based interface, making it more intuitive for Windows users. The wizard follows a straightforward path to get you to your initial network scan for assets, with steps along the way to learn configuration and administration. After the initial scan, you can install agents on those machines.
Although Ivanti can tap into both mobile and desktop workspaces, it does not offer a cloud-based service, which means a more involved installation with minimum hardware requirements. For businesses that can manage an on-site installation, the upside is a faster response time for asset discovery and report generation. As previously mentioned, the reports quickly return information, even after manipulating queries to see more data.
Like many AMS providers, Ivanti's pricing is based on the number of nodes that need support, and similar to InvGate Assets, Ivanti counts only the number of agents installed. So IP phones, routers, and other network devices that can't install an agent are not included in the asset count for determining the price. Ivanti does not publish its pricing but instead asks interested parties to contact them for an estimate.
Ivanti also offers a free trial of the Asset Management Suite. But because the trial software must be installed on a local server, you will need to confirm that your machines meet the minimum hardware requirements.
An Ivanti subscription includes access to technical support, including phone support, a web portal, and online self-service. For a premium, Ivanti offers a dedicated technical account manager's support. There is 24/7 phone support for critical issues, but this is only available with premium enterprise-level support.
### Best Value
:
Asset Panda
---
![Asset Panda]()
:fill(white):max_bytes(150000):strip_icc()/Asset_Panda-6eb447c9d7114b2e87b0768a9fc16d18.jpg)
Asset Panda
* **Pricing:** $1,500 per year for 500 assets
* **Trial Period:** 14 days
* **Support Features:** Online knowledge base access and free training
[Learn More](https://www.assetpanda.com/)
Why We Chose It
Asset Panda prices out at 500 assets for $1,500 per year, including unlimited users, free applications with barcode scanning, customizable CSV import with field mapping, "premium" technical support, and custom reporting, making it our choice as the best value for asset management software.
Pros & Cons
Pros
* Highly configurable dashboard
* Feature-rich mobile app with barcode scanning
* Can include images, videos, and voice recordings in data files
* Solid technical support
Cons
* Longer user learning curve
* No network discovery
Overview
Asset Panda is a cloud-based asset management system suitable for businesses of any type or size. Though it looks and feels like a turnkey solution, AMS is anything but that. In addition to offering premium features such as unlimited users and custom reporting, Asset Panda can easily be configured to meet any business's niche requirements, all for $1,500 per 500 assets, making it our choice as the best value for asset management software.
Asset Panda is as complete a package as any business needs to track and manage its assets. Its inventory management module combines inventory and asset management on one platform and includes the ability to manage assets at multiple locations and move between locations. Designated users may customize workflows for managed assets and inventory, which they can easily track using UPCs or serial numbers.
Asset Panda also offers the ability to add photos, documents, and videos to asset data files, and users have access to some solid reporting options with built-in reports that allow for customization as needed. It also has a mobile app to scan barcodes and add assets on the fly, and it is completely integrated with the web application. The app can generate reports and also features mobile audit and GPS tracking. That's an unusual amount of features for a mobile app.
The downside to Asset Panda is that its greater capacity to configure and customize comes with a steeper learning curve. Companies that don't have internal IT support can find it more difficult. However, the good news for small to midsize businesses is that everyone is treated as a premium user, with complete access to phone support. Users also have access to a web portal and an online knowledge base. Free training is included.
The 14-day free trial is short compared to others offering 30 or 45 days.
### Best for Mobile Applications
:
MMSoft Pulseway
---
![MMSoft Pulseway]()
:fill(white):max_bytes(150000):strip_icc()/Pulseway-9ef115964ae84a52877ae52937010d81.jpg)
MMSoft Pulseway
* **Reporting Options:** On-screen and by email
* **Trial Period:** 14 days
* **Starting Price:** Starting at $22 for 20 workstations
[Learn More](https://www.pulseway.com/)
Why We Chose It
We chose MMSoft Pulseway as the best asset management software for mobile applications because it excels at its primary focus as a leading cloud-first remote monitoring and management (RMM) software.
Pros & Cons
Pros
* Robust and easy-to-use mobile client
* Modern, intelligent user experience
* iPad app provides access to full feature set
* Easy connections to cloud and locally deployed physical and virtual infrastructure
Cons
* Limited reporting
* Managed assets must be networked
Overview
MMSoft Pulseway is a powerful, user-friendly mobile system for monitoring and managing assets. Unlike other remote monitoring and management software, Pulseway is mobile-first, with the ability to perform any administrative task straight from any smartphone or tablet. That's why Pulseway is our choice as the best AMS for mobile applications.
As you might expect with a mobile-first system, Pulseway provides users with an ultra-modern and intelligent user experience regardless of the device or platform in use. Users can access the entire range of system functionalities through a simple and attractive interface, and machine connectivity is nearly instant.
Although there's also remote desktop access into Windows machines, the Pulseway mobile application capabilities include troubleshooting cloud-based servers and other operating systems. It can kill processes, restart, log out, suspend, and lock non-Windows-based assets from the mobile client.
The real game-changer is the availability of real-time status updates from the mobile app. Notification options are very detailed, allowing you to select services and schedule tasks that need managing.
A significant downside to Pulseway is its limited reporting capabilities. Relative to other options, there are a small number of pre-built reports and no way to edit them or create new ones. The reports can be viewed on-screen and sent by email.
Pricing for Pulseway's Professional plan starts at $22 for 20 workstations. There is also a full-featured 14-day trial.
### Best for Tracking Physical Assets
:
GoCodes
---
![GoCodes]()
:fill(white):max_bytes(150000):strip_icc()/Go_Codes-a18962de1d3140ef9655396203828834.jpg)
GoCodes
* **Number of Reporting Capabilities:** Less than 20
* **Number of Plan Tiers:** 5
* **Starting Price:** $500 per year for 3 users and 200 assets
[Learn More](https://gocodes.com/)
Why We Chose It
Using secure QR stickers, GoCodes has built a robust, mobile-capable physical asset tracking system that's also affordable, making it our choice as the best AMS for tracking physical assets.
Pros & Cons
Pros
* Ease of setup and use
* Reasonably priced
* Secure, physical stickers with detailed information
* Locates powered-down assets online or from mobile devices
* Tracks networked and non-networked assets
Cons
* No software usage tracking or automated detection of assets
* Limited reporting
Overview
GoCodes is a web-based asset and inventory tracking software program suitable for businesses of any size that need to manage physical assets. We chose GoCodes as the best AMS for tracking physical assets because of its effective use of QR codes to track assets easily and quickly through any computer or mobile device. The simplicity of a physical sticker is attractive to businesses that aren't technology-driven.
It really is as easy as placing a barcode sticker on an asset to check it into GoCodes with details such as asset type, subtype, serial number, and who is assigned the asset, as well as any additional data tracked using customizable, user-defined fields. Asset data files can include documentation, such as invoices, repair records, photos, and videos. A mapping feature allows managers to track the location of an asset. GoCodes tracks service requests, repairs, and maintenance of that particular asset.
With GoCodes, calculating [depreciation](https://www.investopedia.com/terms/b/business-asset.asp) is automatic, using the most common calculation scenarios of fixed assets. Pre-built depreciation reports showing calculation data are included and can be exported for more detailed depreciation management.
GoCode's general reporting capabilities are limited, with less than 20 customizable reports available in the Enterprise plan with optional reporting functions in the other plans.
GoCodes offers five plans: Standard, Premium, Premium Elite, Professional, and Enterprise. All plans include any number of employees, an unlimited number of mobile apps, custom data fields, GPS tracking, and an inventory module.
The Standard plan starts at $500 per year and includes three users, 200 assets, and email support. The Premium plan costs $1000 per year and consists of five users with up to 500 assets. Premium Elite users pay $1,750 a year for 10 users and up to 1,000 assets. The Professional plan, which includes 20 users and up to 2,000 assets, starts at $2,500 per year and provides custom reporting.
Premium, Premium Elite, and Professional plan users have access to phone support during business hours. Pricing for the Enterprise plan is available upon request.
## Final Verdict
We recommend ManageEngine AssetExplorer as the best overall asset management software for its mature toolkit and abundance of advanced features, including top-notch reporting, unique relationship maps, and support for both physical and virtual assets. The software solution features a number of tools for simplifying its learning curve, making its sprawling array of capabilities and processes accessible even to new asset management businesses. It is also an outlier among the rest in that it features 24/7 tech support as well as support for virtual hosts and machines.
## Frequently Asked Questions
* ### What Is Asset Management Software?
Businesses use asset management software (AMS) to optimize asset efficiency while minimizing the cost of lost or underutilized assets. Asset management software automatically collects all assets data and compiles reports the business can use to optimize their use. A well-implemented asset management software system provides the business with in-depth visibility into every asset inside its environment.
* ### How Does Asset Management Software Work?
Asset management software collects and compiles data on all assets for tracking through their entire lifecycles. As an asset moves through its lifecycle, AMS tracks its location, who's using it, as well as its downtime and uptime. Automated reports provide management with critical data and an analysis of each asset.
* ### Why Is Asset Management Software Important?
Without tracking their assets, businesses can't know what they own and what it costs them. When implemented properly, AMS can lower the administrative costs of tracking assets, reduce human errors, and save the business time and resources that can go toward revenue-generating functions. It can also provide the framework for holding employees accountable for the proper handling of assets as well as deep insights into business performance.
* ### How Much Does Asset Management Software Cost?
Pricing for asset management software varies depending on the features offered and the pricing method. Some AMS providers base their pricing on the number of users, while others base it on the number of assets or a combination of the two. So it depends on what you are looking for in an AMS system.
* ### How Does Asset Management Software Help With Audits?
All organizations—private and public—must keep accurate asset records. Asset management software provides businesses with a streamlined process for tracking assets with efficient data management. AMS delivers complete visibility into asset costs, usage, and return on investment for improved business performance insights. It can also track depreciation for tax purposes and determine the useful business life of an asset.
## Methodology
Choosing the right asset management software can be daunting. There are many moving parts within an AMS program, and programs can vary widely in their feature sets and pricing. Your challenge begins with having to choose from more than two dozen AMS providers.
To narrow your choices to the best AMS programs, we considered several key factors, including ease of setup, ease of operation, standard features, mobile capabilities, reporting, and pricing. Ultimately, you should choose the right AMS program based on these key factors and, more importantly, whether the program applications are suitable for your specific business needs.
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Getty Images / Andrey Suslov
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|
Businesses in the digital age must manage and track more assets than ever before. With mobile devices flooding the workplace, increasingly complex cloud technologies, licensed-based software, and more frequent updates, managing and tracking IT assets has become much more complicated. And frequent employee turnover raises data security issues.
This is where asset management software (AMS) comes in. It allows businesses to monitor their assets and effectively manage them to ensure their optimum utilization while reducing IT and software costs. They provide a holistic view of an asset's lifecycle—from its procurement and implementation through its renewal and disposal. Though a business could use a simple spreadsheet to track its assets, an AMS allows it to analyze data specific to each asset, enabling it to make more informed decisions about managing its assets.
In this roundup, we reviewed 20 AMS programs, comparing factors such as price, configurability, special features, ease of implementation, remote capabilities, and user experience to arrive at the best in six different categories.
The 6 Best Asset Management Software Options
Best Overall:
ManageEngine AssetExplorer
Best for Small to Medium Businesses:
InvGate Assets
Best for Custom Reporting:
Ivanti IT Asset Management
Best Value:
Asset Panda
Best for Mobile Applications:
MMSoft Pulseway
Best for Tracking Physical Assets:
GoCodes
Best Asset Management Software
Expand
Best Asset Management Software
Our Top Picks
ManageEngine AssetExplorer
InvGate Assets
Ivanti IT Asset Management
Asset Panda
MMSoft Pulseway
GoCodes
See More (3)
Final Verdict
Frequently Asked Questions
Methodology
Best Overall
:
ManageEngine AssetExplorer
ManageEngine
Trial Period: 30 daysStarting Price: $995 per year for 250 IT assetsTech Support: 24/7
Learn More
Why We Chose It
With its mature toolkit and abundance of advanced features, including top-notch reporting, unique relationship maps, and support for both physical and virtual assets, ManageEngine AssetExplorer is our choice as the best overall asset management software.
Pros & Cons
Pros
Feature-rich tool set with mature technology
Easy setup
Reasonably priced
Familiar Windows-style user interface
Cons
No mobile application
Not for small businesses with limited IT staff
Overview
ManageEngine AssetExplorer is a web-based solution packed full of tools and features to handle all aspects of asset management, including inventory management, software license administration, compliance review, and more. With its mature technology, ease of setup, and reasonable price, ManageEngine AssetExplorer is our choice as the best overall asset management software.
For businesses new to asset management, ManageEngine AssetExplorer's feature-rich tool set may seem a bit overwhelming. However, if you start with its 30-day free trial, you can shorten the learning curve. The setup can appear incredibly daunting with its excessive number of tabs and drop-down menus. But ManageEngine AssetExplorer includes an excellent Quick Links feature to help you stay focused on the tasks you need to complete.
It also helps that the interface has a Windows look and feel. Adding devices can also seem daunting due to the sheer number of choices. But the Windows Agent Configuration simplifies the process when using installed Windows Agents on new devices.
ManageEngine AssetExplorer's mature technology shines through with its reporting capability. In addition to a few dozen pre-built reports, the system can export reports in multiple formats to include all past queries. You can also easily create completely customized reports. In addition to scheduling reports to run, you can schedule email delivery to specific recipients.
One significant downside to ManageEngine AssetExplorer is the lack of a mobile application. Though you can access the program on a mobile browser, its somewhat complicated user interface (UI) can make navigating on mobile devices more difficult. It's OK for more straightforward tasks, such as handling repair tickets and troubleshooting on the road.
The starting price for ManageEngine AssetExplorer is $995 per year for 250 IT assets, but you have to contact ManageEngine for a detailed quote.
All ManageEngine AssetExplorer users have access to 24/7 technical support, which is another key differentiator. Its support for virtual hosts and virtual machines is also a rarity. The only downside is there is no support if you're managing a lot of mobile devices, though there is support for voice-over IP (VoIP) phones.
Best for Small to Medium Businesses
:
InvGate Assets
InvGate
System Compatibility: Windows, MacOS, LinuxSupport Features: Unlimited access by phone and online for subscribersPricing: Available only by request
Learn More
Why We Chose It
We chose InvGate Assets as the best asset management software for small to medium-size businesses with limited IT staff because it checks all the boxes, including easy setup, ease of use, advanced reporting, and remote desktop, all at a reasonable price.
Pros & Cons
Pros
Quick and easy setup
Straightforward and easy-to-follow navigation
Alarms can quickly show problems with assets
Reasonably priced for small to mid-size businesses
Cons
Limited reporting
Overview
InvGate Assets covers all the essential software and hardware bases for tracking assets and inventory and doing so with an easy installation and easy-to-use interface, making it our choice for the best asset management software for small to medium-size businesses.
Out of the box, InvGate Assets allows businesses to track their assets with features such as advanced reports, network discovery, remote desktop, change management, license management, software deployment, and software metering. InvGate shortens the user learning curve with a straightforward and easy-to-follow UI. The navigation for getting reports is as simple as conducting a regular search and then exporting the data to Microsoft Excel.
InvGate's alert system is easy to set up, and it quickly notifies users of any problems with assets. It also uses a straightforward approach to getting assets into the system with a simple agent install on any machine or device to be tracked. The system supports clients using Windows, MacOS, and even Linux.
The price you pay for InvGate Assets depends on the number of nodes you want to support. Nodes are only counted if an agent will be installed for the InvGate Assets application. Other access points, such as IP phones, printers, routers, and fax machines, aren't included in the nodes count.
InvGate offers three plans—Insight, Service Desk, and Assets—but pricing is not readily available on its website. To get a quote, you must request it by filling out a form and having the company contact you.
InvGate support is ideal for businesses with limited IT staff that might need more hand-holding. Subscribers receive unlimited access to phone support and a web support portal that includes a self-service knowledge base. Users have access to documentation and can request assistance with problem reporting throughout the license period.
Best for Custom Reporting
:
Ivanti IT Asset Management
Ivanti
System Compatibility: WindowsSupport Features: 24/7 access for subscribersPricing: Available only by request
Learn More
Why We Chose It
For businesses wanting more flexibility in tracking key data points, Ivanti IT Asset Management offers many pre-built reports, which can be further customized based on personal queries. That makes Ivanti IT Asset Management our choice for the best custom reporting.
Pros & Cons
Pros
Mobile and desktop workspaces
Familiar Windows-style interface
Easy wizard setup
Workflows and processes can be customized
Several tech support options
Cons
Does not offer a cloud-based service
Lengthy, hardware-heavy installation process
Overview
There are several reasons to like the feature-rich Ivanti IT Asset Management Suite. But the one that stands out for enterprises that want to quickly and explicitly highlight key data points is its reporting capability. With many pre-built reports available and the opportunity to build more queries, Ivanti IT Asset Management is our choice as the best custom reporting AMS.
Ivanti offers everything a business needs to accurately track and efficiently manage IT assets through their complete lifecycle, including asset discovery, financial management, software compliance, and license management. The setup uses a Windows-based interface, making it more intuitive for Windows users. The wizard follows a straightforward path to get you to your initial network scan for assets, with steps along the way to learn configuration and administration. After the initial scan, you can install agents on those machines.
Although Ivanti can tap into both mobile and desktop workspaces, it does not offer a cloud-based service, which means a more involved installation with minimum hardware requirements. For businesses that can manage an on-site installation, the upside is a faster response time for asset discovery and report generation. As previously mentioned, the reports quickly return information, even after manipulating queries to see more data.
Like many AMS providers, Ivanti's pricing is based on the number of nodes that need support, and similar to InvGate Assets, Ivanti counts only the number of agents installed. So IP phones, routers, and other network devices that can't install an agent are not included in the asset count for determining the price. Ivanti does not publish its pricing but instead asks interested parties to contact them for an estimate.
Ivanti also offers a free trial of the Asset Management Suite. But because the trial software must be installed on a local server, you will need to confirm that your machines meet the minimum hardware requirements.
An Ivanti subscription includes access to technical support, including phone support, a web portal, and online self-service. For a premium, Ivanti offers a dedicated technical account manager's support. There is 24/7 phone support for critical issues, but this is only available with premium enterprise-level support.
Best Value
:
Asset Panda
Asset Panda
Pricing: $1,500 per year for 500 assetsTrial Period: 14 daysSupport Features: Online knowledge base access and free training
Learn More
Why We Chose It
Asset Panda prices out at 500 assets for $1,500 per year, including unlimited users, free applications with barcode scanning, customizable CSV import with field mapping, "premium" technical support, and custom reporting, making it our choice as the best value for asset management software.
Pros & Cons
Pros
Highly configurable dashboard
Feature-rich mobile app with barcode scanning
Can include images, videos, and voice recordings in data files
Solid technical support
Cons
Longer user learning curve
No network discovery
Overview
Asset Panda is a cloud-based asset management system suitable for businesses of any type or size. Though it looks and feels like a turnkey solution, AMS is anything but that. In addition to offering premium features such as unlimited users and custom reporting, Asset Panda can easily be configured to meet any business's niche requirements, all for $1,500 per 500 assets, making it our choice as the best value for asset management software.
Asset Panda is as complete a package as any business needs to track and manage its assets. Its inventory management module combines inventory and asset management on one platform and includes the ability to manage assets at multiple locations and move between locations. Designated users may customize workflows for managed assets and inventory, which they can easily track using UPCs or serial numbers.
Asset Panda also offers the ability to add photos, documents, and videos to asset data files, and users have access to some solid reporting options with built-in reports that allow for customization as needed. It also has a mobile app to scan barcodes and add assets on the fly, and it is completely integrated with the web application. The app can generate reports and also features mobile audit and GPS tracking. That's an unusual amount of features for a mobile app.
The downside to Asset Panda is that its greater capacity to configure and customize comes with a steeper learning curve. Companies that don't have internal IT support can find it more difficult. However, the good news for small to midsize businesses is that everyone is treated as a premium user, with complete access to phone support. Users also have access to a web portal and an online knowledge base. Free training is included.
The 14-day free trial is short compared to others offering 30 or 45 days.
Best for Mobile Applications
:
MMSoft Pulseway
MMSoft Pulseway
Reporting Options: On-screen and by emailTrial Period: 14 daysStarting Price: Starting at $22 for 20 workstations
Learn More
Why We Chose It
We chose MMSoft Pulseway as the best asset management software for mobile applications because it excels at its primary focus as a leading cloud-first remote monitoring and management (RMM) software.
Pros & Cons
Pros
Robust and easy-to-use mobile client
Modern, intelligent user experience
iPad app provides access to full feature set
Easy connections to cloud and locally deployed physical and virtual infrastructure
Cons
Limited reporting
Managed assets must be networked
Overview
MMSoft Pulseway is a powerful, user-friendly mobile system for monitoring and managing assets. Unlike other remote monitoring and management software, Pulseway is mobile-first, with the ability to perform any administrative task straight from any smartphone or tablet. That's why Pulseway is our choice as the best AMS for mobile applications.
As you might expect with a mobile-first system, Pulseway provides users with an ultra-modern and intelligent user experience regardless of the device or platform in use. Users can access the entire range of system functionalities through a simple and attractive interface, and machine connectivity is nearly instant.
Although there's also remote desktop access into Windows machines, the Pulseway mobile application capabilities include troubleshooting cloud-based servers and other operating systems. It can kill processes, restart, log out, suspend, and lock non-Windows-based assets from the mobile client.
The real game-changer is the availability of real-time status updates from the mobile app. Notification options are very detailed, allowing you to select services and schedule tasks that need managing.
A significant downside to Pulseway is its limited reporting capabilities. Relative to other options, there are a small number of pre-built reports and no way to edit them or create new ones. The reports can be viewed on-screen and sent by email.
Pricing for Pulseway's Professional plan starts at $22 for 20 workstations. There is also a full-featured 14-day trial.
Best for Tracking Physical Assets
:
GoCodes
GoCodes
Number of Reporting Capabilities: Less than 20Number of Plan Tiers: 5Starting Price: $500 per year for 3 users and 200 assets
Learn More
Why We Chose It
Using secure QR stickers, GoCodes has built a robust, mobile-capable physical asset tracking system that's also affordable, making it our choice as the best AMS for tracking physical assets.
Pros & Cons
Pros
Ease of setup and use
Reasonably priced
Secure, physical stickers with detailed information
Locates powered-down assets online or from mobile devices
Tracks networked and non-networked assets
Cons
No software usage tracking or automated detection of assets
Limited reporting
Overview
GoCodes is a web-based asset and inventory tracking software program suitable for businesses of any size that need to manage physical assets. We chose GoCodes as the best AMS for tracking physical assets because of its effective use of QR codes to track assets easily and quickly through any computer or mobile device. The simplicity of a physical sticker is attractive to businesses that aren't technology-driven.
It really is as easy as placing a barcode sticker on an asset to check it into GoCodes with details such as asset type, subtype, serial number, and who is assigned the asset, as well as any additional data tracked using customizable, user-defined fields. Asset data files can include documentation, such as invoices, repair records, photos, and videos. A mapping feature allows managers to track the location of an asset. GoCodes tracks service requests, repairs, and maintenance of that particular asset.
With GoCodes, calculating depreciation is automatic, using the most common calculation scenarios of fixed assets. Pre-built depreciation reports showing calculation data are included and can be exported for more detailed depreciation management.
GoCode's general reporting capabilities are limited, with less than 20 customizable reports available in the Enterprise plan with optional reporting functions in the other plans.
GoCodes offers five plans: Standard, Premium, Premium Elite, Professional, and Enterprise. All plans include any number of employees, an unlimited number of mobile apps, custom data fields, GPS tracking, and an inventory module.
The Standard plan starts at $500 per year and includes three users, 200 assets, and email support. The Premium plan costs $1000 per year and consists of five users with up to 500 assets. Premium Elite users pay $1,750 a year for 10 users and up to 1,000 assets. The Professional plan, which includes 20 users and up to 2,000 assets, starts at $2,500 per year and provides custom reporting.
Premium, Premium Elite, and Professional plan users have access to phone support during business hours. Pricing for the Enterprise plan is available upon request.
Final Verdict
We recommend ManageEngine AssetExplorer as the best overall asset management software for its mature toolkit and abundance of advanced features, including top-notch reporting, unique relationship maps, and support for both physical and virtual assets. The software solution features a number of tools for simplifying its learning curve, making its sprawling array of capabilities and processes accessible even to new asset management businesses. It is also an outlier among the rest in that it features 24/7 tech support as well as support for virtual hosts and machines.
Frequently Asked Questions
What Is Asset Management Software?
Businesses use asset management software (AMS) to optimize asset efficiency while minimizing the cost of lost or underutilized assets. Asset management software automatically collects all assets data and compiles reports the business can use to optimize their use. A well-implemented asset management software system provides the business with in-depth visibility into every asset inside its environment.
How Does Asset Management Software Work?
Asset management software collects and compiles data on all assets for tracking through their entire lifecycles. As an asset moves through its lifecycle, AMS tracks its location, who's using it, as well as its downtime and uptime. Automated reports provide management with critical data and an analysis of each asset.
Why Is Asset Management Software Important?
Without tracking their assets, businesses can't know what they own and what it costs them. When implemented properly, AMS can lower the administrative costs of tracking assets, reduce human errors, and save the business time and resources that can go toward revenue-generating functions. It can also provide the framework for holding employees accountable for the proper handling of assets as well as deep insights into business performance.
How Much Does Asset Management Software Cost?
Pricing for asset management software varies depending on the features offered and the pricing method. Some AMS providers base their pricing on the number of users, while others base it on the number of assets or a combination of the two. So it depends on what you are looking for in an AMS system.
How Does Asset Management Software Help With Audits?
All organizations—private and public—must keep accurate asset records. Asset management software provides businesses with a streamlined process for tracking assets with efficient data management. AMS delivers complete visibility into asset costs, usage, and return on investment for improved business performance insights. It can also track depreciation for tax purposes and determine the useful business life of an asset.
Methodology
Choosing the right asset management software can be daunting. There are many moving parts within an AMS program, and programs can vary widely in their feature sets and pricing. Your challenge begins with having to choose from more than two dozen AMS providers.
To narrow your choices to the best AMS programs, we considered several key factors, including ease of setup, ease of operation, standard features, mobile capabilities, reporting, and pricing. Ultimately, you should choose the right AMS program based on these key factors and, more importantly, whether the program applications are suitable for your specific business needs.
Getty Images / Andrey Suslov
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] |
https://www.investopedia.com/the-small-business-healthcare-tax-credit-5070476 | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> As a small business owner, you have many decisions to make regarding <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financialcareers/07/negotiate_perks.asp">employee perks</a> and benefits. Offering the right <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/09/deciphering-benefits-at-new-job.asp">benefits</a> may entice experienced individuals to apply for jobs while encouraging current employees to stay with your company longer than expected.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> One of the most important employee benefits to consider is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/healthinsurance.asp">health insurance</a>. And if you’re worried about the cost, there’s a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxcredit.asp">tax credit</a> that can help you as long as your business or organization qualifies. Here’s what you need to know about it to help offset the cost of providing health insurance to your employees. Remember that it’s also available to small tax-exempt organizations.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Health insurance is one of the perks you may offer your employees.</li><li>Covering health insurance premiums can be costly, especially for small businesses.<br/></li><li>The small business healthcare tax credit can offset the costs if a business meets certain thresholds, offers a qualified health plan through the SHOP Marketplace, and pays at least 50% of the cost of employee-only health plans.</li><li>Eligible small businesses may carry the credit backward or forward.</li><li>Eligible small tax-exempt organizations may claim a refundable credit.</li></ul></div></div></div>
<span class="heading-toc" id="toc-what-is-the-small-business-healthcare-tax-credit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> What Is the Small Business Healthcare Tax Credit? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Certain provisions of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/affordable-care-act.asp">Affordable Care Act (ACA)</a> apply only to small businesses. For example, special insurance options are available through the Small Business Health Options Program (SHOP), but only to employers of fewer than 50 workers.<span class="ql-inline-citation" data-cite="3"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The small business healthcare tax credit is another feature of the ACA, but it is limited to employers of fewer than 25 full-time employees. It is a sliding-scale credit that is based on size: The larger the employer, the smaller the tax credit and vice versa. The maximum credit is 50% of premiums paid for small business employers or 35% of premiums paid for small tax-exempt employers. The credit is available to eligible businesses for two consecutive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxyear.asp">tax years</a>.<span class="ql-inline-citation" data-cite="1"></span>
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> If you have an eligible small business that does not owe tax during any one year, the credit can be carried backward or forward to other tax years. If the amount you paid for employer <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/health-insurance-premium-4773146">health insurance premiums</a> is more than the allowable credit, the excess can be claimed as a business expense deduction. In order to claim the tax credit, you need to fill out <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp">Internal Revenue Service (IRS)</a> Form 8941.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="1"></span>
</p>
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<span class="heading-toc" id="toc-who-qualifies-for-the-small-business-healthcare-tax-credit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Who Qualifies for the Small Business Healthcare Tax Credit? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> According to the IRS, an employer with fewer than 25 full-time-equivalent (FTE) employees can qualify for the small business healthcare tax credit by doing all of the following three things:<span class="ql-inline-citation" data-cite="12"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0">
<li>Pay average wages of less than $56,000 per year for each FTE employee (indexed annually for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">inflation</a> starting in 2014)</li>
<li>Offer a qualified health plan to its employees through the SHOP Marketplace (with rare exceptions)</li>
<li>Pay at least 50% of the cost of the employee-only option for each employee</li>
</ul>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> As mentioned above, the credit works on a sliding scale based on the size of the employer. The maximum credit is reduced if you have more than 10 FTE employees or your average wage is more than $27,000 (also indexed annually for inflation).<span class="ql-inline-citation" data-cite="5"></span>
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Tax-exempt organizations are also eligible for the tax credit. If you have a tax-exempt business, the credit is refundable to the extent that it does not exceed your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/withholdingtax.asp">income tax withholding</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/medicare.asp">Medicare</a> tax liability. Refunds to tax-exempt organizations are subject to <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sequestration.asp">sequestration</a>, which means the refundable amount will be reduced by the current fiscal year sequestration rate.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="6"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_23-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_24-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Employers don’t have to cover 50% of the dependent or family health insurance options to qualify.<span class="ql-inline-citation" data-cite="2"></span></p></div></div></div>
<span class="heading-toc" id="toc-how-to-calculate-the-small-business-healthcare-tax-credit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> How to Calculate the Small Business Healthcare Tax Credit </span> </h2>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-subheading__text"> Calculating FTEs </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> One FTE employee equals 2,080 hours per year for the purpose of the tax credit. This is in contrast to other provisions in the ACA that consider 30 hours per week to be one FTE employee. Any number of part-time employees that adds up to 2,080 hours per year is equivalent to one FTE employee.<span class="ql-inline-citation" data-cite="13"></span>
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Hours worked by a single employee over 2,080 hours per year do not count toward FTE and are excluded from the calculation. Any seasonal employees who worked fewer than 120 days per year should also be excluded. However, the health <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/insurance-premium.asp">insurance premiums</a> paid by the employer for seasonal workers may still be included in the calculation of the credit amount.<span class="ql-inline-citation" data-cite="13"></span>
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> The following should also be excluded from the calculation of FTE employees, and any <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/premium.asp">premiums</a> paid for these individuals should be excluded from the calculation of the credit amount:<span class="ql-inline-citation" data-cite="1"></span>
</p>
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<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0">
<li>Owner of a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/soleproprietorship.asp">sole proprietorship</a></li>
<li>Partner in a partnership</li>
<li>Shareholder of an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/subchapters.asp">S Corporation</a> owning more than 2%</li>
<li>Owner of more than 5% of a business</li>
<li>Family members of the above</li>
</ul>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-subheading__text"> Calculating Average Annual Wages </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The total annual wages you pay to all of your eligible employees is divided by your total FTE employees to arrive at your average annual wage. For example, if you paid a total of $240,000 to 10 FTE employees, you divide $240,000 by 10 to arrive at a $24,000 average annual wage.<span class="ql-inline-citation" data-cite="1"></span>
</p>
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<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_38-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_39-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The average premium for a given area is published by the Department of Health and Human Services annually.<span class="ql-inline-citation" data-cite="7"></span></p></div></div></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-subheading__text"> Limit on Premiums </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> When calculating the small business healthcare tax credit, the employer-paid premiums are limited to the premium payment that would have been made if the employer paid the average premium for the small group <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/market.asp">market</a> in the rating area. This means the tax credit is limited to the lesser of the actual premiums paid by the employer or the average premium that would have been paid for the small group market in the rating area in which the employee enrolls for coverage.<span class="ql-inline-citation" data-cite="2"></span><br/>
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Let’s assume an employer has 10 total employees. The employer covers 50% of all employee-only and family options. Five employees are on an employee-only plan, and each one has a total premium of $4,000. Five employees are on a family plan, and each one has a total premium of $10,000. The total premiums paid were: (5 × $4,000) + (5 × $10,000) = $70,000.
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Half of that was paid by the employer, for a total of $35,000 in premiums on behalf of the employees. The average premium in the employer’s small group market was $6,000 for employee-only plans and $12,000 for family plans. Because the employer paid less than average for its area, it is able to use the full amount of premiums paid on behalf of employees in the calculation of the tax credit.
</p>
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<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_47-0"><span class="heading-toc" id="toc-what-is-form-8941"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Form 8941?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>IRS Form 8941 is used by eligible small business owners or employers to calculate the credits for which they may be eligible based on their healthcare expenses. It should be filed by small business owners that provide health insurance coverage to their employees and meet certain criteria, which are outlined in Form 8941. For example, the business must have no more than 25 employees and pay average annual wages of $56,000 or less to their workers.</p></div>
</div>
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<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_49-0"><span class="heading-toc" id="toc-how-do-i-know-if-my-business-qualifies-for-the-small-business-healthcare-tax-credit"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do I Know if My Business Qualifies for the Small Business Healthcare Tax Credit?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>The IRS provides specific eligibility criteria for the small employer health insurance credit, including the size of the business, the average annual wages of the employees, and the premiums paid by the employer. You can check the guidelines provided on the IRS website to determine if your business qualifies.<span class="ql-inline-citation" data-cite="1"></span><span class="ql-inline-citation" data-cite="8"></span></p></div>
</div>
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<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_51-0"><span class="heading-toc" id="toc-is-there-a-maximum-amount-that-can-be-claimed-under-the-small-business-healthcare-tax-credit"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is There a Maximum Amount That Can Be Claimed Under the Small Business Healthcare Tax Credit?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Yes, there is a maximum credit amount that can be claimed; it’s based on the premiums paid and the average annual wages of your employees. For example and based on the first criteria, the maximum credit is 50% of premiums paid for small business employers and 35% of premiums paid for small tax-exempt employers.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="1"></span><br/></p></div>
</div>
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<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-health-insurance-for-small-business-owners-4846573">Health insurance is a benefit</a> that some small business owners think is beyond their economic grasp, even though it is attractive to both prospective and current employees. Governmental incentives such as the small business healthcare tax credit are there to help bridge the gap, allowing more Americans access to decent healthcare. Take a good look at the tax implications to see if it can help your small business.
</p></div> | As a small business owner, you have many decisions to make regarding [employee perks](https://www.investopedia.com/articles/financialcareers/07/negotiate_perks.asp) and benefits. Offering the right [benefits](https://www.investopedia.com/articles/pf/09/deciphering-benefits-at-new-job.asp) may entice experienced individuals to apply for jobs while encouraging current employees to stay with your company longer than expected.
One of the most important employee benefits to consider is [health insurance](https://www.investopedia.com/terms/h/healthinsurance.asp). And if you’re worried about the cost, there’s a [tax credit](https://www.investopedia.com/terms/t/taxcredit.asp) that can help you as long as your business or organization qualifies. Here’s what you need to know about it to help offset the cost of providing health insurance to your employees. Remember that it’s also available to small tax-exempt organizations.
### Key Takeaways
* Health insurance is one of the perks you may offer your employees.
* Covering health insurance premiums can be costly, especially for small businesses.
* The small business healthcare tax credit can offset the costs if a business meets certain thresholds, offers a qualified health plan through the SHOP Marketplace, and pays at least 50% of the cost of employee-only health plans.
* Eligible small businesses may carry the credit backward or forward.
* Eligible small tax-exempt organizations may claim a refundable credit.
## What Is the Small Business Healthcare Tax Credit?
Certain provisions of the [Affordable Care Act (ACA)](https://www.investopedia.com/terms/a/affordable-care-act.asp) apply only to small businesses. For example, special insurance options are available through the Small Business Health Options Program (SHOP), but only to employers of fewer than 50 workers.
The small business healthcare tax credit is another feature of the ACA, but it is limited to employers of fewer than 25 full-time employees. It is a sliding-scale credit that is based on size: The larger the employer, the smaller the tax credit and vice versa. The maximum credit is 50% of premiums paid for small business employers or 35% of premiums paid for small tax-exempt employers. The credit is available to eligible businesses for two consecutive [tax years](https://www.investopedia.com/terms/t/taxyear.asp).
If you have an eligible small business that does not owe tax during any one year, the credit can be carried backward or forward to other tax years. If the amount you paid for employer [health insurance premiums](https://www.investopedia.com/health-insurance-premium-4773146) is more than the allowable credit, the excess can be claimed as a business expense deduction. In order to claim the tax credit, you need to fill out [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp) Form 8941.
## Who Qualifies for the Small Business Healthcare Tax Credit?
According to the IRS, an employer with fewer than 25 full-time-equivalent (FTE) employees can qualify for the small business healthcare tax credit by doing all of the following three things:
* Pay average wages of less than $56,000 per year for each FTE employee (indexed annually for [inflation](https://www.investopedia.com/terms/i/inflation.asp) starting in 2014)
* Offer a qualified health plan to its employees through the SHOP Marketplace (with rare exceptions)
* Pay at least 50% of the cost of the employee-only option for each employee
As mentioned above, the credit works on a sliding scale based on the size of the employer. The maximum credit is reduced if you have more than 10 FTE employees or your average wage is more than $27,000 (also indexed annually for inflation).
Tax-exempt organizations are also eligible for the tax credit. If you have a tax-exempt business, the credit is refundable to the extent that it does not exceed your [income tax withholding](https://www.investopedia.com/terms/w/withholdingtax.asp) and [Medicare](https://www.investopedia.com/terms/m/medicare.asp) tax liability. Refunds to tax-exempt organizations are subject to [sequestration](https://www.investopedia.com/terms/s/sequestration.asp), which means the refundable amount will be reduced by the current fiscal year sequestration rate.
###
Employers don’t have to cover 50% of the dependent or family health insurance options to qualify.
## How to Calculate the Small Business Healthcare Tax Credit
### Calculating FTEs
One FTE employee equals 2,080 hours per year for the purpose of the tax credit. This is in contrast to other provisions in the ACA that consider 30 hours per week to be one FTE employee. Any number of part-time employees that adds up to 2,080 hours per year is equivalent to one FTE employee.
Hours worked by a single employee over 2,080 hours per year do not count toward FTE and are excluded from the calculation. Any seasonal employees who worked fewer than 120 days per year should also be excluded. However, the health [insurance premiums](https://www.investopedia.com/terms/i/insurance-premium.asp) paid by the employer for seasonal workers may still be included in the calculation of the credit amount.
The following should also be excluded from the calculation of FTE employees, and any [premiums](https://www.investopedia.com/terms/p/premium.asp) paid for these individuals should be excluded from the calculation of the credit amount:
* Owner of a [sole proprietorship](https://www.investopedia.com/terms/s/soleproprietorship.asp)
* Partner in a partnership
* Shareholder of an [S Corporation](https://www.investopedia.com/terms/s/subchapters.asp) owning more than 2%
* Owner of more than 5% of a business
* Family members of the above
### Calculating Average Annual Wages
The total annual wages you pay to all of your eligible employees is divided by your total FTE employees to arrive at your average annual wage. For example, if you paid a total of $240,000 to 10 FTE employees, you divide $240,000 by 10 to arrive at a $24,000 average annual wage.
###
The average premium for a given area is published by the Department of Health and Human Services annually.
### Limit on Premiums
When calculating the small business healthcare tax credit, the employer-paid premiums are limited to the premium payment that would have been made if the employer paid the average premium for the small group [market](https://www.investopedia.com/terms/m/market.asp) in the rating area. This means the tax credit is limited to the lesser of the actual premiums paid by the employer or the average premium that would have been paid for the small group market in the rating area in which the employee enrolls for coverage.
Let’s assume an employer has 10 total employees. The employer covers 50% of all employee-only and family options. Five employees are on an employee-only plan, and each one has a total premium of $4,000. Five employees are on a family plan, and each one has a total premium of $10,000. The total premiums paid were: (5 × $4,000) + (5 × $10,000) = $70,000.
Half of that was paid by the employer, for a total of $35,000 in premiums on behalf of the employees. The average premium in the employer’s small group market was $6,000 for employee-only plans and $12,000 for family plans. Because the employer paid less than average for its area, it is able to use the full amount of premiums paid on behalf of employees in the calculation of the tax credit.
## What Is Form 8941?
IRS Form 8941 is used by eligible small business owners or employers to calculate the credits for which they may be eligible based on their healthcare expenses. It should be filed by small business owners that provide health insurance coverage to their employees and meet certain criteria, which are outlined in Form 8941. For example, the business must have no more than 25 employees and pay average annual wages of $56,000 or less to their workers.
## How Do I Know if My Business Qualifies for the Small Business Healthcare Tax Credit?
The IRS provides specific eligibility criteria for the small employer health insurance credit, including the size of the business, the average annual wages of the employees, and the premiums paid by the employer. You can check the guidelines provided on the IRS website to determine if your business qualifies.
## Is There a Maximum Amount That Can Be Claimed Under the Small Business Healthcare Tax Credit?
Yes, there is a maximum credit amount that can be claimed; it’s based on the premiums paid and the average annual wages of your employees. For example and based on the first criteria, the maximum credit is 50% of premiums paid for small business employers and 35% of premiums paid for small tax-exempt employers.
## The Bottom Line
[Health insurance is a benefit](https://www.investopedia.com/best-health-insurance-for-small-business-owners-4846573) that some small business owners think is beyond their economic grasp, even though it is attractive to both prospective and current employees. Governmental incentives such as the small business healthcare tax credit are there to help bridge the gap, allowing more Americans access to decent healthcare. Take a good look at the tax implications to see if it can help your small business.
| As a small business owner, you have many decisions to make regarding employee perks and benefits. Offering the right benefits may entice experienced individuals to apply for jobs while encouraging current employees to stay with your company longer than expected.
One of the most important employee benefits to consider is health insurance. And if you’re worried about the cost, there’s a tax credit that can help you as long as your business or organization qualifies. Here’s what you need to know about it to help offset the cost of providing health insurance to your employees. Remember that it’s also available to small tax-exempt organizations.
Key Takeaways
Health insurance is one of the perks you may offer your employees.Covering health insurance premiums can be costly, especially for small businesses.The small business healthcare tax credit can offset the costs if a business meets certain thresholds, offers a qualified health plan through the SHOP Marketplace, and pays at least 50% of the cost of employee-only health plans.Eligible small businesses may carry the credit backward or forward.Eligible small tax-exempt organizations may claim a refundable credit.
What Is the Small Business Healthcare Tax Credit?
Certain provisions of the Affordable Care Act (ACA) apply only to small businesses. For example, special insurance options are available through the Small Business Health Options Program (SHOP), but only to employers of fewer than 50 workers.
The small business healthcare tax credit is another feature of the ACA, but it is limited to employers of fewer than 25 full-time employees. It is a sliding-scale credit that is based on size: The larger the employer, the smaller the tax credit and vice versa. The maximum credit is 50% of premiums paid for small business employers or 35% of premiums paid for small tax-exempt employers. The credit is available to eligible businesses for two consecutive tax years.
If you have an eligible small business that does not owe tax during any one year, the credit can be carried backward or forward to other tax years. If the amount you paid for employer health insurance premiums is more than the allowable credit, the excess can be claimed as a business expense deduction. In order to claim the tax credit, you need to fill out Internal Revenue Service (IRS) Form 8941.
Who Qualifies for the Small Business Healthcare Tax Credit?
According to the IRS, an employer with fewer than 25 full-time-equivalent (FTE) employees can qualify for the small business healthcare tax credit by doing all of the following three things:
Pay average wages of less than $56,000 per year for each FTE employee (indexed annually for inflation starting in 2014)
Offer a qualified health plan to its employees through the SHOP Marketplace (with rare exceptions)
Pay at least 50% of the cost of the employee-only option for each employee
As mentioned above, the credit works on a sliding scale based on the size of the employer. The maximum credit is reduced if you have more than 10 FTE employees or your average wage is more than $27,000 (also indexed annually for inflation).
Tax-exempt organizations are also eligible for the tax credit. If you have a tax-exempt business, the credit is refundable to the extent that it does not exceed your income tax withholding and Medicare tax liability. Refunds to tax-exempt organizations are subject to sequestration, which means the refundable amount will be reduced by the current fiscal year sequestration rate.
Employers don’t have to cover 50% of the dependent or family health insurance options to qualify.
How to Calculate the Small Business Healthcare Tax Credit
Calculating FTEs
One FTE employee equals 2,080 hours per year for the purpose of the tax credit. This is in contrast to other provisions in the ACA that consider 30 hours per week to be one FTE employee. Any number of part-time employees that adds up to 2,080 hours per year is equivalent to one FTE employee.
Hours worked by a single employee over 2,080 hours per year do not count toward FTE and are excluded from the calculation. Any seasonal employees who worked fewer than 120 days per year should also be excluded. However, the health insurance premiums paid by the employer for seasonal workers may still be included in the calculation of the credit amount.
The following should also be excluded from the calculation of FTE employees, and any premiums paid for these individuals should be excluded from the calculation of the credit amount:
Owner of a sole proprietorship
Partner in a partnership
Shareholder of an S Corporation owning more than 2%
Owner of more than 5% of a business
Family members of the above
Calculating Average Annual Wages
The total annual wages you pay to all of your eligible employees is divided by your total FTE employees to arrive at your average annual wage. For example, if you paid a total of $240,000 to 10 FTE employees, you divide $240,000 by 10 to arrive at a $24,000 average annual wage.
The average premium for a given area is published by the Department of Health and Human Services annually.
Limit on Premiums
When calculating the small business healthcare tax credit, the employer-paid premiums are limited to the premium payment that would have been made if the employer paid the average premium for the small group market in the rating area. This means the tax credit is limited to the lesser of the actual premiums paid by the employer or the average premium that would have been paid for the small group market in the rating area in which the employee enrolls for coverage.
Let’s assume an employer has 10 total employees. The employer covers 50% of all employee-only and family options. Five employees are on an employee-only plan, and each one has a total premium of $4,000. Five employees are on a family plan, and each one has a total premium of $10,000. The total premiums paid were: (5 × $4,000) + (5 × $10,000) = $70,000.
Half of that was paid by the employer, for a total of $35,000 in premiums on behalf of the employees. The average premium in the employer’s small group market was $6,000 for employee-only plans and $12,000 for family plans. Because the employer paid less than average for its area, it is able to use the full amount of premiums paid on behalf of employees in the calculation of the tax credit.
What Is Form 8941?
IRS Form 8941 is used by eligible small business owners or employers to calculate the credits for which they may be eligible based on their healthcare expenses. It should be filed by small business owners that provide health insurance coverage to their employees and meet certain criteria, which are outlined in Form 8941. For example, the business must have no more than 25 employees and pay average annual wages of $56,000 or less to their workers.
How Do I Know if My Business Qualifies for the Small Business Healthcare Tax Credit?
The IRS provides specific eligibility criteria for the small employer health insurance credit, including the size of the business, the average annual wages of the employees, and the premiums paid by the employer. You can check the guidelines provided on the IRS website to determine if your business qualifies.
Is There a Maximum Amount That Can Be Claimed Under the Small Business Healthcare Tax Credit?
Yes, there is a maximum credit amount that can be claimed; it’s based on the premiums paid and the average annual wages of your employees. For example and based on the first criteria, the maximum credit is 50% of premiums paid for small business employers and 35% of premiums paid for small tax-exempt employers.
The Bottom Line
Health insurance is a benefit that some small business owners think is beyond their economic grasp, even though it is attractive to both prospective and current employees. Governmental incentives such as the small business healthcare tax credit are there to help bridge the gap, allowing more Americans access to decent healthcare. Take a good look at the tax implications to see if it can help your small business.
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https://www.investopedia.com/terms/l/long-tail.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-long-tail"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Long Tail? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. The term was first coined in 2004 by Chris Anderson, who argued that products in low demand or with low sales volume can collectively make up market share that rivals or exceeds the relatively few current bestsellers and blockbusters but only if the store or distribution channel is large enough.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Long-tail may also refer to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/longtail-liability.asp">type of liability</a> in the insurance industry or to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tailrisk.asp">tail risk</a> found in investment portfolios. This definition deals with the business strategy use of the term.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div>
<span class="heading-toc" id="toc-understanding-the-long-tail-strategy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding the Long Tail Strategy </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Chris Anderson is a British-American writer and editor most notably known for his work at Wired Magazine. In 2004, Anderson coined the phrase "long tail" after writing about the concept in Wired Magazine where he was editor-in-chief. In 2006, Anderson also wrote a book titled “The Long Tail: Why the Future of Business Is Selling Less of More.”
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The long tail concept considers less popular goods that are in lower demand. Anderson argues that these goods could actually increase in profitability because consumers are navigating away from mainstream markets. This theory is supported by the growing number of online marketplaces that alleviate the competition for shelf space and allow an unmeasurable number of products to be sold, specifically through the Internet.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Anderson’s research shows the demand overall for these less popular goods as a comprehensive whole could rival the demand for mainstream goods. While mainstream products achieve a greater number of hits through leading distribution channels and shelf space, their initial costs are high, which drags on their profitability. In comparison, long tail goods have remained in the market over long periods of time and are still sold through off-market channels. These goods have low distribution and production costs, yet are readily available for sale.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_13-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_14-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items.</li><li>The term was first coined in 2004 by researcher Chris Anderson.</li><li>Anderson argues that these goods could actually increase in profitability because consumers are navigating away from mainstream markets.</li><li>The strategy theorizes that consumers are shifting from mass-market buying to more niche or artisan buying.</li></ul></div></div></div>
<span class="heading-toc" id="toc-long-tail-probability-and-profitability"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Long Tail Probability and Profitability </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The long tail of distribution represents a period in time when sales for less common products can return a profit due to reduced marketing and distribution costs. Overall, long tail occurs when sales are made for goods not commonly sold. These goods can return a profit through reduced marketing and distribution costs.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The long tail also serves as a statistical property that states a larger share of population rests within the long tail of a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/probabilitydistribution.asp">probability distribution</a> as opposed to the concentrated tail that represents a high level of hits from the traditional mainstream products highly stocked by mainstream retail stores.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The head and long tail graph depicted by Anderson in his research represents this complete buying pattern. The concept overall suggests the U.S. economy is likely to shift from one of mass-market buying to an economy of niche buying all through the 21st century.
</p></div> | ## What Is the Long Tail?
The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. The term was first coined in 2004 by Chris Anderson, who argued that products in low demand or with low sales volume can collectively make up market share that rivals or exceeds the relatively few current bestsellers and blockbusters but only if the store or distribution channel is large enough.
Long-tail may also refer to a [type of liability](https://www.investopedia.com/terms/l/longtail-liability.asp) in the insurance industry or to [tail risk](https://www.investopedia.com/terms/t/tailrisk.asp) found in investment portfolios. This definition deals with the business strategy use of the term.
## Understanding the Long Tail Strategy
Chris Anderson is a British-American writer and editor most notably known for his work at Wired Magazine. In 2004, Anderson coined the phrase "long tail" after writing about the concept in Wired Magazine where he was editor-in-chief. In 2006, Anderson also wrote a book titled “The Long Tail: Why the Future of Business Is Selling Less of More.”
The long tail concept considers less popular goods that are in lower demand. Anderson argues that these goods could actually increase in profitability because consumers are navigating away from mainstream markets. This theory is supported by the growing number of online marketplaces that alleviate the competition for shelf space and allow an unmeasurable number of products to be sold, specifically through the Internet.
Anderson’s research shows the demand overall for these less popular goods as a comprehensive whole could rival the demand for mainstream goods. While mainstream products achieve a greater number of hits through leading distribution channels and shelf space, their initial costs are high, which drags on their profitability. In comparison, long tail goods have remained in the market over long periods of time and are still sold through off-market channels. These goods have low distribution and production costs, yet are readily available for sale.
### Key Takeaways
* The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items.
* The term was first coined in 2004 by researcher Chris Anderson.
* Anderson argues that these goods could actually increase in profitability because consumers are navigating away from mainstream markets.
* The strategy theorizes that consumers are shifting from mass-market buying to more niche or artisan buying.
## Long Tail Probability and Profitability
The long tail of distribution represents a period in time when sales for less common products can return a profit due to reduced marketing and distribution costs. Overall, long tail occurs when sales are made for goods not commonly sold. These goods can return a profit through reduced marketing and distribution costs.
The long tail also serves as a statistical property that states a larger share of population rests within the long tail of a [probability distribution](https://www.investopedia.com/terms/p/probabilitydistribution.asp) as opposed to the concentrated tail that represents a high level of hits from the traditional mainstream products highly stocked by mainstream retail stores.
The head and long tail graph depicted by Anderson in his research represents this complete buying pattern. The concept overall suggests the U.S. economy is likely to shift from one of mass-market buying to an economy of niche buying all through the 21st century.
| What Is the Long Tail?
The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. The term was first coined in 2004 by Chris Anderson, who argued that products in low demand or with low sales volume can collectively make up market share that rivals or exceeds the relatively few current bestsellers and blockbusters but only if the store or distribution channel is large enough.
Long-tail may also refer to a type of liability in the insurance industry or to tail risk found in investment portfolios. This definition deals with the business strategy use of the term.
Understanding the Long Tail Strategy
Chris Anderson is a British-American writer and editor most notably known for his work at Wired Magazine. In 2004, Anderson coined the phrase "long tail" after writing about the concept in Wired Magazine where he was editor-in-chief. In 2006, Anderson also wrote a book titled “The Long Tail: Why the Future of Business Is Selling Less of More.”
The long tail concept considers less popular goods that are in lower demand. Anderson argues that these goods could actually increase in profitability because consumers are navigating away from mainstream markets. This theory is supported by the growing number of online marketplaces that alleviate the competition for shelf space and allow an unmeasurable number of products to be sold, specifically through the Internet.
Anderson’s research shows the demand overall for these less popular goods as a comprehensive whole could rival the demand for mainstream goods. While mainstream products achieve a greater number of hits through leading distribution channels and shelf space, their initial costs are high, which drags on their profitability. In comparison, long tail goods have remained in the market over long periods of time and are still sold through off-market channels. These goods have low distribution and production costs, yet are readily available for sale.
Key Takeaways
The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items.The term was first coined in 2004 by researcher Chris Anderson.Anderson argues that these goods could actually increase in profitability because consumers are navigating away from mainstream markets.The strategy theorizes that consumers are shifting from mass-market buying to more niche or artisan buying.
Long Tail Probability and Profitability
The long tail of distribution represents a period in time when sales for less common products can return a profit due to reduced marketing and distribution costs. Overall, long tail occurs when sales are made for goods not commonly sold. These goods can return a profit through reduced marketing and distribution costs.
The long tail also serves as a statistical property that states a larger share of population rests within the long tail of a probability distribution as opposed to the concentrated tail that represents a high level of hits from the traditional mainstream products highly stocked by mainstream retail stores.
The head and long tail graph depicted by Anderson in his research represents this complete buying pattern. The concept overall suggests the U.S. economy is likely to shift from one of mass-market buying to an economy of niche buying all through the 21st century.
| [
[
"type of liability",
"https://www.investopedia.com/terms/l/longtail-liability.asp"
],
[
"tail risk",
"https://www.investopedia.com/terms/t/tailrisk.asp"
],
[
"probability distribution",
"https://www.investopedia.com/terms/p/probabilitydistribution.asp"
]
] |
https://www.investopedia.com/terms/m/media-kit.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-media-kit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Media Kit? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A media kit is a package of information assembled by a company to provide basic information about itself to reporters. The media kit is a promotional public relations tool that can serve several functions. These functions include promoting the launch of a new company or announcing the launch of a new product or service by an existing company. You can present your company as you would like it be seen and save time by eliminating the need for you or your employees to repeatedly answer the same questions.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A media kit is a public information kit a company presents to reporters and other media outlets.</li><li>These kits usually include biographies, contact information, products and services, and more.</li><li>You can include your website address, it's demographics and traffic information, social media profile and your goals.</li><li>Most kits include a company's mission and vision statements to help those seeking information determine what it is trying to accomplish.</li></ul><p><br/></p></div></div></div>
<span class="heading-toc" id="toc-building-a-media-kit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Building a Media Kit </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> A media kit should address your specific business's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/public-relations-pr.asp">publicity and communication</a> needs. A media kit should demonstrate your creativity and value while being informative and easily understood. It should convey everything outsiders needs to know about your business, packaged up and ready to introduce you to anyone. Finally, you should put enough effort into your kit to be proud of it.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> A media kit can be as simple as a page on a company's website or as complex as a package of information and product samples sent to selected media members. The media kit commonly provides the company's official name and:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0">
<li>The names, titles, and biographies of executives and leadership</li>
<li>Information about the company's history and function</li>
<li>Photos and any relevant and positive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pressrelease.asp">press releases</a></li>
<li>Contact information for reporters</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<span class="heading-toc" id="toc-possible-components-of-a-media-kit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-heading__text"> Possible Components of a Media Kit </span> </h2>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-subheading__text"> Social Media Following </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Include information on your social media platforms, including Instagram, X (formerly Twitter), Facebook, Pinterest, YouTube, Tumblr, Snapchat, or any other social media platform on which you might have a presence. This will give people a quick idea of your social media reach.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_17-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_18-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Social media influencers can also benefit from media kits by including information on their user base and followers for potential partnerships.</p></div></div></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-subheading__text"> Website Traffic </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Sharing your website stats showcases your audience size and characteristics. It’s important to include figures such as your bounce rate, page views, and duration of visitors in the kit. Google Analytics is the industry standard for sharing website traffic data.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> Audience Demographics </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Google Analytics can also track your audience demographics. You can also learn more through other tools, such as Iconosquare for Instagram. Understanding your audience demographics is not only beneficial to you, but it is also beneficial to people that might want to engage you somehow. If your audience aligns with their goals, a collaboration might be a good fit for you both.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_25-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_26-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>It's okay to include your rates in your media kit. Doing this can help prospects save time deciding whether they can afford your products or services and save you time by screening them out before even talking to them.</p></div></div></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-subheading__text"> Your Goals </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> It's smart to identify your goals in a media kit, so a recipient can also self-identify their potential role in them. By noting the capabilities you'll use to achieve your goals, it could spark ideas and interest on the part of your press kit recipient.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-subheading__text"> Contact Information </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> There is little point in sending a media kit with no contact information. You should ensure your contact information is up-to-date and as timeless as possible. This means a phone number, website, social media account, or email address that will not change anytime soon.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> About You </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Include a short paragraph about you and your organization. This is a great place to discuss what you do and why you do what you do. Reiterate your strengths and unique characteristics. Provide insight into who you are and why you would be a good collaborator.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div>
<span class="heading-toc" id="toc-example-of-a-media-kit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Example of a Media Kit </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> One example of a media kit is the one for finance website Kiplinger.com. Its media kit presents a clear value proposition on why Kiplinger’s advice is trusted and highly practical “for readers seeking actionable solutions.” Below this headline are product links, including the Kiplinger Personal Finance Magazine, Kiplinger Retirement Report, and Kiplinger’s Custom Content option.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> In addition, Kiplinger offers native advertising, a retirement planning guide, and email opportunities. The site also includes a quick link to contact an Ad Sales Representative. This example is on the simpler end of media kits; however, the materials still display Kiplinger’s important information in a readily accessible form to promote the company's product and clearly communicate its mission and audience.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_41-0"><span class="heading-toc" id="toc-what-is-a-media-kit-and-why-is-it-important"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Media Kit and Why Is It Important?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>A media kit is a bundle of materials and information you put together to hand out to members of the press or other media outlets. Having one is important because it gives reporters numbers to contact, establishes your brand, and promotes your amicability towards sharing information.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_43-0"><span class="heading-toc" id="toc-how-do-you-make-a-media-kit"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Make a Media Kit?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>How you make a media kit depends on what you do. Generally, it includes contact information, company history, mission and vision statements, biographies, client stories, and anything else you think might interest the press. It can also be as minimal as a webpage with basic information.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_45-0"><span class="heading-toc" id="toc-who-needs-media-kits"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Needs Media Kits?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Media kits should be an essential part of the toolbox for every business endeavor. You never know when you might need to make your company information easily accessible. It is also a great marketing tool that is usually less expensive than most marketing campaigns.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Media kits function as more than informational packets for the press. You can use them for marketing purposes and brand growth. If you have new products, you can send samples to review websites and social media influencers or even include a video review of the product in your kit. Lastly, every business should have some form of online media kit because it's another way to reach a target audience and extend their reach.
</p></div> | ## What Is a Media Kit?
A media kit is a package of information assembled by a company to provide basic information about itself to reporters. The media kit is a promotional public relations tool that can serve several functions. These functions include promoting the launch of a new company or announcing the launch of a new product or service by an existing company. You can present your company as you would like it be seen and save time by eliminating the need for you or your employees to repeatedly answer the same questions.
### Key Takeaways
* A media kit is a public information kit a company presents to reporters and other media outlets.
* These kits usually include biographies, contact information, products and services, and more.
* You can include your website address, it's demographics and traffic information, social media profile and your goals.
* Most kits include a company's mission and vision statements to help those seeking information determine what it is trying to accomplish.
## Building a Media Kit
A media kit should address your specific business's [publicity and communication](https://www.investopedia.com/terms/p/public-relations-pr.asp) needs. A media kit should demonstrate your creativity and value while being informative and easily understood. It should convey everything outsiders needs to know about your business, packaged up and ready to introduce you to anyone. Finally, you should put enough effort into your kit to be proud of it.
A media kit can be as simple as a page on a company's website or as complex as a package of information and product samples sent to selected media members. The media kit commonly provides the company's official name and:
* The names, titles, and biographies of executives and leadership
* Information about the company's history and function
* Photos and any relevant and positive [press releases](https://www.investopedia.com/terms/p/pressrelease.asp)
* Contact information for reporters
## Possible Components of a Media Kit
### Social Media Following
Include information on your social media platforms, including Instagram, X (formerly Twitter), Facebook, Pinterest, YouTube, Tumblr, Snapchat, or any other social media platform on which you might have a presence. This will give people a quick idea of your social media reach.
###
Social media influencers can also benefit from media kits by including information on their user base and followers for potential partnerships.
### Website Traffic
Sharing your website stats showcases your audience size and characteristics. It’s important to include figures such as your bounce rate, page views, and duration of visitors in the kit. Google Analytics is the industry standard for sharing website traffic data.
### Audience Demographics
Google Analytics can also track your audience demographics. You can also learn more through other tools, such as Iconosquare for Instagram. Understanding your audience demographics is not only beneficial to you, but it is also beneficial to people that might want to engage you somehow. If your audience aligns with their goals, a collaboration might be a good fit for you both.
###
It's okay to include your rates in your media kit. Doing this can help prospects save time deciding whether they can afford your products or services and save you time by screening them out before even talking to them.
### Your Goals
It's smart to identify your goals in a media kit, so a recipient can also self-identify their potential role in them. By noting the capabilities you'll use to achieve your goals, it could spark ideas and interest on the part of your press kit recipient.
### Contact Information
There is little point in sending a media kit with no contact information. You should ensure your contact information is up-to-date and as timeless as possible. This means a phone number, website, social media account, or email address that will not change anytime soon.
### About You
Include a short paragraph about you and your organization. This is a great place to discuss what you do and why you do what you do. Reiterate your strengths and unique characteristics. Provide insight into who you are and why you would be a good collaborator.
## Example of a Media Kit
One example of a media kit is the one for finance website Kiplinger.com. Its media kit presents a clear value proposition on why Kiplinger’s advice is trusted and highly practical “for readers seeking actionable solutions.” Below this headline are product links, including the Kiplinger Personal Finance Magazine, Kiplinger Retirement Report, and Kiplinger’s Custom Content option.
In addition, Kiplinger offers native advertising, a retirement planning guide, and email opportunities. The site also includes a quick link to contact an Ad Sales Representative. This example is on the simpler end of media kits; however, the materials still display Kiplinger’s important information in a readily accessible form to promote the company's product and clearly communicate its mission and audience.
## What Is a Media Kit and Why Is It Important?
A media kit is a bundle of materials and information you put together to hand out to members of the press or other media outlets. Having one is important because it gives reporters numbers to contact, establishes your brand, and promotes your amicability towards sharing information.
## How Do You Make a Media Kit?
How you make a media kit depends on what you do. Generally, it includes contact information, company history, mission and vision statements, biographies, client stories, and anything else you think might interest the press. It can also be as minimal as a webpage with basic information.
## Who Needs Media Kits?
Media kits should be an essential part of the toolbox for every business endeavor. You never know when you might need to make your company information easily accessible. It is also a great marketing tool that is usually less expensive than most marketing campaigns.
## The Bottom Line
Media kits function as more than informational packets for the press. You can use them for marketing purposes and brand growth. If you have new products, you can send samples to review websites and social media influencers or even include a video review of the product in your kit. Lastly, every business should have some form of online media kit because it's another way to reach a target audience and extend their reach.
| What Is a Media Kit?
A media kit is a package of information assembled by a company to provide basic information about itself to reporters. The media kit is a promotional public relations tool that can serve several functions. These functions include promoting the launch of a new company or announcing the launch of a new product or service by an existing company. You can present your company as you would like it be seen and save time by eliminating the need for you or your employees to repeatedly answer the same questions.
Key Takeaways
A media kit is a public information kit a company presents to reporters and other media outlets.These kits usually include biographies, contact information, products and services, and more.You can include your website address, it's demographics and traffic information, social media profile and your goals.Most kits include a company's mission and vision statements to help those seeking information determine what it is trying to accomplish.
Building a Media Kit
A media kit should address your specific business's publicity and communication needs. A media kit should demonstrate your creativity and value while being informative and easily understood. It should convey everything outsiders needs to know about your business, packaged up and ready to introduce you to anyone. Finally, you should put enough effort into your kit to be proud of it.
A media kit can be as simple as a page on a company's website or as complex as a package of information and product samples sent to selected media members. The media kit commonly provides the company's official name and:
The names, titles, and biographies of executives and leadership
Information about the company's history and function
Photos and any relevant and positive press releases
Contact information for reporters
Possible Components of a Media Kit
Social Media Following
Include information on your social media platforms, including Instagram, X (formerly Twitter), Facebook, Pinterest, YouTube, Tumblr, Snapchat, or any other social media platform on which you might have a presence. This will give people a quick idea of your social media reach.
Social media influencers can also benefit from media kits by including information on their user base and followers for potential partnerships.
Website Traffic
Sharing your website stats showcases your audience size and characteristics. It’s important to include figures such as your bounce rate, page views, and duration of visitors in the kit. Google Analytics is the industry standard for sharing website traffic data.
Audience Demographics
Google Analytics can also track your audience demographics. You can also learn more through other tools, such as Iconosquare for Instagram. Understanding your audience demographics is not only beneficial to you, but it is also beneficial to people that might want to engage you somehow. If your audience aligns with their goals, a collaboration might be a good fit for you both.
It's okay to include your rates in your media kit. Doing this can help prospects save time deciding whether they can afford your products or services and save you time by screening them out before even talking to them.
Your Goals
It's smart to identify your goals in a media kit, so a recipient can also self-identify their potential role in them. By noting the capabilities you'll use to achieve your goals, it could spark ideas and interest on the part of your press kit recipient.
Contact Information
There is little point in sending a media kit with no contact information. You should ensure your contact information is up-to-date and as timeless as possible. This means a phone number, website, social media account, or email address that will not change anytime soon.
About You
Include a short paragraph about you and your organization. This is a great place to discuss what you do and why you do what you do. Reiterate your strengths and unique characteristics. Provide insight into who you are and why you would be a good collaborator.
Example of a Media Kit
One example of a media kit is the one for finance website Kiplinger.com. Its media kit presents a clear value proposition on why Kiplinger’s advice is trusted and highly practical “for readers seeking actionable solutions.” Below this headline are product links, including the Kiplinger Personal Finance Magazine, Kiplinger Retirement Report, and Kiplinger’s Custom Content option.
In addition, Kiplinger offers native advertising, a retirement planning guide, and email opportunities. The site also includes a quick link to contact an Ad Sales Representative. This example is on the simpler end of media kits; however, the materials still display Kiplinger’s important information in a readily accessible form to promote the company's product and clearly communicate its mission and audience.
What Is a Media Kit and Why Is It Important?
A media kit is a bundle of materials and information you put together to hand out to members of the press or other media outlets. Having one is important because it gives reporters numbers to contact, establishes your brand, and promotes your amicability towards sharing information.
How Do You Make a Media Kit?
How you make a media kit depends on what you do. Generally, it includes contact information, company history, mission and vision statements, biographies, client stories, and anything else you think might interest the press. It can also be as minimal as a webpage with basic information.
Who Needs Media Kits?
Media kits should be an essential part of the toolbox for every business endeavor. You never know when you might need to make your company information easily accessible. It is also a great marketing tool that is usually less expensive than most marketing campaigns.
The Bottom Line
Media kits function as more than informational packets for the press. You can use them for marketing purposes and brand growth. If you have new products, you can send samples to review websites and social media influencers or even include a video review of the product in your kit. Lastly, every business should have some form of online media kit because it's another way to reach a target audience and extend their reach.
| [
[
"publicity and communication",
"https://www.investopedia.com/terms/p/public-relations-pr.asp"
],
[
"press releases",
"https://www.investopedia.com/terms/p/pressrelease.asp"
]
] |
https://www.investopedia.com/your-guide-to-the-paycheck-protection-program-ppp-and-how-to-apply-4802195 | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> The Consolidated Appropriations Act of 2021 (CAA) was signed into law on Dec. 27, 2020 and included new funding for the Paycheck Protection Program (PPP), which expired on Aug. 8, 2020.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> The PPP was a U.S. loan program established to help small businesses affected by the economic slowdown associated with the COVID pandemic to pay the wages of employees and certain other expenses. It was created by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707">CARES Act</a> and originally included $349 billion in funding; however, that money was gone within two weeks, resulting in the second round of funding totaling $310 billion.<span class="ql-inline-citation" data-cite="42"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> After round two loans ended in August of 2020, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/congress-agrees-on-second-stimulus-here-s-what-s-in-it-and-what-s-not-5093226">Consolidated Appropriations Act of 2021 (CAA)</a> authorized the third round of PPP loans. Round three funding of $284 billion expanded on the original PPP goals of providing loans to businesses for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/payroll.asp">payroll</a> and other costs to help them remain viable and allow their workers to pay their bills; however, those funds were depleted, and as of May 31, 2021, the PPP program was no longer available.<span class="ql-inline-citation" data-cite="58"></span><span class="ql-inline-citation" data-cite="55"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_7-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_8-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A third round of Paycheck Protection Program (PPP) loans was authorized by the passage of H.R. 133: Consolidated Appropriations Act, 2021 into law on Dec. 27, 2020.</li><li>Based on the CARES Act, the first-draw PPP loans were available for the lesser of $10 million or 2.5 times a company's average monthly payroll.</li><li>Second-draw loans of up to $2 million were available for businesses that had used funds in their Round 1 or Round 2 loans.</li><li>100% of a PPP loan could be forgiven if guidelines were followed.</li><li>Passage of the PPP Flexibility Act of 2020 relaxed many PPP loan guidelines.</li></ul></div></div></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The table below outlines all three rounds of PPP loan funding.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_11-0"> <div class="mntl-sc-block-table__table-wrapper">
<table class="mntl-sc-block-table__table">
<colgroup span="1" style="width: 68px;"></colgroup>
<colgroup span="1" style=""></colgroup>
<colgroup span="1" style=""></colgroup>
<colgroup span="1" style=""></colgroup>
<thead>
<tr>
<th>Round</th>
<th>Legislation</th>
<th>Funding</th>
<th>Expiration</th>
</tr>
</thead>
<tbody data-check="0">
<tr>
<th>1</th>
<td>H.R. 748 - CARES Act</td>
<td>$349 billion</td>
<td>Apr. 16, 2020</td>
</tr>
<tr>
<th>2</th>
<td>H.R. 266 - PPP and Health Care Enhancement Act</td>
<td>$310 billion</td>
<td>Aug. 8, 2020</td>
</tr>
<tr>
<th>3</th>
<td>H.R. 133 - Consolidated Appropriations Act, 2021</td>
<td>$284 billion</td>
<td>May 31, 2021</td>
</tr>
</tbody>
</table>
</div></figure>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Sources: U.S. Congress<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="21"></span><span class="ql-inline-citation" data-cite="43"></span>; Congressional Research Service<span class="ql-inline-citation" data-cite="42"></span>; U.S. Small Business Administration<span class="ql-inline-citation" data-cite="55"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div>
<span class="heading-toc" id="toc-changes-to-the-ppp-program-announced-by-the-biden-administration"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Changes to the PPP Program Announced by the Biden Administration </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> On Feb. 22, 2021, the White House announced five changes to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/where-ppp-money-went-5216725">Paycheck Protection Program (PPP)</a>. One change had a set term of two weeks.<span class="ql-inline-citation" data-cite="31"></span> The other four would be effective until at least the end of March 2021.<span class="ql-inline-citation" data-cite="42"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> These changes were designed to make PPP funds available to very small businesses and others that had been inadequately helped by the program, according to the Biden administration.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> <li>Beginning on Wed., Feb. 24, 2021, through Tue. March 9, 2021, businesses with fewer than 20 employees were permitted to apply for PPP funding.</li><li>The formula used to calculate PPP loans was revised to provide more funding for sole proprietors, independent contractors, and self-employed individuals. An additional $1 billion was allocated for these individuals in low-and moderate-income (LMI) areas.</li><li>Eligibility for PPP funding was extended to small business owners with non-fraud-related felonies as long as the applicant was not incarcerated at the time of the application.</li><li>Business owners with delinquent federal student loans were eligible for a PPP loan.</li><li>Non-citizens who were lawful U.S. residents were also eligible and allowed to use their Individual Taxpayer Identification Numbers (ITINs) to apply.<span class="ql-inline-citation" data-cite="31"></span></li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_22-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_23-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">Feb. 24, 2021</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The starting date for a 14-day period, ordered by the Biden administration, during which only businesses with fewer than 20 employees could apply for a PPP loan.<span class="ql-inline-citation" data-cite="31"></span></p></div></div></div>
<span class="heading-toc" id="toc-first-draw-vs-second-draw-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> First-Draw vs. Second-Draw Loans </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> The CAA provided for two types of round three PPP loans. The first type was initial or first-draw loans up to $10 million for entities that had never received a PPP loan. The second type was second-draw loans of up to $2 million for entities that had received PPP loans.<span class="ql-inline-citation" data-cite="42"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Following guidance from the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a> and Treasury Department, community financial institutions including <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cdfi.asp">Community Development Financial Institutions (CDFIs)</a> began making first-draw PPP loans on Mon., Jan. 11, and second-draw loans on Wed., Jan. 13.<span class="ql-inline-citation" data-cite="47"></span><span class="ql-inline-citation" data-cite="46"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Small lenders with less than $1 billion in assets were slated to begin making both first- and second-draw loans on Fri., Jan. 15.<strong> </strong>All approved PPP lenders could begin lending on Tues., Jan. 19, 2021.<span class="ql-inline-citation" data-cite="30"></span><span class="ql-inline-citation" data-cite="29"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div>
<span class="heading-toc" id="toc-ppp-third-round-general-terms-and-conditions"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> PPP Third-Round General Terms and Conditions </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Both first- and second-draw PPP loans were subject (but not limited) to the same general terms and conditions as original PPP loans under the CARES Act:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> <li>Loans were 100% guaranteed by the government.</li><li>No collateral was required.</li><li>No personal guarantees were required.</li><li>The interest rate for all loans was 1% and maturity was five years.<span class="ql-inline-citation" data-cite="48"></span></li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div>
<span class="heading-toc" id="toc-ppp-third-round-eligible-entities"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> PPP Third-Round Eligible Entities </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> While there were key differences between first- and second-draw PPP loans, the types of eligible entities were the same.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0">
<li>Small businesses with 500 or fewer employees (300 or fewer for second-draw loans)</li>
<li>Businesses categorized as "Accommodation or Food Services" such as restaurants and hotels with 500 or fewer employees per location (300 or fewer for second-draw loans)<span class="ql-inline-citation" data-cite="42"></span></li>
<li>Independently owned franchises</li>
<li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/self-employed.asp#">Self-employed</a> workers, independent contractors, gig workers, and sole proprietors</li>
<li>501(c)(3) businesses or tax-exempt nonprofit organizations; tax-exempt 501(c)(19) veterans organizations; 31(b)(2)(C) tribal business concerns</li>
<li>Housing cooperatives; eligible section 501(c)(6) organizations, or eligible destination marketing organizations with 300 or fewer employees</li>
<li>News organizations that were majority-owned or controlled by a NAICS code 511110 or 5151 business or a nonprofit public broadcasting entity with a trade or business under NAICS 511110 or 5151 with 500 or fewer employees</li>
<li>Business must have been in operation on Feb. 15, 2020<span class="ql-inline-citation" data-cite="24"></span></li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div>
<span class="heading-toc" id="toc-additional-second-draw-requirements"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> Additional Second-Draw Requirements </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Second-draw PPP loans had some restrictions that first-draw loans didn't have. Businesses couldn't receive a second-draw loan of up to $2 million unless they met the following conditions:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0">
<li>They had received and used (or expected to use) all proceeds from the first-draw loan by the time they received (or expected to receive) the second-draw loan proceeds</li>
<li>They had 300 or fewer employees</li>
<li>They could demonstrate that they experienced a loss of at least 25% of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gross-receipts.asp">gross receipts</a> in any quarter during 2020 compared to the same quarter in 2019</li>
<li>They spent all proceeds from their first-draw loan on eligible expenses<span class="ql-inline-citation" data-cite="49"></span></li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div>
<span class="heading-toc" id="toc-second-draw-borrower-exclusions"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> Second-Draw Borrower Exclusions </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Round 3 guidelines excluded businesses from a second-draw loan if a company was:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> <li>Permanently closed</li><li>Ineligible under existing SBA regulations</li><li>Primarily engaged in lobbying or other political activities</li><li>Owned by an entity created in, or with significant operations in, the People's Republic of China or the Special Administrative Region of Hong Kong</li><li>Included a board member who was a resident of the People's Republic of China</li><li>A recipient of a shuttered venue operator grant under Section 24 of the Act<span class="ql-inline-citation" data-cite="50"></span></li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_51-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_52-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>On March 30, 2021, the Paycheck Protection Program Extension Act was signed into law, which gave applicants until May 31, 2021, to apply for a PPP loan, extended the covered period to June 30, 2021, and gave lenders until that date to process loans.<span class="ql-inline-citation" data-cite="32"></span></p></div></div></div>
<span class="heading-toc" id="toc-required-certifications-for-ppp-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-heading__text"> Required Certifications for PPP Loans </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Businesses were required to certify that pandemic-related economic uncertainty made the loan request necessary to support ongoing operations and that funds would be used as required. This included using no more than 40% for non-payroll costs. This requirement applied to both first- and second-draw PPP loans.<span class="ql-inline-citation" data-cite="56"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div>
<span class="heading-toc" id="toc-special-new-set-aside-funding"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-heading__text"> Special New Set-Aside Funding </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Round three included special set-aside funding for specific groups of first- and second-draw borrowers.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0">
<li>$15 billion for lending by community financial institutions</li>
<li>$15 billion for lending by insured depository institutions, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditunion.asp">credit unions</a>, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/farm-credit-system.asp">farm credit system</a> institutions with consolidated assets of less than $10 billion</li>
<li>$35 billion for new first-draw PPP borrowers</li>
<li>$15 billion and $25 billion for first-draw and second-draw PPP loans for borrowers with 10 employees or fewer, or for loans of less than $250,000 to borrowers in low-or moderate-income neighborhoods<span class="ql-inline-citation" data-cite="51"></span></li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div>
<span class="heading-toc" id="toc-application-dates-for-a-third-round-ppp-loan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-heading__text"> Application Dates for a Third-Round PPP Loan </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> As noted above, applications for Round three first-draw PPP loans from approved community financial institutions started Mon., Jan. 11, 2021. Second-draw applications began on Wed., Jan. 13. That was followed by first- and second-draw loans from small lenders with less than $1 billion in assets on Fri., Jan. 15, 2021. All SBA 7(a) lenders were approved to accept first and second draw applications starting on Tues., Jan. 19, 2021.<span class="ql-inline-citation" data-cite="29"></span><span class="ql-inline-citation" data-cite="30"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div>
<span class="heading-toc" id="toc-third-round-ppp-application-deadline"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_64-0"> <span class="mntl-sc-block-heading__text"> Third-Round PPP Application Deadline </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> The Consolidated Appropriations Act, 2021 extended the Paycheck Protection Program through March 31, 2021 or until funds ran out.<span class="ql-inline-citation" data-cite="60"></span> Congress extended the Paycheck Protection Program's application deadline through May 31, 2021.<span class="ql-inline-citation" data-cite="59"></span> Once the PPP funds were exhausted by May 31, 2021, the PPP program was no longer available.<span class="ql-inline-citation" data-cite="52"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> The amount of funds made available in the third round totaled $284 billion. Maximum loans of $10 million were available to first-draw borrowers, and loans up to $2 million were offered to second-draw, small business owners.<span class="ql-inline-citation" data-cite="55"></span><span class="ql-inline-citation" data-cite="42"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div>
<span class="heading-toc" id="toc-application-process-for-a-third-round-ppp-loan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_69-0"> <span class="mntl-sc-block-heading__text"> Application Process for a Third-Round PPP Loan </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> New first- and second-draw loans followed a pattern similar to that followed with previous PPP loans. Business owners could download and fill out the loan application from the SBA website.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> Both the first-draw application and second-draw application were seven pages long, including instructions.<span class="ql-inline-citation" data-cite="28"></span><span class="ql-inline-citation" data-cite="27"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div>
<span class="heading-toc" id="toc-covered-period-for-third-round-ppp"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_74-0"> <span class="mntl-sc-block-heading__text"> Covered Period for Third-Round PPP </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> Round one and Round two PPP loans stipulated that the period during which a business had to use its loan proceeds (the covered period) was an eight-week period beginning on the date the business received its loan proceeds. That was later expanded to 24 weeks.<span class="ql-inline-citation" data-cite="53"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_77-0"> Round three allowed a business to choose any length period between eight weeks and 24 weeks, giving it more control over how to handle any needed reductions in a workforce, once PPP funds were depleted.<span class="ql-inline-citation" data-cite="54"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_78-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_79-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_80-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_4-0">60%</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>The percentage of both first- and second-draw PPP loans that had to be used for payroll expenses.<span class="ql-inline-citation" data-cite="40"></span></p></div></div></div>
<span class="heading-toc" id="toc-use-of-third-round-ppp-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_81-0"> <span class="mntl-sc-block-heading__text"> Use of Third-Round PPP Funds </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_82-0"> The CAA expanded the types of expenses for which a business could use Round 3 PPP funds. This also applied to existing PPP loan funds (unless the business already had obtained forgiveness).
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> In addition to payroll, rent, covered <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mortgageinterest.asp">mortgage interest</a>, and utilities, the Paycheck Protection Program allowed a business to use loan proceeds for:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_86-0"> <li><strong>Certain operations expenses</strong> including<strong> </strong>business software; business-related cloud computing services; product or service delivery; payroll processing, payment, and tracking costs; HR and billing functions; tracking of supplies, inventory, records, and expenses</li><li><strong>Covered property damage costs </strong>including costs related to damage or vandalism caused by looting or public disturbances in 2020 that were not covered by insurance or other compensation</li><li><strong>Listed supplier costs</strong> including payments to a supplier of goods that were essential to operations and made pursuant to a contract or order in effect at any time before the covered period or, with respect to perishable goods, in effect at any time during the covered period</li><li><strong>Covered worker protection expenses </strong>including operating or capital expenditures required to comply with requirements or guidance issued by the CDC, HHS, OSHA, or any state or local government during the period beginning March 1, 2020, and ending on the date when the national emergency expired<span class="ql-inline-citation" data-cite="43"></span></li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div>
<span class="heading-toc" id="toc-tax-treatment-of-third-round-ppp-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_88-0"> <span class="mntl-sc-block-heading__text"> Tax Treatment of Third-Round PPP Loans </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_89-0"> Round three PPP loans were not included in a company's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxableincome.asp">taxable income</a>. If a loan was forgiven, expenses paid with the proceeds of the loan were tax-deductible. Further, this rule applied to new, existing, and previous PPP loans. In addition, any income tax basis increase that resulted from a PPP loan remained even if the PPP loan was eventually forgiven.<span class="ql-inline-citation" data-cite="43"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_90-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_91-0"> Any PPP loans that were wrongfully forgiven either due to omission or misrepresentation by the taxpayer will be treated as taxable income, as the IRS announced in August 2022. The IRS is encouraging anyone to whom this guidance applies to, if necessary, file an amended return.<span class="ql-inline-citation" data-cite="39"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_92-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_93-0"><span class="heading-toc" id="toc-what-was-the-total-amount-of-funding-for-the-paycheck-protection-program-loans"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Was the Total Amount of Funding for the Paycheck Protection Program Loans?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Total funding for PPP loans included $349 billion appropriated by the CARES Act, $310 billion from the PPP and Health Care Enhancement Act, and $284 billion from the Consolidated Appropriations Act (CAA).<span class="ql-inline-citation" data-cite="55"></span><span class="ql-inline-citation" data-cite="42"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_94-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_95-0"><span class="heading-toc" id="toc-are-ppp-loans-still-available"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are PPP Loans Still Available?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>No. The Paycheck Protection Program ended May 31, 2021 after all funding was exhausted. To date there have been no further allocations to the PPP.<span class="ql-inline-citation" data-cite="37"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_96-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_97-0"><span class="heading-toc" id="toc-were-round-3-ppp-loans-to-be-used-exclusively-for-payroll"></span> <h2 class="mntl-sc-block-questionandanswer__question">Were Round 3 PPP Loans to Be Used Exclusively for Payroll?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>No. PPP loan recipients could use up to 40% of loan proceeds for non-payroll costs, although the list of authorized uses did limit non-payroll spending.<span class="ql-inline-citation" data-cite="40"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_98-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_99-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_100-0"> On Dec. 27, 2020, the Consolidated Appropriations Act, 2021 became law, which included new funding for the Paycheck Protection Program (PPP), which had expired on Aug. 8, 2020. The PPP was established to help businesses during times of financial difficulty caused by the COVID-19 pandemic.
</p></div> | The Consolidated Appropriations Act of 2021 (CAA) was signed into law on Dec. 27, 2020 and included new funding for the Paycheck Protection Program (PPP), which expired on Aug. 8, 2020.
The PPP was a U.S. loan program established to help small businesses affected by the economic slowdown associated with the COVID pandemic to pay the wages of employees and certain other expenses. It was created by the [CARES Act](https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707) and originally included $349 billion in funding; however, that money was gone within two weeks, resulting in the second round of funding totaling $310 billion.
After round two loans ended in August of 2020, the [Consolidated Appropriations Act of 2021 (CAA)](https://www.investopedia.com/congress-agrees-on-second-stimulus-here-s-what-s-in-it-and-what-s-not-5093226) authorized the third round of PPP loans. Round three funding of $284 billion expanded on the original PPP goals of providing loans to businesses for [payroll](https://www.investopedia.com/terms/p/payroll.asp) and other costs to help them remain viable and allow their workers to pay their bills; however, those funds were depleted, and as of May 31, 2021, the PPP program was no longer available.
### Key Takeaways
* A third round of Paycheck Protection Program (PPP) loans was authorized by the passage of H.R. 133: Consolidated Appropriations Act, 2021 into law on Dec. 27, 2020.
* Based on the CARES Act, the first-draw PPP loans were available for the lesser of $10 million or 2.5 times a company's average monthly payroll.
* Second-draw loans of up to $2 million were available for businesses that had used funds in their Round 1 or Round 2 loans.
* 100% of a PPP loan could be forgiven if guidelines were followed.
* Passage of the PPP Flexibility Act of 2020 relaxed many PPP loan guidelines.
The table below outlines all three rounds of PPP loan funding.
| Round | Legislation | Funding | Expiration |
| --- | --- | --- | --- |
| 1 | H.R. 748 - CARES Act | $349 billion | Apr. 16, 2020 |
| 2 | H.R. 266 - PPP and Health Care Enhancement Act | $310 billion | Aug. 8, 2020 |
| 3 | H.R. 133 - Consolidated Appropriations Act, 2021 | $284 billion | May 31, 2021 |
Sources: U.S. Congress; Congressional Research Service; U.S. Small Business Administration
## Changes to the PPP Program Announced by the Biden Administration
On Feb. 22, 2021, the White House announced five changes to the [Paycheck Protection Program (PPP)](https://www.investopedia.com/where-ppp-money-went-5216725). One change had a set term of two weeks. The other four would be effective until at least the end of March 2021.
These changes were designed to make PPP funds available to very small businesses and others that had been inadequately helped by the program, according to the Biden administration.
* Beginning on Wed., Feb. 24, 2021, through Tue. March 9, 2021, businesses with fewer than 20 employees were permitted to apply for PPP funding.
* The formula used to calculate PPP loans was revised to provide more funding for sole proprietors, independent contractors, and self-employed individuals. An additional $1 billion was allocated for these individuals in low-and moderate-income (LMI) areas.
* Eligibility for PPP funding was extended to small business owners with non-fraud-related felonies as long as the applicant was not incarcerated at the time of the application.
* Business owners with delinquent federal student loans were eligible for a PPP loan.
* Non-citizens who were lawful U.S. residents were also eligible and allowed to use their Individual Taxpayer Identification Numbers (ITINs) to apply.
### Feb. 24, 2021
The starting date for a 14-day period, ordered by the Biden administration, during which only businesses with fewer than 20 employees could apply for a PPP loan.
## First-Draw vs. Second-Draw Loans
The CAA provided for two types of round three PPP loans. The first type was initial or first-draw loans up to $10 million for entities that had never received a PPP loan. The second type was second-draw loans of up to $2 million for entities that had received PPP loans.
Following guidance from the U.S. [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) and Treasury Department, community financial institutions including [Community Development Financial Institutions (CDFIs)](https://www.investopedia.com/terms/c/cdfi.asp) began making first-draw PPP loans on Mon., Jan. 11, and second-draw loans on Wed., Jan. 13.
Small lenders with less than $1 billion in assets were slated to begin making both first- and second-draw loans on Fri., Jan. 15.All approved PPP lenders could begin lending on Tues., Jan. 19, 2021.
## PPP Third-Round General Terms and Conditions
Both first- and second-draw PPP loans were subject (but not limited) to the same general terms and conditions as original PPP loans under the CARES Act:
* Loans were 100% guaranteed by the government.
* No collateral was required.
* No personal guarantees were required.
* The interest rate for all loans was 1% and maturity was five years.
## PPP Third-Round Eligible Entities
While there were key differences between first- and second-draw PPP loans, the types of eligible entities were the same.
* Small businesses with 500 or fewer employees (300 or fewer for second-draw loans)
* Businesses categorized as "Accommodation or Food Services" such as restaurants and hotels with 500 or fewer employees per location (300 or fewer for second-draw loans)
* Independently owned franchises
* [Self-employed](https://www.investopedia.com/terms/s/self-employed.asp#) workers, independent contractors, gig workers, and sole proprietors
* 501(c)(3) businesses or tax-exempt nonprofit organizations; tax-exempt 501(c)(19) veterans organizations; 31(b)(2)(C) tribal business concerns
* Housing cooperatives; eligible section 501(c)(6) organizations, or eligible destination marketing organizations with 300 or fewer employees
* News organizations that were majority-owned or controlled by a NAICS code 511110 or 5151 business or a nonprofit public broadcasting entity with a trade or business under NAICS 511110 or 5151 with 500 or fewer employees
* Business must have been in operation on Feb. 15, 2020
## Additional Second-Draw Requirements
Second-draw PPP loans had some restrictions that first-draw loans didn't have. Businesses couldn't receive a second-draw loan of up to $2 million unless they met the following conditions:
* They had received and used (or expected to use) all proceeds from the first-draw loan by the time they received (or expected to receive) the second-draw loan proceeds
* They had 300 or fewer employees
* They could demonstrate that they experienced a loss of at least 25% of [gross receipts](https://www.investopedia.com/terms/g/gross-receipts.asp) in any quarter during 2020 compared to the same quarter in 2019
* They spent all proceeds from their first-draw loan on eligible expenses
## Second-Draw Borrower Exclusions
Round 3 guidelines excluded businesses from a second-draw loan if a company was:
* Permanently closed
* Ineligible under existing SBA regulations
* Primarily engaged in lobbying or other political activities
* Owned by an entity created in, or with significant operations in, the People's Republic of China or the Special Administrative Region of Hong Kong
* Included a board member who was a resident of the People's Republic of China
* A recipient of a shuttered venue operator grant under Section 24 of the Act
###
On March 30, 2021, the Paycheck Protection Program Extension Act was signed into law, which gave applicants until May 31, 2021, to apply for a PPP loan, extended the covered period to June 30, 2021, and gave lenders until that date to process loans.
## Required Certifications for PPP Loans
Businesses were required to certify that pandemic-related economic uncertainty made the loan request necessary to support ongoing operations and that funds would be used as required. This included using no more than 40% for non-payroll costs. This requirement applied to both first- and second-draw PPP loans.
## Special New Set-Aside Funding
Round three included special set-aside funding for specific groups of first- and second-draw borrowers.
* $15 billion for lending by community financial institutions
* $15 billion for lending by insured depository institutions, [credit unions](https://www.investopedia.com/terms/c/creditunion.asp), and [farm credit system](https://www.investopedia.com/terms/f/farm-credit-system.asp) institutions with consolidated assets of less than $10 billion
* $35 billion for new first-draw PPP borrowers
* $15 billion and $25 billion for first-draw and second-draw PPP loans for borrowers with 10 employees or fewer, or for loans of less than $250,000 to borrowers in low-or moderate-income neighborhoods
## Application Dates for a Third-Round PPP Loan
As noted above, applications for Round three first-draw PPP loans from approved community financial institutions started Mon., Jan. 11, 2021. Second-draw applications began on Wed., Jan. 13. That was followed by first- and second-draw loans from small lenders with less than $1 billion in assets on Fri., Jan. 15, 2021. All SBA 7(a) lenders were approved to accept first and second draw applications starting on Tues., Jan. 19, 2021.
## Third-Round PPP Application Deadline
The Consolidated Appropriations Act, 2021 extended the Paycheck Protection Program through March 31, 2021 or until funds ran out. Congress extended the Paycheck Protection Program's application deadline through May 31, 2021. Once the PPP funds were exhausted by May 31, 2021, the PPP program was no longer available.
The amount of funds made available in the third round totaled $284 billion. Maximum loans of $10 million were available to first-draw borrowers, and loans up to $2 million were offered to second-draw, small business owners.
## Application Process for a Third-Round PPP Loan
New first- and second-draw loans followed a pattern similar to that followed with previous PPP loans. Business owners could download and fill out the loan application from the SBA website.
Both the first-draw application and second-draw application were seven pages long, including instructions.
## Covered Period for Third-Round PPP
Round one and Round two PPP loans stipulated that the period during which a business had to use its loan proceeds (the covered period) was an eight-week period beginning on the date the business received its loan proceeds. That was later expanded to 24 weeks.
Round three allowed a business to choose any length period between eight weeks and 24 weeks, giving it more control over how to handle any needed reductions in a workforce, once PPP funds were depleted.
### 60%
The percentage of both first- and second-draw PPP loans that had to be used for payroll expenses.
## Use of Third-Round PPP Funds
The CAA expanded the types of expenses for which a business could use Round 3 PPP funds. This also applied to existing PPP loan funds (unless the business already had obtained forgiveness).
In addition to payroll, rent, covered [mortgage interest](https://www.investopedia.com/terms/m/mortgageinterest.asp), and utilities, the Paycheck Protection Program allowed a business to use loan proceeds for:
* **Certain operations expenses** includingbusiness software; business-related cloud computing services; product or service delivery; payroll processing, payment, and tracking costs; HR and billing functions; tracking of supplies, inventory, records, and expenses
* **Covered property damage costs** including costs related to damage or vandalism caused by looting or public disturbances in 2020 that were not covered by insurance or other compensation
* **Listed supplier costs** including payments to a supplier of goods that were essential to operations and made pursuant to a contract or order in effect at any time before the covered period or, with respect to perishable goods, in effect at any time during the covered period
* **Covered worker protection expenses** including operating or capital expenditures required to comply with requirements or guidance issued by the CDC, HHS, OSHA, or any state or local government during the period beginning March 1, 2020, and ending on the date when the national emergency expired
## Tax Treatment of Third-Round PPP Loans
Round three PPP loans were not included in a company's [taxable income](https://www.investopedia.com/terms/t/taxableincome.asp). If a loan was forgiven, expenses paid with the proceeds of the loan were tax-deductible. Further, this rule applied to new, existing, and previous PPP loans. In addition, any income tax basis increase that resulted from a PPP loan remained even if the PPP loan was eventually forgiven.
Any PPP loans that were wrongfully forgiven either due to omission or misrepresentation by the taxpayer will be treated as taxable income, as the IRS announced in August 2022. The IRS is encouraging anyone to whom this guidance applies to, if necessary, file an amended return.
## What Was the Total Amount of Funding for the Paycheck Protection Program Loans?
Total funding for PPP loans included $349 billion appropriated by the CARES Act, $310 billion from the PPP and Health Care Enhancement Act, and $284 billion from the Consolidated Appropriations Act (CAA).
## Are PPP Loans Still Available?
No. The Paycheck Protection Program ended May 31, 2021 after all funding was exhausted. To date there have been no further allocations to the PPP.
## Were Round 3 PPP Loans to Be Used Exclusively for Payroll?
No. PPP loan recipients could use up to 40% of loan proceeds for non-payroll costs, although the list of authorized uses did limit non-payroll spending.
## The Bottom Line
On Dec. 27, 2020, the Consolidated Appropriations Act, 2021 became law, which included new funding for the Paycheck Protection Program (PPP), which had expired on Aug. 8, 2020. The PPP was established to help businesses during times of financial difficulty caused by the COVID-19 pandemic.
| The Consolidated Appropriations Act of 2021 (CAA) was signed into law on Dec. 27, 2020 and included new funding for the Paycheck Protection Program (PPP), which expired on Aug. 8, 2020.
The PPP was a U.S. loan program established to help small businesses affected by the economic slowdown associated with the COVID pandemic to pay the wages of employees and certain other expenses. It was created by the CARES Act and originally included $349 billion in funding; however, that money was gone within two weeks, resulting in the second round of funding totaling $310 billion.
After round two loans ended in August of 2020, the Consolidated Appropriations Act of 2021 (CAA) authorized the third round of PPP loans. Round three funding of $284 billion expanded on the original PPP goals of providing loans to businesses for payroll and other costs to help them remain viable and allow their workers to pay their bills; however, those funds were depleted, and as of May 31, 2021, the PPP program was no longer available.
Key Takeaways
A third round of Paycheck Protection Program (PPP) loans was authorized by the passage of H.R. 133: Consolidated Appropriations Act, 2021 into law on Dec. 27, 2020.Based on the CARES Act, the first-draw PPP loans were available for the lesser of $10 million or 2.5 times a company's average monthly payroll.Second-draw loans of up to $2 million were available for businesses that had used funds in their Round 1 or Round 2 loans.100% of a PPP loan could be forgiven if guidelines were followed.Passage of the PPP Flexibility Act of 2020 relaxed many PPP loan guidelines.
The table below outlines all three rounds of PPP loan funding.
Round
Legislation
Funding
Expiration
1
H.R. 748 - CARES Act
$349 billion
Apr. 16, 2020
2
H.R. 266 - PPP and Health Care Enhancement Act
$310 billion
Aug. 8, 2020
3
H.R. 133 - Consolidated Appropriations Act, 2021
$284 billion
May 31, 2021
Sources: U.S. Congress; Congressional Research Service; U.S. Small Business Administration
Changes to the PPP Program Announced by the Biden Administration
On Feb. 22, 2021, the White House announced five changes to the Paycheck Protection Program (PPP). One change had a set term of two weeks. The other four would be effective until at least the end of March 2021.
These changes were designed to make PPP funds available to very small businesses and others that had been inadequately helped by the program, according to the Biden administration.
Beginning on Wed., Feb. 24, 2021, through Tue. March 9, 2021, businesses with fewer than 20 employees were permitted to apply for PPP funding.The formula used to calculate PPP loans was revised to provide more funding for sole proprietors, independent contractors, and self-employed individuals. An additional $1 billion was allocated for these individuals in low-and moderate-income (LMI) areas.Eligibility for PPP funding was extended to small business owners with non-fraud-related felonies as long as the applicant was not incarcerated at the time of the application.Business owners with delinquent federal student loans were eligible for a PPP loan.Non-citizens who were lawful U.S. residents were also eligible and allowed to use their Individual Taxpayer Identification Numbers (ITINs) to apply.
Feb. 24, 2021
The starting date for a 14-day period, ordered by the Biden administration, during which only businesses with fewer than 20 employees could apply for a PPP loan.
First-Draw vs. Second-Draw Loans
The CAA provided for two types of round three PPP loans. The first type was initial or first-draw loans up to $10 million for entities that had never received a PPP loan. The second type was second-draw loans of up to $2 million for entities that had received PPP loans.
Following guidance from the U.S. Small Business Administration (SBA) and Treasury Department, community financial institutions including Community Development Financial Institutions (CDFIs) began making first-draw PPP loans on Mon., Jan. 11, and second-draw loans on Wed., Jan. 13.
Small lenders with less than $1 billion in assets were slated to begin making both first- and second-draw loans on Fri., Jan. 15. All approved PPP lenders could begin lending on Tues., Jan. 19, 2021.
PPP Third-Round General Terms and Conditions
Both first- and second-draw PPP loans were subject (but not limited) to the same general terms and conditions as original PPP loans under the CARES Act:
Loans were 100% guaranteed by the government.No collateral was required.No personal guarantees were required.The interest rate for all loans was 1% and maturity was five years.
PPP Third-Round Eligible Entities
While there were key differences between first- and second-draw PPP loans, the types of eligible entities were the same.
Small businesses with 500 or fewer employees (300 or fewer for second-draw loans)
Businesses categorized as "Accommodation or Food Services" such as restaurants and hotels with 500 or fewer employees per location (300 or fewer for second-draw loans)
Independently owned franchises
Self-employed workers, independent contractors, gig workers, and sole proprietors
501(c)(3) businesses or tax-exempt nonprofit organizations; tax-exempt 501(c)(19) veterans organizations; 31(b)(2)(C) tribal business concerns
Housing cooperatives; eligible section 501(c)(6) organizations, or eligible destination marketing organizations with 300 or fewer employees
News organizations that were majority-owned or controlled by a NAICS code 511110 or 5151 business or a nonprofit public broadcasting entity with a trade or business under NAICS 511110 or 5151 with 500 or fewer employees
Business must have been in operation on Feb. 15, 2020
Additional Second-Draw Requirements
Second-draw PPP loans had some restrictions that first-draw loans didn't have. Businesses couldn't receive a second-draw loan of up to $2 million unless they met the following conditions:
They had received and used (or expected to use) all proceeds from the first-draw loan by the time they received (or expected to receive) the second-draw loan proceeds
They had 300 or fewer employees
They could demonstrate that they experienced a loss of at least 25% of gross receipts in any quarter during 2020 compared to the same quarter in 2019
They spent all proceeds from their first-draw loan on eligible expenses
Second-Draw Borrower Exclusions
Round 3 guidelines excluded businesses from a second-draw loan if a company was:
Permanently closedIneligible under existing SBA regulationsPrimarily engaged in lobbying or other political activitiesOwned by an entity created in, or with significant operations in, the People's Republic of China or the Special Administrative Region of Hong KongIncluded a board member who was a resident of the People's Republic of ChinaA recipient of a shuttered venue operator grant under Section 24 of the Act
On March 30, 2021, the Paycheck Protection Program Extension Act was signed into law, which gave applicants until May 31, 2021, to apply for a PPP loan, extended the covered period to June 30, 2021, and gave lenders until that date to process loans.
Required Certifications for PPP Loans
Businesses were required to certify that pandemic-related economic uncertainty made the loan request necessary to support ongoing operations and that funds would be used as required. This included using no more than 40% for non-payroll costs. This requirement applied to both first- and second-draw PPP loans.
Special New Set-Aside Funding
Round three included special set-aside funding for specific groups of first- and second-draw borrowers.
$15 billion for lending by community financial institutions
$15 billion for lending by insured depository institutions, credit unions, and farm credit system institutions with consolidated assets of less than $10 billion
$35 billion for new first-draw PPP borrowers
$15 billion and $25 billion for first-draw and second-draw PPP loans for borrowers with 10 employees or fewer, or for loans of less than $250,000 to borrowers in low-or moderate-income neighborhoods
Application Dates for a Third-Round PPP Loan
As noted above, applications for Round three first-draw PPP loans from approved community financial institutions started Mon., Jan. 11, 2021. Second-draw applications began on Wed., Jan. 13. That was followed by first- and second-draw loans from small lenders with less than $1 billion in assets on Fri., Jan. 15, 2021. All SBA 7(a) lenders were approved to accept first and second draw applications starting on Tues., Jan. 19, 2021.
Third-Round PPP Application Deadline
The Consolidated Appropriations Act, 2021 extended the Paycheck Protection Program through March 31, 2021 or until funds ran out. Congress extended the Paycheck Protection Program's application deadline through May 31, 2021. Once the PPP funds were exhausted by May 31, 2021, the PPP program was no longer available.
The amount of funds made available in the third round totaled $284 billion. Maximum loans of $10 million were available to first-draw borrowers, and loans up to $2 million were offered to second-draw, small business owners.
Application Process for a Third-Round PPP Loan
New first- and second-draw loans followed a pattern similar to that followed with previous PPP loans. Business owners could download and fill out the loan application from the SBA website.
Both the first-draw application and second-draw application were seven pages long, including instructions.
Covered Period for Third-Round PPP
Round one and Round two PPP loans stipulated that the period during which a business had to use its loan proceeds (the covered period) was an eight-week period beginning on the date the business received its loan proceeds. That was later expanded to 24 weeks.
Round three allowed a business to choose any length period between eight weeks and 24 weeks, giving it more control over how to handle any needed reductions in a workforce, once PPP funds were depleted.
60%
The percentage of both first- and second-draw PPP loans that had to be used for payroll expenses.
Use of Third-Round PPP Funds
The CAA expanded the types of expenses for which a business could use Round 3 PPP funds. This also applied to existing PPP loan funds (unless the business already had obtained forgiveness).
In addition to payroll, rent, covered mortgage interest, and utilities, the Paycheck Protection Program allowed a business to use loan proceeds for:
Certain operations expenses including business software; business-related cloud computing services; product or service delivery; payroll processing, payment, and tracking costs; HR and billing functions; tracking of supplies, inventory, records, and expensesCovered property damage costs including costs related to damage or vandalism caused by looting or public disturbances in 2020 that were not covered by insurance or other compensationListed supplier costs including payments to a supplier of goods that were essential to operations and made pursuant to a contract or order in effect at any time before the covered period or, with respect to perishable goods, in effect at any time during the covered periodCovered worker protection expenses including operating or capital expenditures required to comply with requirements or guidance issued by the CDC, HHS, OSHA, or any state or local government during the period beginning March 1, 2020, and ending on the date when the national emergency expired
Tax Treatment of Third-Round PPP Loans
Round three PPP loans were not included in a company's taxable income. If a loan was forgiven, expenses paid with the proceeds of the loan were tax-deductible. Further, this rule applied to new, existing, and previous PPP loans. In addition, any income tax basis increase that resulted from a PPP loan remained even if the PPP loan was eventually forgiven.
Any PPP loans that were wrongfully forgiven either due to omission or misrepresentation by the taxpayer will be treated as taxable income, as the IRS announced in August 2022. The IRS is encouraging anyone to whom this guidance applies to, if necessary, file an amended return.
What Was the Total Amount of Funding for the Paycheck Protection Program Loans?
Total funding for PPP loans included $349 billion appropriated by the CARES Act, $310 billion from the PPP and Health Care Enhancement Act, and $284 billion from the Consolidated Appropriations Act (CAA).
Are PPP Loans Still Available?
No. The Paycheck Protection Program ended May 31, 2021 after all funding was exhausted. To date there have been no further allocations to the PPP.
Were Round 3 PPP Loans to Be Used Exclusively for Payroll?
No. PPP loan recipients could use up to 40% of loan proceeds for non-payroll costs, although the list of authorized uses did limit non-payroll spending.
The Bottom Line
On Dec. 27, 2020, the Consolidated Appropriations Act, 2021 became law, which included new funding for the Paycheck Protection Program (PPP), which had expired on Aug. 8, 2020. The PPP was established to help businesses during times of financial difficulty caused by the COVID-19 pandemic.
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],
[
"Self-employed",
"https://www.investopedia.com/terms/s/self-employed.asp#"
],
[
"gross receipts",
"https://www.investopedia.com/terms/g/gross-receipts.asp"
],
[
"credit unions",
"https://www.investopedia.com/terms/c/creditunion.asp"
],
[
"farm credit system",
"https://www.investopedia.com/terms/f/farm-credit-system.asp"
],
[
"mortgage interest",
"https://www.investopedia.com/terms/m/mortgageinterest.asp"
],
[
"taxable income",
"https://www.investopedia.com/terms/t/taxableincome.asp"
]
] |
https://www.investopedia.com/small-business/protect-small-business-getting-sued/ | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> As a business owner, you likely do everything in your power to limit risk and keep your business running smoothly. But no one can control every eventuality, including the possibility that you might one day face a lawsuit. However, there are some actions you can take today to protect your company from being sued tomorrow. Here are five important ones.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Small businesses can be sued for a variety of reasons and need to take steps in advance to lessen the likelihood of that happening.</li><li>Businesses should retain an attorney who knows the laws where they operate.</li><li>Some business structures, such as limited liability companies, can help safeguard their owners' personal assets in the event of a lawsuit.</li><li>Businesses can also purchase liability insurance to protect themselves.</li><li>Businesses should take measures to protect their computer systems from hacking and viruses, which can disrupt operations and lead to lawsuits.</li></ul></div></div></div>
<span class="heading-toc" id="toc-1-watch-what-you-say-and-do"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> 1. Watch What You Say and Do </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> In conducting your day-to-day business, you and your employees should be careful about making any public statements that might be construed as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/libel.asp">libelous or slanderous</a>. Similarly, doing business with possibly unscrupulous individuals, even if your behavior is totally above board, could get you caught up in a situation resulting in a lawsuit.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> You and your employees should also try to avoid any potential <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/conflict-of-interest.asp">conflicts of interest</a>. Even the appearance of a conflict of interest can damage the reputation of your business and land you in legal hot water. For example, sitting on the town council and helping pass an ordinance that benefits your business would seem to be a conflict of interest, even if you didn't cast your vote with any benefit for your company in mind.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div>
<span class="heading-toc" id="toc-2-hire-a-competent-attorney"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> 2. Hire a Competent Attorney </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> It's always a good idea to have legal counsel on standby. You may need a lawyer to advise you before you take a particular action—or to recommend the steps to take if you happen to be sued.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> You'll be best served by an attorney who is familiar with the local laws and customs where your business operates. If you anticipate legal challenges from the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp">Internal Revenue Service</a> (IRS) or a state tax department, it may make sense to hire a tax attorney.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> If you don't already have an attorney, ask other business owners for referrals. You can also solicit recommendations from any professional organizations you belong to or your local chamber of commerce.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div>
<span class="heading-toc" id="toc-3-consider-your-business-structure"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> 3. Consider Your Business Structure </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Many entrepreneurs own and operate their businesses as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/soleproprietorship.asp">sole proprietorships</a>. This can be risky if your business is sued because an owner's individual assets (for example, cars or a home) are fairly easy to attack or attach in a court of law.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> One way to limit the possibility that your personal assets will be the target of a suit is to have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trust.asp">trust</a> own the business. A trust is a legal entity that, in most cases, files its own tax return and can own property, businesses, cash, securities, and a host of other assets.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> If a properly established trust owns a business and the business is sued, in most cases the only assets that can be attacked or attached in a court of law are those that are in the trust itself.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Establishing your business as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/llc.asp">limited liability company (LLC)</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/subchapters.asp">S corporation</a> can also create a shield between your personal assets and your company's liability in the event of a lawsuit. The downside is that LLCs and S corps are more complicated and costly to set up and run than sole proprietorships.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div>
<span class="heading-toc" id="toc-4-insure-yourself"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> 4. Insure Yourself </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> All businesses should obtain <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liability_insurance.asp">liability insurance</a>—just in case, for example, a customer slips and falls in your place of business. Certain professionals, such as insurance agents and consultants, should also consider obtaining <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/errors-omissions-insurance.asp">errors and omissions insurance</a> (E&O) to ensure their business is protected if a customer or client accuses the owner of making an error or not living up to a contract.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> In addition to purchasing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-legal-expense-insurance.asp">insurance</a>, you can build liability protection into your contracts. If an act of nature, a particular supplier, or some other uncontrollable act could make it impossible for you to fulfill a contract (thus exposing you to legal action), you should include in that contract that you are not liable for incomplete work due to these factors.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Discussing with your lawyer the possible clauses and legal phrases you will need in your work contracts can reduce your need for a lawyer later on.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_33-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_34-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>If the business has a formal board of directors, it may also make sense to buy <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/directors-and-officers-liability-insurance.asp">directors and officers (D&O) insurance</a> to protect the directors' personal assets in the event of a suit.</p></div></div></div>
<span class="heading-toc" id="toc-5-protect-your-files-and-computer-system"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> 5. Protect Your Files and Computer System </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Most businesses these days work extensively on computers, which requires taking the necessary steps to protect your data from prying eyes. That means, for example, installing antivirus and other types of security software and keeping them up to date.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> If a hacker or virus were to bring down your computer system, you could be unable to perform work you have contracted for by the agreed-upon deadlines. Also, key files could be lost or stolen, which could lead to legal action from clients and/or suppliers whose information has been compromised.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Make sure you have a set of backed-up files to refer to in the event of a massive technological breakdown. This could mean performing monthly, weekly, or even daily backups and storing them safely in another location.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-what-percentage-of-small-businesses-get-sued"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Percentage of Small Businesses Get Sued?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>The Zebra, an insurance comparison site, maintains that 36% to 53% of small businesses are sued every year and 43% of them are threatened with lawsuits. It also estimates that 90% of all businesses are sued at least once during their existence.<span class="ql-inline-citation" data-cite="1"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-what-should-i-do-if-my-business-is-sued"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Should I Do If My Business Is Sued?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>If your business is sued you should first contact a lawyer and your insurance company. Experts commonly advise that you not try to represent yourself, respond to the suit yourself, or ignore it altogether. An experienced lawyer can help guide you through the process.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_46-0"><span class="heading-toc" id="toc-how-much-does-liability-insurance-cost"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Does Liability Insurance Cost?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>While costs can vary widely by the type and size of business, the trade publication Insurance Business reported in 2023 that the cost of a general liability insurance policy for a small business averaged about $40 to $55 a month, or $480 to $660 a year.<span class="ql-inline-citation" data-cite="2"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Small business owners can protect themselves against the potentially catastrophic financial consequences of a lawsuit by taking some basic preventative measures beforehand. Even if they are unable to able to eliminate the risk entirely, they will be better positioned to deal with a lawsuit should one ever happen.
</p></div> | As a business owner, you likely do everything in your power to limit risk and keep your business running smoothly. But no one can control every eventuality, including the possibility that you might one day face a lawsuit. However, there are some actions you can take today to protect your company from being sued tomorrow. Here are five important ones.
### Key Takeaways
* Small businesses can be sued for a variety of reasons and need to take steps in advance to lessen the likelihood of that happening.
* Businesses should retain an attorney who knows the laws where they operate.
* Some business structures, such as limited liability companies, can help safeguard their owners' personal assets in the event of a lawsuit.
* Businesses can also purchase liability insurance to protect themselves.
* Businesses should take measures to protect their computer systems from hacking and viruses, which can disrupt operations and lead to lawsuits.
## 1. Watch What You Say and Do
In conducting your day-to-day business, you and your employees should be careful about making any public statements that might be construed as [libelous or slanderous](https://www.investopedia.com/terms/l/libel.asp). Similarly, doing business with possibly unscrupulous individuals, even if your behavior is totally above board, could get you caught up in a situation resulting in a lawsuit.
You and your employees should also try to avoid any potential [conflicts of interest](https://www.investopedia.com/terms/c/conflict-of-interest.asp). Even the appearance of a conflict of interest can damage the reputation of your business and land you in legal hot water. For example, sitting on the town council and helping pass an ordinance that benefits your business would seem to be a conflict of interest, even if you didn't cast your vote with any benefit for your company in mind.
## 2. Hire a Competent Attorney
It's always a good idea to have legal counsel on standby. You may need a lawyer to advise you before you take a particular action—or to recommend the steps to take if you happen to be sued.
You'll be best served by an attorney who is familiar with the local laws and customs where your business operates. If you anticipate legal challenges from the [Internal Revenue Service](https://www.investopedia.com/terms/i/irs.asp) (IRS) or a state tax department, it may make sense to hire a tax attorney.
If you don't already have an attorney, ask other business owners for referrals. You can also solicit recommendations from any professional organizations you belong to or your local chamber of commerce.
## 3. Consider Your Business Structure
Many entrepreneurs own and operate their businesses as [sole proprietorships](https://www.investopedia.com/terms/s/soleproprietorship.asp). This can be risky if your business is sued because an owner's individual assets (for example, cars or a home) are fairly easy to attack or attach in a court of law.
One way to limit the possibility that your personal assets will be the target of a suit is to have a [trust](https://www.investopedia.com/terms/t/trust.asp) own the business. A trust is a legal entity that, in most cases, files its own tax return and can own property, businesses, cash, securities, and a host of other assets.
If a properly established trust owns a business and the business is sued, in most cases the only assets that can be attacked or attached in a court of law are those that are in the trust itself.
Establishing your business as a [limited liability company (LLC)](https://www.investopedia.com/terms/l/llc.asp) or [S corporation](https://www.investopedia.com/terms/s/subchapters.asp) can also create a shield between your personal assets and your company's liability in the event of a lawsuit. The downside is that LLCs and S corps are more complicated and costly to set up and run than sole proprietorships.
## 4. Insure Yourself
All businesses should obtain [liability insurance](https://www.investopedia.com/terms/l/liability_insurance.asp)—just in case, for example, a customer slips and falls in your place of business. Certain professionals, such as insurance agents and consultants, should also consider obtaining [errors and omissions insurance](https://www.investopedia.com/terms/e/errors-omissions-insurance.asp) (E&O) to ensure their business is protected if a customer or client accuses the owner of making an error or not living up to a contract.
In addition to purchasing [insurance](https://www.investopedia.com/terms/b/business-legal-expense-insurance.asp), you can build liability protection into your contracts. If an act of nature, a particular supplier, or some other uncontrollable act could make it impossible for you to fulfill a contract (thus exposing you to legal action), you should include in that contract that you are not liable for incomplete work due to these factors.
Discussing with your lawyer the possible clauses and legal phrases you will need in your work contracts can reduce your need for a lawyer later on.
###
If the business has a formal board of directors, it may also make sense to buy [directors and officers (D&O) insurance](https://www.investopedia.com/terms/d/directors-and-officers-liability-insurance.asp) to protect the directors' personal assets in the event of a suit.
## 5. Protect Your Files and Computer System
Most businesses these days work extensively on computers, which requires taking the necessary steps to protect your data from prying eyes. That means, for example, installing antivirus and other types of security software and keeping them up to date.
If a hacker or virus were to bring down your computer system, you could be unable to perform work you have contracted for by the agreed-upon deadlines. Also, key files could be lost or stolen, which could lead to legal action from clients and/or suppliers whose information has been compromised.
Make sure you have a set of backed-up files to refer to in the event of a massive technological breakdown. This could mean performing monthly, weekly, or even daily backups and storing them safely in another location.
## What Percentage of Small Businesses Get Sued?
The Zebra, an insurance comparison site, maintains that 36% to 53% of small businesses are sued every year and 43% of them are threatened with lawsuits. It also estimates that 90% of all businesses are sued at least once during their existence.
## What Should I Do If My Business Is Sued?
If your business is sued you should first contact a lawyer and your insurance company. Experts commonly advise that you not try to represent yourself, respond to the suit yourself, or ignore it altogether. An experienced lawyer can help guide you through the process.
## How Much Does Liability Insurance Cost?
While costs can vary widely by the type and size of business, the trade publication Insurance Business reported in 2023 that the cost of a general liability insurance policy for a small business averaged about $40 to $55 a month, or $480 to $660 a year.
## The Bottom Line
Small business owners can protect themselves against the potentially catastrophic financial consequences of a lawsuit by taking some basic preventative measures beforehand. Even if they are unable to able to eliminate the risk entirely, they will be better positioned to deal with a lawsuit should one ever happen.
| As a business owner, you likely do everything in your power to limit risk and keep your business running smoothly. But no one can control every eventuality, including the possibility that you might one day face a lawsuit. However, there are some actions you can take today to protect your company from being sued tomorrow. Here are five important ones.
Key Takeaways
Small businesses can be sued for a variety of reasons and need to take steps in advance to lessen the likelihood of that happening.Businesses should retain an attorney who knows the laws where they operate.Some business structures, such as limited liability companies, can help safeguard their owners' personal assets in the event of a lawsuit.Businesses can also purchase liability insurance to protect themselves.Businesses should take measures to protect their computer systems from hacking and viruses, which can disrupt operations and lead to lawsuits.
1. Watch What You Say and Do
In conducting your day-to-day business, you and your employees should be careful about making any public statements that might be construed as libelous or slanderous. Similarly, doing business with possibly unscrupulous individuals, even if your behavior is totally above board, could get you caught up in a situation resulting in a lawsuit.
You and your employees should also try to avoid any potential conflicts of interest. Even the appearance of a conflict of interest can damage the reputation of your business and land you in legal hot water. For example, sitting on the town council and helping pass an ordinance that benefits your business would seem to be a conflict of interest, even if you didn't cast your vote with any benefit for your company in mind.
2. Hire a Competent Attorney
It's always a good idea to have legal counsel on standby. You may need a lawyer to advise you before you take a particular action—or to recommend the steps to take if you happen to be sued.
You'll be best served by an attorney who is familiar with the local laws and customs where your business operates. If you anticipate legal challenges from the Internal Revenue Service (IRS) or a state tax department, it may make sense to hire a tax attorney.
If you don't already have an attorney, ask other business owners for referrals. You can also solicit recommendations from any professional organizations you belong to or your local chamber of commerce.
3. Consider Your Business Structure
Many entrepreneurs own and operate their businesses as sole proprietorships. This can be risky if your business is sued because an owner's individual assets (for example, cars or a home) are fairly easy to attack or attach in a court of law.
One way to limit the possibility that your personal assets will be the target of a suit is to have a trust own the business. A trust is a legal entity that, in most cases, files its own tax return and can own property, businesses, cash, securities, and a host of other assets.
If a properly established trust owns a business and the business is sued, in most cases the only assets that can be attacked or attached in a court of law are those that are in the trust itself.
Establishing your business as a limited liability company (LLC) or S corporation can also create a shield between your personal assets and your company's liability in the event of a lawsuit. The downside is that LLCs and S corps are more complicated and costly to set up and run than sole proprietorships.
4. Insure Yourself
All businesses should obtain liability insurance—just in case, for example, a customer slips and falls in your place of business. Certain professionals, such as insurance agents and consultants, should also consider obtaining errors and omissions insurance (E&O) to ensure their business is protected if a customer or client accuses the owner of making an error or not living up to a contract.
In addition to purchasing insurance, you can build liability protection into your contracts. If an act of nature, a particular supplier, or some other uncontrollable act could make it impossible for you to fulfill a contract (thus exposing you to legal action), you should include in that contract that you are not liable for incomplete work due to these factors.
Discussing with your lawyer the possible clauses and legal phrases you will need in your work contracts can reduce your need for a lawyer later on.
If the business has a formal board of directors, it may also make sense to buy directors and officers (D&O) insurance to protect the directors' personal assets in the event of a suit.
5. Protect Your Files and Computer System
Most businesses these days work extensively on computers, which requires taking the necessary steps to protect your data from prying eyes. That means, for example, installing antivirus and other types of security software and keeping them up to date.
If a hacker or virus were to bring down your computer system, you could be unable to perform work you have contracted for by the agreed-upon deadlines. Also, key files could be lost or stolen, which could lead to legal action from clients and/or suppliers whose information has been compromised.
Make sure you have a set of backed-up files to refer to in the event of a massive technological breakdown. This could mean performing monthly, weekly, or even daily backups and storing them safely in another location.
What Percentage of Small Businesses Get Sued?
The Zebra, an insurance comparison site, maintains that 36% to 53% of small businesses are sued every year and 43% of them are threatened with lawsuits. It also estimates that 90% of all businesses are sued at least once during their existence.
What Should I Do If My Business Is Sued?
If your business is sued you should first contact a lawyer and your insurance company. Experts commonly advise that you not try to represent yourself, respond to the suit yourself, or ignore it altogether. An experienced lawyer can help guide you through the process.
How Much Does Liability Insurance Cost?
While costs can vary widely by the type and size of business, the trade publication Insurance Business reported in 2023 that the cost of a general liability insurance policy for a small business averaged about $40 to $55 a month, or $480 to $660 a year.
The Bottom Line
Small business owners can protect themselves against the potentially catastrophic financial consequences of a lawsuit by taking some basic preventative measures beforehand. Even if they are unable to able to eliminate the risk entirely, they will be better positioned to deal with a lawsuit should one ever happen.
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https://www.investopedia.com/terms/i/invoice-financing.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-invoice-financing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What is Invoice Financing? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Invoice financing is a way for businesses to borrow money against the amounts due from customers. Invoice financing helps businesses improve cash flow, pay employees and suppliers, and reinvest in operations and growth earlier than they could if they had to wait until their customers paid their balances in full. Businesses pay a percentage of the invoice amount to the lender as a fee for borrowing the money. Invoice financing can solve problems associated with customers taking a long time to pay as well as difficulties obtaining other types of business credit.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Invoice financing is also known as "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accountsreceivablefinancing.asp">accounts receivable financing</a>" or simply "receivables financing."
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div>
<span class="heading-toc" id="toc-understanding-invoice-financing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding Invoice Financing </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> When businesses sell goods or services to large customers, such as wholesalers or retailers, they usually do so on credit. This means that the customer does not have to pay immediately for the goods that it purchases. The purchasing company is given an invoice that has the total amount due and the bill's due date. However, offering credit to clients ties up funds that a business might otherwise use to invest or grow its operations. To finance slow-paying <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accountsreceivable.asp">accounts receivable</a> or to meet short-term liquidity, businesses may opt to finance their invoices.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Invoice financing is a form of short-term borrowing that is extended by a lender to its business customers based on unpaid invoices. Through invoice factoring, a company sells its accounts receivable to improve its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/workingcapital.asp">working capital</a>, which would provide the business with immediate funds that can be used to pay for company expenses.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_11-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_12-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Invoice financing allows a business to use its unpaid invoices as collateral for financing.</li><li>A company may use invoice financing to improve cash flow for operational needs or speed up expansion and investment plans.</li><li>Invoice financing can be structured so that the business' customer is unaware that their invoice has been financed or it can be explicitly managed by the lender. </li></ul></div></div></div>
<span class="heading-toc" id="toc-invoice-financing-from-the-lenders-perspective"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-heading__text"> Invoice Financing From the Lender's Perspective </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Invoice financing benefits lenders because, unlike extending a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lineofcredit.asp">line of credit</a>, which may be <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unsecured.asp">unsecured</a> and leave little recourse if the business does not repay what it borrows, invoices act as <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collateral.asp">collateral</a> for invoice financing. The lender also limits its risk by not advancing 100% of the invoice amount to the borrowing business. Invoice financing does not eliminate all risk, though, since the customer might never pay the invoice. This would result in a difficult and expensive collections process involving both the bank and the business doing invoice financing with the bank.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div>
<span class="heading-toc" id="toc-how-invoice-financing-is-structured"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> How Invoice Financing is Structured </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Invoice financing can be structured in a number of ways, most commonly via factoring or discounting. With invoice factoring, the company sells its outstanding invoices to a lender, who might pay the company 70% to 85% up front of what the invoices are ultimately worth. Assuming the lender receives full payment for the invoices, it will then remit the remaining 15% to 30% of the invoice amounts to the business, and the business will pay interest and/or fees for the service. Since the lender collects payments from the customers, the customers will be aware of this arrangement, which might reflect poorly on the business.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> As an alternative, a business could use invoice discounting, which is similar to invoice factoring except that the business, not the lender, collects payments from customers, so customers are not aware of the arrangement. With invoice discounting, the lender will advance the business up to 95% of the invoice amount. When clients pay their invoices, the business repays the lender, minus a fee or interest.
</p></div> | ## What is Invoice Financing?
Invoice financing is a way for businesses to borrow money against the amounts due from customers. Invoice financing helps businesses improve cash flow, pay employees and suppliers, and reinvest in operations and growth earlier than they could if they had to wait until their customers paid their balances in full. Businesses pay a percentage of the invoice amount to the lender as a fee for borrowing the money. Invoice financing can solve problems associated with customers taking a long time to pay as well as difficulties obtaining other types of business credit.
Invoice financing is also known as "[accounts receivable financing](https://www.investopedia.com/terms/a/accountsreceivablefinancing.asp)" or simply "receivables financing."
## Understanding Invoice Financing
When businesses sell goods or services to large customers, such as wholesalers or retailers, they usually do so on credit. This means that the customer does not have to pay immediately for the goods that it purchases. The purchasing company is given an invoice that has the total amount due and the bill's due date. However, offering credit to clients ties up funds that a business might otherwise use to invest or grow its operations. To finance slow-paying [accounts receivable](https://www.investopedia.com/terms/a/accountsreceivable.asp) or to meet short-term liquidity, businesses may opt to finance their invoices.
Invoice financing is a form of short-term borrowing that is extended by a lender to its business customers based on unpaid invoices. Through invoice factoring, a company sells its accounts receivable to improve its [working capital](https://www.investopedia.com/terms/w/workingcapital.asp), which would provide the business with immediate funds that can be used to pay for company expenses.
### Key Takeaways
* Invoice financing allows a business to use its unpaid invoices as collateral for financing.
* A company may use invoice financing to improve cash flow for operational needs or speed up expansion and investment plans.
* Invoice financing can be structured so that the business' customer is unaware that their invoice has been financed or it can be explicitly managed by the lender.
## Invoice Financing From the Lender's Perspective
Invoice financing benefits lenders because, unlike extending a [line of credit](https://www.investopedia.com/terms/l/lineofcredit.asp), which may be [unsecured](https://www.investopedia.com/terms/u/unsecured.asp) and leave little recourse if the business does not repay what it borrows, invoices act as [collateral](https://www.investopedia.com/terms/c/collateral.asp) for invoice financing. The lender also limits its risk by not advancing 100% of the invoice amount to the borrowing business. Invoice financing does not eliminate all risk, though, since the customer might never pay the invoice. This would result in a difficult and expensive collections process involving both the bank and the business doing invoice financing with the bank.
## How Invoice Financing is Structured
Invoice financing can be structured in a number of ways, most commonly via factoring or discounting. With invoice factoring, the company sells its outstanding invoices to a lender, who might pay the company 70% to 85% up front of what the invoices are ultimately worth. Assuming the lender receives full payment for the invoices, it will then remit the remaining 15% to 30% of the invoice amounts to the business, and the business will pay interest and/or fees for the service. Since the lender collects payments from the customers, the customers will be aware of this arrangement, which might reflect poorly on the business.
As an alternative, a business could use invoice discounting, which is similar to invoice factoring except that the business, not the lender, collects payments from customers, so customers are not aware of the arrangement. With invoice discounting, the lender will advance the business up to 95% of the invoice amount. When clients pay their invoices, the business repays the lender, minus a fee or interest.
| What is Invoice Financing?
Invoice financing is a way for businesses to borrow money against the amounts due from customers. Invoice financing helps businesses improve cash flow, pay employees and suppliers, and reinvest in operations and growth earlier than they could if they had to wait until their customers paid their balances in full. Businesses pay a percentage of the invoice amount to the lender as a fee for borrowing the money. Invoice financing can solve problems associated with customers taking a long time to pay as well as difficulties obtaining other types of business credit.
Invoice financing is also known as "accounts receivable financing" or simply "receivables financing."
Understanding Invoice Financing
When businesses sell goods or services to large customers, such as wholesalers or retailers, they usually do so on credit. This means that the customer does not have to pay immediately for the goods that it purchases. The purchasing company is given an invoice that has the total amount due and the bill's due date. However, offering credit to clients ties up funds that a business might otherwise use to invest or grow its operations. To finance slow-paying accounts receivable or to meet short-term liquidity, businesses may opt to finance their invoices.
Invoice financing is a form of short-term borrowing that is extended by a lender to its business customers based on unpaid invoices. Through invoice factoring, a company sells its accounts receivable to improve its working capital, which would provide the business with immediate funds that can be used to pay for company expenses.
Key Takeaways
Invoice financing allows a business to use its unpaid invoices as collateral for financing.A company may use invoice financing to improve cash flow for operational needs or speed up expansion and investment plans.Invoice financing can be structured so that the business' customer is unaware that their invoice has been financed or it can be explicitly managed by the lender.
Invoice Financing From the Lender's Perspective
Invoice financing benefits lenders because, unlike extending a line of credit, which may be unsecured and leave little recourse if the business does not repay what it borrows, invoices act as collateral for invoice financing. The lender also limits its risk by not advancing 100% of the invoice amount to the borrowing business. Invoice financing does not eliminate all risk, though, since the customer might never pay the invoice. This would result in a difficult and expensive collections process involving both the bank and the business doing invoice financing with the bank.
How Invoice Financing is Structured
Invoice financing can be structured in a number of ways, most commonly via factoring or discounting. With invoice factoring, the company sells its outstanding invoices to a lender, who might pay the company 70% to 85% up front of what the invoices are ultimately worth. Assuming the lender receives full payment for the invoices, it will then remit the remaining 15% to 30% of the invoice amounts to the business, and the business will pay interest and/or fees for the service. Since the lender collects payments from the customers, the customers will be aware of this arrangement, which might reflect poorly on the business.
As an alternative, a business could use invoice discounting, which is similar to invoice factoring except that the business, not the lender, collects payments from customers, so customers are not aware of the arrangement. With invoice discounting, the lender will advance the business up to 95% of the invoice amount. When clients pay their invoices, the business repays the lender, minus a fee or interest.
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https://www.investopedia.com/articles/pf/08/make-money-in-business.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> To build a successful business, you need more than a good—or even great—idea. You have to be well organized, flexible, and creative, and develop a knack for paying close attention to the details while never losing sight of the big picture. You should also be prepared to make some personal sacrifices. Whatever type of business you have in mind, these nine basic tips, with links to additional advice, can help you get it started and keep it growing.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Starting and growing a business requires good organizational skills, creativity, and constant focus, among other essentials.</li><li>It's important to be aware of your competition, particularly the things it is doing that you might want to adopt or improve upon.</li><li>You'll almost certainly end up working harder for yourself than you would for someone else, so be prepared to make some sacrifices in your personal life.</li></ul></div></div></div>
<div class="comp mntl-sc-block finance-sc-block-inlinevideo mntl-sc-block-inlinevideo mntl-block has-details inline-video" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block-inlinevideo__video-container mntl-block" id="mntl-sc-block-inlinevideo__video-container_1-0"><div class="comp mntl-sc-block-inlinevideo__video mntl-jwplayer mm-video lazyload aspectratio-16:9" data-bgset="https://cdn.jwplayer.com/v2/media/PLrL34RY/poster.jpg?width=720" data-sizes="auto" id="mntl-sc-block-inlinevideo__video_1-0"></div></div>
<h4 class="comp mntl-sc-block-inlinevideo__title mntl-text-block" id="mntl-sc-block-inlinevideo__title_1-0">9 Tips For Growing A Successful Business</h4></div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div>
<span class="heading-toc" id="toc-1-get-organized"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> 1. Get Organized </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> To achieve success as a business owner you first have to be well organized. That will help you complete tasks efficiently and stay on top of the many things that need to be done. A simple way to get and stay organized is to create a to-do list each day. As you complete each item, check it off your list. Remember, too, that some tasks are more important than others. Aim to tackle the high-priority ones first.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> There are many online resources that are available to help. They include tools like Slack, Asana, Zoom, and Microsoft Teams. That being said, a simple Excel spreadsheet will meet many of a small business's organizational requirements, especially in the early days.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div>
<span class="heading-toc" id="toc-2-keep-detailed-records"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> 2. Keep Detailed Records </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> No matter how busy they are, successful businesses take the time to keep careful <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accounting-records.asp">accounting records</a>. By doing so, they know where their business stands financially and can often get a better (and earlier) grasp of any potential challenges they might be facing. Investopedia periodically rates the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-accounting-software-for-small-business-5069679">best accounting software for small businesses</a>.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Many businesses today keep two sets of records: one physical and another in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cloud-computing.asp">the cloud</a>. That way, a business owner no longer has to worry about losing crucial data if something unfortunate happens, like a fire, computer virus, or other calamity.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div>
<span class="heading-toc" id="toc-3-analyze-your-competition"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> 3. Analyze Your Competition </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> To be successful, you can't afford to ignore your competitors. Instead, take the time to study and learn from them. Larger companies devote significant resources to obtaining this sort of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/competitive-intelligence.asp">competitive intelligence</a>.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> How you go about analyzing the competition can depend on the nature of your business. If you're a restaurant or store owner, you may simply be able to dine or shop at a competitor's place of business, ask customers what they like or don't like about it, and gain information that way.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> If you're in a field with more limited access to your competitors' inner workings, such as manufacturing, try to keep up with the news in relevant trade publications, speak with any customers you share in common, and obtain and scrutinize whatever financial information a competitor makes publicly available.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div>
<span class="heading-toc" id="toc-4-understand-the-risks-and-rewards"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> 4. Understand the Risks and Rewards </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Another key to being successful is taking calculated risks to help your business grow. Besides contemplating the potential rewards if you succeed, a good question to ask is: "What's the downside if this doesn't work out?" If you can answer that question, you'll know what the worst-case scenario is. If you could live with that scenario, and are prepared to take the necessary steps to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/072315/top-ways-manage-business-risks.asp">manage the risk</a> as much as possible, you might want to give it a go. Otherwise, this could be a good time to consider other opportunities.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Understanding risks and rewards includes being smart about the timing of starting a business or launching a new product. For example, the severe economic dislocation during the COVID pandemic provided some businesses with new opportunities (say, manufacturing and selling protective gear) and others with difficult-to-overcome obstacles (such as running a restaurant with constraints on indoor dining).
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div>
<span class="heading-toc" id="toc-5-be-creative"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> 5. Be Creative </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Always be looking for ways to improve your business and make it stand out from the competition. Recognize that you don't know everything and be open to new ideas and different approaches.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Keep an eye out for opportunities to expand your current business or develop related enterprises that will lead to additional revenues and provide the benefit of diversification. The history of Amazon provides a good example. The company started out as an online bookseller and grew into an e-commerce giant, selling just about everything. Today it has a growing brick-and-mortar presence, as well. Among its many subsidiaries are Amazon Pharmacy, Amazon MGM Studios, Whole Foods Market, and Zappos.<span class="ql-inline-citation" data-cite="4"></span><span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="2"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div>
<span class="heading-toc" id="toc-6-stay-focused-on-your-goals"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-heading__text"> 6. Stay Focused on Your Goals </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> The old saying "Rome wasn't built in a day" applies to building a business as well. Just because you open a business doesn't mean you're going to start making money immediately. It takes time to let people know who you are and what you have to offer, so stay focused on achieving your goals.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Even many small business owners who ultimately achieve success won't see a profit for a few years and will have to rely on borrowed money (if they can get it) or their own savings to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/starting-a-business-with-no-money-7972903">support the business</a> until it can become profitable. Fortunately, there are a variety of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/13/business-financing-primer.asp">ways to finance a business</a>.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> That being said, if the business is not turning a profit after a reasonable period of time, it's worth looking into why that is and whether the business needs to go in another direction.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div>
<span class="heading-toc" id="toc-7-provide-great-customer-service"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> 7. Provide Great Customer Service </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Too many businesses forget the importance of providing great <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/customer-service.asp">customer service</a>. If you deliver better service for your customers, they'll be more inclined to come to you the next time they need something instead of going to your competition. High-quality service is one key to obtaining <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/competitive_advantage.asp">competitive advantage</a> in the marketplace.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Some businesses refer to this as a taking a consumer-centric or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/client-centric.asp">client-centric approach</a>.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> In fact, in today's hyper-competitive business environment, service is often the major differentiating factor between successful and unsuccessful businesses. This is where the saying "undersell and overdeliver" comes in, and savvy business owners are wise to follow it.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div>
<span class="heading-toc" id="toc-8-be-consistent"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> 8. Be Consistent </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Consistency is a key component to success in business. You have to keep doing what is necessary to be successful, day in and day out. This will create long-term positive habits that will help you make money in the long run and create satisfied customers from day one. Customers value consistency, too.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div>
<span class="heading-toc" id="toc-9-prepare-to-make-some-sacrifices"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-heading__text"> 9. Prepare to Make Some Sacrifices </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> Having your own business often requires putting in more time than if you were working for someone else. That can mean spending less time with family and friends than you wish you could. The adage that there are no weekends and no vacations for business owners can ring true for anyone who's committed to making their business work.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Owning a business isn't for everyone. If, after an honest self-evaluation, you decide you aren't cut out for it, you'll save yourself a lot of grief, and probably a lot of money, by pursuing another career path.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_56-0"><span class="heading-toc" id="toc-what-is-the-fastest-way-for-a-business-to-grow"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Fastest Way for a Business to Grow?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Businesses will grow at their own rates, and many times this is out of the control of the business owner or workers. However, there are some aspects to running lean that may help a business grow quickly, such as focusing on a small product line, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/scalability.asp">scaling up</a> at a manageable pace, and providing some sort of obvious edge over your competitors.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_58-0"><span class="heading-toc" id="toc-how-do-you-increase-sales"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Increase Sales?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Increasing sales can come from a few different places. You can raise ad expenditures where advertising has already proven effective, proactively solicit referrals from existing clients, build a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/direct-to-consumer-advertising.asp">direct-to-consumer</a> email list, and others. You can also expand your product portfolio, but if the new additions underperform, that will negatively affect your bottom line.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_60-0"><span class="heading-toc" id="toc-what-makes-a-startup-successful"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Makes a Startup Successful?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Business success is a difficult concept to quantify, but if it means generating returns for stakeholders, startups can be an excellent way to deliver returns. The best startups have a good product or service that is scalable. A well-run startup will understand the overall market and its particular place in it, be able to pivot quickly, and be ready to take advantage of opportunities when they present themselves.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Growing a successful business is hard work, and not everyone succeeds at it. According to 2022 data from the U.S. Bureau of Labor Statistics, about 20% of new businesses fail during their first year, 50% fail during the first five years, and 65% fail during the first 10 years. Only 25% of new businesses make it to 15 years or beyond.<span class="ql-inline-citation" data-cite="1"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> If you want to be among that 25%, paying attention to these nine tips is a good start, but certainly not exhaustive. To own and run a successful business you'll want to be in a state of constant learning and adapting.
</p></div> | To build a successful business, you need more than a good—or even great—idea. You have to be well organized, flexible, and creative, and develop a knack for paying close attention to the details while never losing sight of the big picture. You should also be prepared to make some personal sacrifices. Whatever type of business you have in mind, these nine basic tips, with links to additional advice, can help you get it started and keep it growing.
### Key Takeaways
* Starting and growing a business requires good organizational skills, creativity, and constant focus, among other essentials.
* It's important to be aware of your competition, particularly the things it is doing that you might want to adopt or improve upon.
* You'll almost certainly end up working harder for yourself than you would for someone else, so be prepared to make some sacrifices in your personal life.
#### 9 Tips For Growing A Successful Business
## 1. Get Organized
To achieve success as a business owner you first have to be well organized. That will help you complete tasks efficiently and stay on top of the many things that need to be done. A simple way to get and stay organized is to create a to-do list each day. As you complete each item, check it off your list. Remember, too, that some tasks are more important than others. Aim to tackle the high-priority ones first.
There are many online resources that are available to help. They include tools like Slack, Asana, Zoom, and Microsoft Teams. That being said, a simple Excel spreadsheet will meet many of a small business's organizational requirements, especially in the early days.
## 2. Keep Detailed Records
No matter how busy they are, successful businesses take the time to keep careful [accounting records](https://www.investopedia.com/terms/a/accounting-records.asp). By doing so, they know where their business stands financially and can often get a better (and earlier) grasp of any potential challenges they might be facing. Investopedia periodically rates the [best accounting software for small businesses](https://www.investopedia.com/best-accounting-software-for-small-business-5069679).
Many businesses today keep two sets of records: one physical and another in [the cloud](https://www.investopedia.com/terms/c/cloud-computing.asp). That way, a business owner no longer has to worry about losing crucial data if something unfortunate happens, like a fire, computer virus, or other calamity.
## 3. Analyze Your Competition
To be successful, you can't afford to ignore your competitors. Instead, take the time to study and learn from them. Larger companies devote significant resources to obtaining this sort of [competitive intelligence](https://www.investopedia.com/terms/c/competitive-intelligence.asp).
How you go about analyzing the competition can depend on the nature of your business. If you're a restaurant or store owner, you may simply be able to dine or shop at a competitor's place of business, ask customers what they like or don't like about it, and gain information that way.
If you're in a field with more limited access to your competitors' inner workings, such as manufacturing, try to keep up with the news in relevant trade publications, speak with any customers you share in common, and obtain and scrutinize whatever financial information a competitor makes publicly available.
## 4. Understand the Risks and Rewards
Another key to being successful is taking calculated risks to help your business grow. Besides contemplating the potential rewards if you succeed, a good question to ask is: "What's the downside if this doesn't work out?" If you can answer that question, you'll know what the worst-case scenario is. If you could live with that scenario, and are prepared to take the necessary steps to [manage the risk](https://www.investopedia.com/articles/personal-finance/072315/top-ways-manage-business-risks.asp) as much as possible, you might want to give it a go. Otherwise, this could be a good time to consider other opportunities.
Understanding risks and rewards includes being smart about the timing of starting a business or launching a new product. For example, the severe economic dislocation during the COVID pandemic provided some businesses with new opportunities (say, manufacturing and selling protective gear) and others with difficult-to-overcome obstacles (such as running a restaurant with constraints on indoor dining).
## 5. Be Creative
Always be looking for ways to improve your business and make it stand out from the competition. Recognize that you don't know everything and be open to new ideas and different approaches.
Keep an eye out for opportunities to expand your current business or develop related enterprises that will lead to additional revenues and provide the benefit of diversification. The history of Amazon provides a good example. The company started out as an online bookseller and grew into an e-commerce giant, selling just about everything. Today it has a growing brick-and-mortar presence, as well. Among its many subsidiaries are Amazon Pharmacy, Amazon MGM Studios, Whole Foods Market, and Zappos.
## 6. Stay Focused on Your Goals
The old saying "Rome wasn't built in a day" applies to building a business as well. Just because you open a business doesn't mean you're going to start making money immediately. It takes time to let people know who you are and what you have to offer, so stay focused on achieving your goals.
Even many small business owners who ultimately achieve success won't see a profit for a few years and will have to rely on borrowed money (if they can get it) or their own savings to [support the business](https://www.investopedia.com/starting-a-business-with-no-money-7972903) until it can become profitable. Fortunately, there are a variety of [ways to finance a business](https://www.investopedia.com/articles/pf/13/business-financing-primer.asp).
That being said, if the business is not turning a profit after a reasonable period of time, it's worth looking into why that is and whether the business needs to go in another direction.
## 7. Provide Great Customer Service
Too many businesses forget the importance of providing great [customer service](https://www.investopedia.com/terms/c/customer-service.asp). If you deliver better service for your customers, they'll be more inclined to come to you the next time they need something instead of going to your competition. High-quality service is one key to obtaining [competitive advantage](https://www.investopedia.com/terms/c/competitive_advantage.asp) in the marketplace.
Some businesses refer to this as a taking a consumer-centric or [client-centric approach](https://www.investopedia.com/terms/c/client-centric.asp).
In fact, in today's hyper-competitive business environment, service is often the major differentiating factor between successful and unsuccessful businesses. This is where the saying "undersell and overdeliver" comes in, and savvy business owners are wise to follow it.
## 8. Be Consistent
Consistency is a key component to success in business. You have to keep doing what is necessary to be successful, day in and day out. This will create long-term positive habits that will help you make money in the long run and create satisfied customers from day one. Customers value consistency, too.
## 9. Prepare to Make Some Sacrifices
Having your own business often requires putting in more time than if you were working for someone else. That can mean spending less time with family and friends than you wish you could. The adage that there are no weekends and no vacations for business owners can ring true for anyone who's committed to making their business work.
Owning a business isn't for everyone. If, after an honest self-evaluation, you decide you aren't cut out for it, you'll save yourself a lot of grief, and probably a lot of money, by pursuing another career path.
## What Is the Fastest Way for a Business to Grow?
Businesses will grow at their own rates, and many times this is out of the control of the business owner or workers. However, there are some aspects to running lean that may help a business grow quickly, such as focusing on a small product line, [scaling up](https://www.investopedia.com/terms/s/scalability.asp) at a manageable pace, and providing some sort of obvious edge over your competitors.
## How Do You Increase Sales?
Increasing sales can come from a few different places. You can raise ad expenditures where advertising has already proven effective, proactively solicit referrals from existing clients, build a [direct-to-consumer](https://www.investopedia.com/terms/d/direct-to-consumer-advertising.asp) email list, and others. You can also expand your product portfolio, but if the new additions underperform, that will negatively affect your bottom line.
## What Makes a Startup Successful?
Business success is a difficult concept to quantify, but if it means generating returns for stakeholders, startups can be an excellent way to deliver returns. The best startups have a good product or service that is scalable. A well-run startup will understand the overall market and its particular place in it, be able to pivot quickly, and be ready to take advantage of opportunities when they present themselves.
## The Bottom Line
Growing a successful business is hard work, and not everyone succeeds at it. According to 2022 data from the U.S. Bureau of Labor Statistics, about 20% of new businesses fail during their first year, 50% fail during the first five years, and 65% fail during the first 10 years. Only 25% of new businesses make it to 15 years or beyond.
If you want to be among that 25%, paying attention to these nine tips is a good start, but certainly not exhaustive. To own and run a successful business you'll want to be in a state of constant learning and adapting.
| To build a successful business, you need more than a good—or even great—idea. You have to be well organized, flexible, and creative, and develop a knack for paying close attention to the details while never losing sight of the big picture. You should also be prepared to make some personal sacrifices. Whatever type of business you have in mind, these nine basic tips, with links to additional advice, can help you get it started and keep it growing.
Key Takeaways
Starting and growing a business requires good organizational skills, creativity, and constant focus, among other essentials.It's important to be aware of your competition, particularly the things it is doing that you might want to adopt or improve upon.You'll almost certainly end up working harder for yourself than you would for someone else, so be prepared to make some sacrifices in your personal life.
9 Tips For Growing A Successful Business
1. Get Organized
To achieve success as a business owner you first have to be well organized. That will help you complete tasks efficiently and stay on top of the many things that need to be done. A simple way to get and stay organized is to create a to-do list each day. As you complete each item, check it off your list. Remember, too, that some tasks are more important than others. Aim to tackle the high-priority ones first.
There are many online resources that are available to help. They include tools like Slack, Asana, Zoom, and Microsoft Teams. That being said, a simple Excel spreadsheet will meet many of a small business's organizational requirements, especially in the early days.
2. Keep Detailed Records
No matter how busy they are, successful businesses take the time to keep careful accounting records. By doing so, they know where their business stands financially and can often get a better (and earlier) grasp of any potential challenges they might be facing. Investopedia periodically rates the best accounting software for small businesses.
Many businesses today keep two sets of records: one physical and another in the cloud. That way, a business owner no longer has to worry about losing crucial data if something unfortunate happens, like a fire, computer virus, or other calamity.
3. Analyze Your Competition
To be successful, you can't afford to ignore your competitors. Instead, take the time to study and learn from them. Larger companies devote significant resources to obtaining this sort of competitive intelligence.
How you go about analyzing the competition can depend on the nature of your business. If you're a restaurant or store owner, you may simply be able to dine or shop at a competitor's place of business, ask customers what they like or don't like about it, and gain information that way.
If you're in a field with more limited access to your competitors' inner workings, such as manufacturing, try to keep up with the news in relevant trade publications, speak with any customers you share in common, and obtain and scrutinize whatever financial information a competitor makes publicly available.
4. Understand the Risks and Rewards
Another key to being successful is taking calculated risks to help your business grow. Besides contemplating the potential rewards if you succeed, a good question to ask is: "What's the downside if this doesn't work out?" If you can answer that question, you'll know what the worst-case scenario is. If you could live with that scenario, and are prepared to take the necessary steps to manage the risk as much as possible, you might want to give it a go. Otherwise, this could be a good time to consider other opportunities.
Understanding risks and rewards includes being smart about the timing of starting a business or launching a new product. For example, the severe economic dislocation during the COVID pandemic provided some businesses with new opportunities (say, manufacturing and selling protective gear) and others with difficult-to-overcome obstacles (such as running a restaurant with constraints on indoor dining).
5. Be Creative
Always be looking for ways to improve your business and make it stand out from the competition. Recognize that you don't know everything and be open to new ideas and different approaches.
Keep an eye out for opportunities to expand your current business or develop related enterprises that will lead to additional revenues and provide the benefit of diversification. The history of Amazon provides a good example. The company started out as an online bookseller and grew into an e-commerce giant, selling just about everything. Today it has a growing brick-and-mortar presence, as well. Among its many subsidiaries are Amazon Pharmacy, Amazon MGM Studios, Whole Foods Market, and Zappos.
6. Stay Focused on Your Goals
The old saying "Rome wasn't built in a day" applies to building a business as well. Just because you open a business doesn't mean you're going to start making money immediately. It takes time to let people know who you are and what you have to offer, so stay focused on achieving your goals.
Even many small business owners who ultimately achieve success won't see a profit for a few years and will have to rely on borrowed money (if they can get it) or their own savings to support the business until it can become profitable. Fortunately, there are a variety of ways to finance a business.
That being said, if the business is not turning a profit after a reasonable period of time, it's worth looking into why that is and whether the business needs to go in another direction.
7. Provide Great Customer Service
Too many businesses forget the importance of providing great customer service. If you deliver better service for your customers, they'll be more inclined to come to you the next time they need something instead of going to your competition. High-quality service is one key to obtaining competitive advantage in the marketplace.
Some businesses refer to this as a taking a consumer-centric or client-centric approach.
In fact, in today's hyper-competitive business environment, service is often the major differentiating factor between successful and unsuccessful businesses. This is where the saying "undersell and overdeliver" comes in, and savvy business owners are wise to follow it.
8. Be Consistent
Consistency is a key component to success in business. You have to keep doing what is necessary to be successful, day in and day out. This will create long-term positive habits that will help you make money in the long run and create satisfied customers from day one. Customers value consistency, too.
9. Prepare to Make Some Sacrifices
Having your own business often requires putting in more time than if you were working for someone else. That can mean spending less time with family and friends than you wish you could. The adage that there are no weekends and no vacations for business owners can ring true for anyone who's committed to making their business work.
Owning a business isn't for everyone. If, after an honest self-evaluation, you decide you aren't cut out for it, you'll save yourself a lot of grief, and probably a lot of money, by pursuing another career path.
What Is the Fastest Way for a Business to Grow?
Businesses will grow at their own rates, and many times this is out of the control of the business owner or workers. However, there are some aspects to running lean that may help a business grow quickly, such as focusing on a small product line, scaling up at a manageable pace, and providing some sort of obvious edge over your competitors.
How Do You Increase Sales?
Increasing sales can come from a few different places. You can raise ad expenditures where advertising has already proven effective, proactively solicit referrals from existing clients, build a direct-to-consumer email list, and others. You can also expand your product portfolio, but if the new additions underperform, that will negatively affect your bottom line.
What Makes a Startup Successful?
Business success is a difficult concept to quantify, but if it means generating returns for stakeholders, startups can be an excellent way to deliver returns. The best startups have a good product or service that is scalable. A well-run startup will understand the overall market and its particular place in it, be able to pivot quickly, and be ready to take advantage of opportunities when they present themselves.
The Bottom Line
Growing a successful business is hard work, and not everyone succeeds at it. According to 2022 data from the U.S. Bureau of Labor Statistics, about 20% of new businesses fail during their first year, 50% fail during the first five years, and 65% fail during the first 10 years. Only 25% of new businesses make it to 15 years or beyond.
If you want to be among that 25%, paying attention to these nine tips is a good start, but certainly not exhaustive. To own and run a successful business you'll want to be in a state of constant learning and adapting.
| [
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"accounting records",
"https://www.investopedia.com/terms/a/accounting-records.asp"
],
[
"best accounting software for small businesses",
"https://www.investopedia.com/best-accounting-software-for-small-business-5069679"
],
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https://www.investopedia.com/how-small-businesses-can-use-ai-tools-8609366 | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Artificial intelligence (AI) tools promise many benefits for small businesses, including increased efficiency, cost savings, better customer service, and growth opportunities. AI tools are software that use AI algorithms to carry out tasks and solve problems. Their potential applications for small businesses include executing and automating business processes and analyzing information for better planning and decision making.<span class="ql-inline-citation" data-cite="1"></span>
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> According to the Small Business and Entrepreneurship Council’s 2023 Small Business AI Adoption Survey, 83% of small business owners plan to invest in AI in the next year.<span class="ql-inline-citation" data-cite="2"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>AI tools can offer small businesses improvements when it comes to efficiency, cost savings, customer service, and growth opportunities.</li><li>Small businesses can use AI tools to assist across many business areas such as accounting, customer service, marketing, security, and recruitment.</li><li>When choosing AI tools, consider factors such as budget, specific business needs, ease of implementation, scalability, and ability to integrate with current systems and technology.</li><li>To smoothly implement an AI tool, it’s advisable to assess current processes, identify areas for improvement, select and implement the appropriate tools, and train employees on them thoroughly.</li><li>It’s important to consider the limitations of AI tools in terms of accuracy, bias, privacy, and security. They may also present challenges in terms of employee training and potential job displacement.</li></ul></div></div></div>
<span class="heading-toc" id="toc-ai-tools-for-small-businesses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> AI Tools for Small Businesses </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Choosing the right <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp">artificial intelligence</a> tool from the many that are available will come down to the requirements of the small business and its day-to-day activities. Here is an overview of some of the applications and business areas that AI tools can support.<br/>
</p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-subheading__text"> Accounting </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> AI can improve <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accounting.asp">accounting</a> processes by automating or making bookkeeping tasks more efficient, offering categorization recommendations for transactions based on historical data. Some AI tools can also assist with data analysis for cash flow forecasting, accounts payable and accounts receivable processing, and catching errors or irregularities in transaction data that indicate fraud or security risks.<span class="ql-inline-citation" data-cite="3"></span><br/>
</p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-subheading__text"> Chatbots </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Adding a chatbot (a software program that simulates human conversation through text or voice interactions) to a website can assist businesses in fielding common requests from customers, freeing up the team to address more complex issues, and extending customer service hours beyond the usual hours of operation. Many chatbots also learn as they capture data, and can be connected to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/customer_relation_management.asp">customer relationship management (CRM)</a> software to integrate information on customer interactions.<span class="ql-inline-citation" data-cite="17"></span><br/>
</p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-subheading__text"> Customer Relationship Management (CRM) </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> AI-enabled CRM software can help drive sales or identify marketing opportunities based on its learnings from customer behavior and data, such as offering incentives based on order value and frequency. It can also predict future customer behavior, providing suggestions and insights into trends.<span class="ql-inline-citation" data-cite="5"></span><br>
</br></p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-subheading__text"> Customer Service Automation </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> AI applications for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/customer-service.asp">customer service</a> aren’t just limited to chatbots. Many phone systems use voice-enabled AI to answer questions and direct calls, while tools like voice search can be helpful to customers on the go. As with chatbots, tools like these can extend customer service center hours without having to hire round-the-clock support.<span class="ql-inline-citation" data-cite="5"></span><br/>
</p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> Cybersecurity </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Small business owners looking to protect their business and customer data can use AI-powered <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cybersecurity.asp">cybersecurity</a> tools to scan for data irregularities or patterns of unusual activity and receive alert notifications.<span class="ql-inline-citation" data-cite="5"></span><br/>
</p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-subheading__text"> Marketing and Advertising </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/generative-ai-7497939">Generative AI</a> tools such as ChatGPT, Midjourney, and Adobe Firefly can help with content creation for all types of marketing and advertising applications, from blog posts to social media captions and graphics to emails. Tools like Grammarly can help review or edit the content, while other AI tools can schedule, post, or send content, and track the performance of campaigns, tests, or posts, according to set metrics.<span class="ql-inline-citation" data-cite="3"></span><br/>
</p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> Recruiting </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Reviewing resumes is a time-consuming task, and AI-powered software can take some of the load off recruiting by screening resumes or applications and narrowing down the candidate pool.<span class="ql-inline-citation" data-cite="6"></span><br>
</br></p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-subheading__text"> Translation and Transcription </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> AI translation tools can provide a quick, low-cost solution for certain applications, while AI recording and transcription tools can be a handy aide in capturing meeting notes or follow-up tasks.<span class="ql-inline-citation" data-cite="7"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div>
<span class="heading-toc" id="toc-benefits-of-using-ai-tools-for-small-businesses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-heading__text"> Benefits of Using AI Tools for Small Businesses </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-ai-is-used-in-business-8611256">Small businesses can gain many advantages</a> by incorporating AI tools into their operations. These advantages might include:<span class="ql-inline-citation" data-cite="5"></span><span class="ql-inline-citation" data-cite="6"></span>
</p>
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<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0">
<li><strong>Improved efficiency</strong>:<strong> </strong>AI can increase employee productivity by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ai-business-taxes-8621438">reducing time spent on rote or recurring tasks</a>.</li>
<li><strong>Cost savings</strong>:<strong> </strong>AI software can alert you to potential threats or errors (such as duplicate payments) by identifying irregularities in data, saving money and reducing risk.</li>
<li><strong>Enhanced customer experience</strong>:<strong> </strong>AI chatbots and automated customer interactions can reduce the volume of calls and queries, freeing your team to focus on more complex customer interactions and cases. They can also extend the hours that your business can offer customer service. AI can also assist in personalizing content or business offerings to offer more customers a unique engagement with the brand.</li>
<li><strong>Increased growth opportunities</strong>: Many AI programs incorporate machine learning algorithms, which can offer an enhanced understanding of customer behavior via pattern recognition that improves over time. This can lead to better sales and revenue growth.</li>
<li><strong>Better decision making</strong>:<strong> </strong>AI can provide and interpret analytics on large volumes of key business data to facilitate better problem solving.</li>
</ul>
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<span class="heading-toc" id="toc-best-practices-for-implementing-ai-tools-in-small-businesses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-heading__text"> Best Practices for Implementing AI Tools in Small Businesses </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> To maximize the effectiveness of any AI tool, it can be helpful to think of it like any other process or technology being introduced to the business. Here are some steps to consider when implementing an AI tool.
</p>
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<ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0">
<li><strong>Assess current processes</strong>.<strong> </strong>Identify areas or systems that could benefit from automation or increased efficiency through use of an AI tool.</li>
<li><strong>Do your research</strong>. As there are many different tools available, comparative research on<strong> </strong>features and pricing can be helpful to ensure you are choosing the right one for the desired application and outcome. It’s also important to check that the tool can be integrated with current systems and scaled according to the needs of the business as it grows.</li>
<li><strong>Give your team a heads-up</strong>.<strong> </strong>Let any relevant team members know in advance that you’re introducing the tool, and provide answers to any questions they may have.</li>
<li><strong>Undergo and provide training</strong>.<strong> </strong>Ensure that anyone using the AI tool fully understands what it’s being used for and how to use it.</li>
<li><strong>Monitor, maintain, and update</strong>.<strong> </strong>Keep the software maintained with any updates, and monitor the tool’s performance and usefulness to the business.</li>
<li><strong>Leverage insights or improvements</strong>.<strong> </strong>Understand how the tool plugs into the bigger picture of your business, and ensure that you are creating processes or setting aside time to capture and incorporate the benefits it’s providing.</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span>
<li><strong>Continue to learn and adapt</strong>.<strong> </strong>Make time to reflect and solicit feedback on how the tool is working for the business and its employees, and take advantage of any <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/machine-learning.asp">machine learning</a> capabilities that the tool may have over time.<br/></li>
</ol>
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<span class="heading-toc" id="toc-challenges-and-considerations-for-using-ai-tools-in-small-businesses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-heading__text"> Challenges and Considerations for Using AI Tools in Small Businesses </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Small businesses may face several challenges and need to take several factors into consideration when adopting AI tools. These include the following:
</p>
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<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> <li><strong>Incorrect or inaccurate results</strong>:<strong> </strong>AI tools are limited by the amount or type of data they are trained on, and they can generate misleading or nonsensical results (referred to as “hallucinations”). This is the case with many generative AI tools, whose outputs might need to be reviewed or fact-checked by a human to ensure their validity, relevance, and accuracy.<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="7"></span></li><li><strong>Data privacy and security</strong>:<strong> </strong>The legal landscape around AI data privacy is still evolving, impacting the future development of AI tools. As AI models require data to train their algorithms, there are urgent concerns about the use and security of personal data.<span class="ql-inline-citation" data-cite="9"></span></li><li><strong>Bias and ethical considerations</strong>:<strong> </strong>As many AI models are designed to recognize patterns, they have been shown to reproduce existing patterns of discrimination. This was the case with an experimental AI recruiting software developed by Amazon: Trained on 10 years of resumes submitted to the company, it demonstrated significant bias against women, reflecting an existing gender gap in tech workers.<span class="ql-inline-citation" data-cite="10"></span></li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span><li><strong>Employee training</strong>:<strong> </strong>Because of the speed at which AI technology is evolving, it can be challenging to keep up with developments and changes and train employees accordingly.<span class="ql-inline-citation" data-cite="11"></span></li><li><strong>Potential job displacement</strong>:<strong> </strong>In 2023, Goldman Sachs predicted that AI could replace “the equivalent of 300 million full-time jobs,” replacing roughly a quarter to as much as half of the workload of exposed occupations.<span class="ql-inline-citation" data-cite="18"></span></li>
</ul>
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<span class="heading-toc" id="toc-future-trends-in-small-business-ai-tools"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> Future Trends in Small Business AI Tools </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Emerging trends and advancements in AI tools hold many promising applications for small businesses. The ability to increasingly personalize customer experiences by capitalizing on historical data, for instance, can offer small businesses a competitive edge.<span class="ql-inline-citation" data-cite="13"></span>
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> As <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/natural-language-processing-nlp.asp">natural language processing</a> models keep evolving, generative AI tools will become more powerful and accurate. More and more tools are adopting this technology and applying it to new industries and specialized use cases.<span class="ql-inline-citation" data-cite="14"></span>
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> AI tools can also enable <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/predictive-analytics.asp">predictive analytics</a>, providing valuable insights to decision makers based on current and historical data. This can be particularly powerful in assisting small businesses with applications such as financial forecasting or inventory management.
</p>
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<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_56-0"><span class="heading-toc" id="toc-what-are-some-free-ai-tools-for-small-businesses"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Some Free AI Tools for Small Businesses?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Many software suites are starting to incorporate AI; for example, Google Workspace Labs introduced AI-assisted capabilities to Google Docs, Sheets, and Slides.<span class="ql-inline-citation" data-cite="15"></span> Free tools like ChatGPT, Dall-E, Canva, and Grammarly can assist with content generation, while software like Fireflies and Otter can help with transcription and meeting notes.<span class="ql-inline-citation" data-cite="21"></span><span class="ql-inline-citation" data-cite="19"></span><span class="ql-inline-citation" data-cite="20"></span></p></div>
</div>
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<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_58-0"><span class="heading-toc" id="toc-how-can-i-use-an-ai-chatbot-for-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can I Use an AI Chatbot for Business?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Adding an AI chatbot to a business website can help address simple customer inquiries and reduce the volume of calls or emails that a business receives. Chatbots can also provide businesses with valuable insight on customer engagement and behavior.<span class="ql-inline-citation" data-cite="16"></span><span class="ql-inline-citation" data-cite="6"></span></p></div>
</div>
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<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_60-0"><span class="heading-toc" id="toc-which-ai-tools-are-best-for-solo-entrepreneurs"></span> <h2 class="mntl-sc-block-questionandanswer__question">Which AI Tools Are Best for Solo Entrepreneurs?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>AI tools that offer automation or increased efficiency can be especially valuable for solo entrepreneurs with limited time and resources. Generative AI tools can assist with time-consuming or repetitive tasks such as writing captions or product descriptions, while recording technology can take meeting notes and provide call transcriptions. AI accounting tools can assist those unable to hire a dedicated or full-time bookkeeper.</p></div>
</div>
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<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Whether used to bolster an existing business need or provide valuable data for decision making, AI tools can have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-use-ai-in-business-planning-8610190">major impact on the success of a small business</a>. However, it’s important to consider their use cases thoughtfully and implement them well to capitalize on their benefits and ensure that any drawbacks in terms of privacy, security, accuracy, and bias are fully considered and safeguarded against.
</p></div> | Artificial intelligence (AI) tools promise many benefits for small businesses, including increased efficiency, cost savings, better customer service, and growth opportunities. AI tools are software that use AI algorithms to carry out tasks and solve problems. Their potential applications for small businesses include executing and automating business processes and analyzing information for better planning and decision making.
According to the Small Business and Entrepreneurship Council’s 2023 Small Business AI Adoption Survey, 83% of small business owners plan to invest in AI in the next year.
### Key Takeaways
* AI tools can offer small businesses improvements when it comes to efficiency, cost savings, customer service, and growth opportunities.
* Small businesses can use AI tools to assist across many business areas such as accounting, customer service, marketing, security, and recruitment.
* When choosing AI tools, consider factors such as budget, specific business needs, ease of implementation, scalability, and ability to integrate with current systems and technology.
* To smoothly implement an AI tool, it’s advisable to assess current processes, identify areas for improvement, select and implement the appropriate tools, and train employees on them thoroughly.
* It’s important to consider the limitations of AI tools in terms of accuracy, bias, privacy, and security. They may also present challenges in terms of employee training and potential job displacement.
## AI Tools for Small Businesses
Choosing the right [artificial intelligence](https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp) tool from the many that are available will come down to the requirements of the small business and its day-to-day activities. Here is an overview of some of the applications and business areas that AI tools can support.
### Accounting
AI can improve [accounting](https://www.investopedia.com/terms/a/accounting.asp) processes by automating or making bookkeeping tasks more efficient, offering categorization recommendations for transactions based on historical data. Some AI tools can also assist with data analysis for cash flow forecasting, accounts payable and accounts receivable processing, and catching errors or irregularities in transaction data that indicate fraud or security risks.
### Chatbots
Adding a chatbot (a software program that simulates human conversation through text or voice interactions) to a website can assist businesses in fielding common requests from customers, freeing up the team to address more complex issues, and extending customer service hours beyond the usual hours of operation. Many chatbots also learn as they capture data, and can be connected to [customer relationship management (CRM)](https://www.investopedia.com/terms/c/customer_relation_management.asp) software to integrate information on customer interactions.
### Customer Relationship Management (CRM)
AI-enabled CRM software can help drive sales or identify marketing opportunities based on its learnings from customer behavior and data, such as offering incentives based on order value and frequency. It can also predict future customer behavior, providing suggestions and insights into trends.
### Customer Service Automation
AI applications for [customer service](https://www.investopedia.com/terms/c/customer-service.asp) aren’t just limited to chatbots. Many phone systems use voice-enabled AI to answer questions and direct calls, while tools like voice search can be helpful to customers on the go. As with chatbots, tools like these can extend customer service center hours without having to hire round-the-clock support.
### Cybersecurity
Small business owners looking to protect their business and customer data can use AI-powered [cybersecurity](https://www.investopedia.com/terms/c/cybersecurity.asp) tools to scan for data irregularities or patterns of unusual activity and receive alert notifications.
### Marketing and Advertising
[Generative AI](https://www.investopedia.com/generative-ai-7497939) tools such as ChatGPT, Midjourney, and Adobe Firefly can help with content creation for all types of marketing and advertising applications, from blog posts to social media captions and graphics to emails. Tools like Grammarly can help review or edit the content, while other AI tools can schedule, post, or send content, and track the performance of campaigns, tests, or posts, according to set metrics.
### Recruiting
Reviewing resumes is a time-consuming task, and AI-powered software can take some of the load off recruiting by screening resumes or applications and narrowing down the candidate pool.
### Translation and Transcription
AI translation tools can provide a quick, low-cost solution for certain applications, while AI recording and transcription tools can be a handy aide in capturing meeting notes or follow-up tasks.
## Benefits of Using AI Tools for Small Businesses
[Small businesses can gain many advantages](https://www.investopedia.com/how-ai-is-used-in-business-8611256) by incorporating AI tools into their operations. These advantages might include:
* **Improved efficiency**:AI can increase employee productivity by [reducing time spent on rote or recurring tasks](https://www.investopedia.com/ai-business-taxes-8621438).
* **Cost savings**:AI software can alert you to potential threats or errors (such as duplicate payments) by identifying irregularities in data, saving money and reducing risk.
* **Enhanced customer experience**:AI chatbots and automated customer interactions can reduce the volume of calls and queries, freeing your team to focus on more complex customer interactions and cases. They can also extend the hours that your business can offer customer service. AI can also assist in personalizing content or business offerings to offer more customers a unique engagement with the brand.
* **Increased growth opportunities**: Many AI programs incorporate machine learning algorithms, which can offer an enhanced understanding of customer behavior via pattern recognition that improves over time. This can lead to better sales and revenue growth.
* **Better decision making**:AI can provide and interpret analytics on large volumes of key business data to facilitate better problem solving.
## Best Practices for Implementing AI Tools in Small Businesses
To maximize the effectiveness of any AI tool, it can be helpful to think of it like any other process or technology being introduced to the business. Here are some steps to consider when implementing an AI tool.
1. **Assess current processes**.Identify areas or systems that could benefit from automation or increased efficiency through use of an AI tool.
2. **Do your research**. As there are many different tools available, comparative research onfeatures and pricing can be helpful to ensure you are choosing the right one for the desired application and outcome. It’s also important to check that the tool can be integrated with current systems and scaled according to the needs of the business as it grows.
3. **Give your team a heads-up**.Let any relevant team members know in advance that you’re introducing the tool, and provide answers to any questions they may have.
4. **Undergo and provide training**.Ensure that anyone using the AI tool fully understands what it’s being used for and how to use it.
5. **Monitor, maintain, and update**.Keep the software maintained with any updates, and monitor the tool’s performance and usefulness to the business.
6. **Leverage insights or improvements**.Understand how the tool plugs into the bigger picture of your business, and ensure that you are creating processes or setting aside time to capture and incorporate the benefits it’s providing.
8. **Continue to learn and adapt**.Make time to reflect and solicit feedback on how the tool is working for the business and its employees, and take advantage of any [machine learning](https://www.investopedia.com/terms/m/machine-learning.asp) capabilities that the tool may have over time.
## Challenges and Considerations for Using AI Tools in Small Businesses
Small businesses may face several challenges and need to take several factors into consideration when adopting AI tools. These include the following:
* **Incorrect or inaccurate results**:AI tools are limited by the amount or type of data they are trained on, and they can generate misleading or nonsensical results (referred to as “hallucinations”). This is the case with many generative AI tools, whose outputs might need to be reviewed or fact-checked by a human to ensure their validity, relevance, and accuracy.
* **Data privacy and security**:The legal landscape around AI data privacy is still evolving, impacting the future development of AI tools. As AI models require data to train their algorithms, there are urgent concerns about the use and security of personal data.
* **Bias and ethical considerations**:As many AI models are designed to recognize patterns, they have been shown to reproduce existing patterns of discrimination. This was the case with an experimental AI recruiting software developed by Amazon: Trained on 10 years of resumes submitted to the company, it demonstrated significant bias against women, reflecting an existing gender gap in tech workers.
* **Employee training**:Because of the speed at which AI technology is evolving, it can be challenging to keep up with developments and changes and train employees accordingly.
* **Potential job displacement**:In 2023, Goldman Sachs predicted that AI could replace “the equivalent of 300 million full-time jobs,” replacing roughly a quarter to as much as half of the workload of exposed occupations.
## Future Trends in Small Business AI Tools
Emerging trends and advancements in AI tools hold many promising applications for small businesses. The ability to increasingly personalize customer experiences by capitalizing on historical data, for instance, can offer small businesses a competitive edge.
As [natural language processing](https://www.investopedia.com/terms/n/natural-language-processing-nlp.asp) models keep evolving, generative AI tools will become more powerful and accurate. More and more tools are adopting this technology and applying it to new industries and specialized use cases.
AI tools can also enable [predictive analytics](https://www.investopedia.com/terms/p/predictive-analytics.asp), providing valuable insights to decision makers based on current and historical data. This can be particularly powerful in assisting small businesses with applications such as financial forecasting or inventory management.
## What Are Some Free AI Tools for Small Businesses?
Many software suites are starting to incorporate AI; for example, Google Workspace Labs introduced AI-assisted capabilities to Google Docs, Sheets, and Slides. Free tools like ChatGPT, Dall-E, Canva, and Grammarly can assist with content generation, while software like Fireflies and Otter can help with transcription and meeting notes.
## How Can I Use an AI Chatbot for Business?
Adding an AI chatbot to a business website can help address simple customer inquiries and reduce the volume of calls or emails that a business receives. Chatbots can also provide businesses with valuable insight on customer engagement and behavior.
## Which AI Tools Are Best for Solo Entrepreneurs?
AI tools that offer automation or increased efficiency can be especially valuable for solo entrepreneurs with limited time and resources. Generative AI tools can assist with time-consuming or repetitive tasks such as writing captions or product descriptions, while recording technology can take meeting notes and provide call transcriptions. AI accounting tools can assist those unable to hire a dedicated or full-time bookkeeper.
## The Bottom Line
Whether used to bolster an existing business need or provide valuable data for decision making, AI tools can have a [major impact on the success of a small business](https://www.investopedia.com/how-to-use-ai-in-business-planning-8610190). However, it’s important to consider their use cases thoughtfully and implement them well to capitalize on their benefits and ensure that any drawbacks in terms of privacy, security, accuracy, and bias are fully considered and safeguarded against.
| Artificial intelligence (AI) tools promise many benefits for small businesses, including increased efficiency, cost savings, better customer service, and growth opportunities. AI tools are software that use AI algorithms to carry out tasks and solve problems. Their potential applications for small businesses include executing and automating business processes and analyzing information for better planning and decision making.
According to the Small Business and Entrepreneurship Council’s 2023 Small Business AI Adoption Survey, 83% of small business owners plan to invest in AI in the next year.
Key Takeaways
AI tools can offer small businesses improvements when it comes to efficiency, cost savings, customer service, and growth opportunities.Small businesses can use AI tools to assist across many business areas such as accounting, customer service, marketing, security, and recruitment.When choosing AI tools, consider factors such as budget, specific business needs, ease of implementation, scalability, and ability to integrate with current systems and technology.To smoothly implement an AI tool, it’s advisable to assess current processes, identify areas for improvement, select and implement the appropriate tools, and train employees on them thoroughly.It’s important to consider the limitations of AI tools in terms of accuracy, bias, privacy, and security. They may also present challenges in terms of employee training and potential job displacement.
AI Tools for Small Businesses
Choosing the right artificial intelligence tool from the many that are available will come down to the requirements of the small business and its day-to-day activities. Here is an overview of some of the applications and business areas that AI tools can support.
Accounting
AI can improve accounting processes by automating or making bookkeeping tasks more efficient, offering categorization recommendations for transactions based on historical data. Some AI tools can also assist with data analysis for cash flow forecasting, accounts payable and accounts receivable processing, and catching errors or irregularities in transaction data that indicate fraud or security risks.
Chatbots
Adding a chatbot (a software program that simulates human conversation through text or voice interactions) to a website can assist businesses in fielding common requests from customers, freeing up the team to address more complex issues, and extending customer service hours beyond the usual hours of operation. Many chatbots also learn as they capture data, and can be connected to customer relationship management (CRM) software to integrate information on customer interactions.
Customer Relationship Management (CRM)
AI-enabled CRM software can help drive sales or identify marketing opportunities based on its learnings from customer behavior and data, such as offering incentives based on order value and frequency. It can also predict future customer behavior, providing suggestions and insights into trends.
Customer Service Automation
AI applications for customer service aren’t just limited to chatbots. Many phone systems use voice-enabled AI to answer questions and direct calls, while tools like voice search can be helpful to customers on the go. As with chatbots, tools like these can extend customer service center hours without having to hire round-the-clock support.
Cybersecurity
Small business owners looking to protect their business and customer data can use AI-powered cybersecurity tools to scan for data irregularities or patterns of unusual activity and receive alert notifications.
Marketing and Advertising
Generative AI tools such as ChatGPT, Midjourney, and Adobe Firefly can help with content creation for all types of marketing and advertising applications, from blog posts to social media captions and graphics to emails. Tools like Grammarly can help review or edit the content, while other AI tools can schedule, post, or send content, and track the performance of campaigns, tests, or posts, according to set metrics.
Recruiting
Reviewing resumes is a time-consuming task, and AI-powered software can take some of the load off recruiting by screening resumes or applications and narrowing down the candidate pool.
Translation and Transcription
AI translation tools can provide a quick, low-cost solution for certain applications, while AI recording and transcription tools can be a handy aide in capturing meeting notes or follow-up tasks.
Benefits of Using AI Tools for Small Businesses
Small businesses can gain many advantages by incorporating AI tools into their operations. These advantages might include:
Improved efficiency: AI can increase employee productivity by reducing time spent on rote or recurring tasks.
Cost savings: AI software can alert you to potential threats or errors (such as duplicate payments) by identifying irregularities in data, saving money and reducing risk.
Enhanced customer experience: AI chatbots and automated customer interactions can reduce the volume of calls and queries, freeing your team to focus on more complex customer interactions and cases. They can also extend the hours that your business can offer customer service. AI can also assist in personalizing content or business offerings to offer more customers a unique engagement with the brand.
Increased growth opportunities: Many AI programs incorporate machine learning algorithms, which can offer an enhanced understanding of customer behavior via pattern recognition that improves over time. This can lead to better sales and revenue growth.
Better decision making: AI can provide and interpret analytics on large volumes of key business data to facilitate better problem solving.
Best Practices for Implementing AI Tools in Small Businesses
To maximize the effectiveness of any AI tool, it can be helpful to think of it like any other process or technology being introduced to the business. Here are some steps to consider when implementing an AI tool.
Assess current processes. Identify areas or systems that could benefit from automation or increased efficiency through use of an AI tool.
Do your research. As there are many different tools available, comparative research on features and pricing can be helpful to ensure you are choosing the right one for the desired application and outcome. It’s also important to check that the tool can be integrated with current systems and scaled according to the needs of the business as it grows.
Give your team a heads-up. Let any relevant team members know in advance that you’re introducing the tool, and provide answers to any questions they may have.
Undergo and provide training. Ensure that anyone using the AI tool fully understands what it’s being used for and how to use it.
Monitor, maintain, and update. Keep the software maintained with any updates, and monitor the tool’s performance and usefulness to the business.
Leverage insights or improvements. Understand how the tool plugs into the bigger picture of your business, and ensure that you are creating processes or setting aside time to capture and incorporate the benefits it’s providing.
Continue to learn and adapt. Make time to reflect and solicit feedback on how the tool is working for the business and its employees, and take advantage of any machine learning capabilities that the tool may have over time.
Challenges and Considerations for Using AI Tools in Small Businesses
Small businesses may face several challenges and need to take several factors into consideration when adopting AI tools. These include the following:
Incorrect or inaccurate results: AI tools are limited by the amount or type of data they are trained on, and they can generate misleading or nonsensical results (referred to as “hallucinations”). This is the case with many generative AI tools, whose outputs might need to be reviewed or fact-checked by a human to ensure their validity, relevance, and accuracy.Data privacy and security: The legal landscape around AI data privacy is still evolving, impacting the future development of AI tools. As AI models require data to train their algorithms, there are urgent concerns about the use and security of personal data.Bias and ethical considerations: As many AI models are designed to recognize patterns, they have been shown to reproduce existing patterns of discrimination. This was the case with an experimental AI recruiting software developed by Amazon: Trained on 10 years of resumes submitted to the company, it demonstrated significant bias against women, reflecting an existing gender gap in tech workers.Employee training: Because of the speed at which AI technology is evolving, it can be challenging to keep up with developments and changes and train employees accordingly.Potential job displacement: In 2023, Goldman Sachs predicted that AI could replace “the equivalent of 300 million full-time jobs,” replacing roughly a quarter to as much as half of the workload of exposed occupations.
Future Trends in Small Business AI Tools
Emerging trends and advancements in AI tools hold many promising applications for small businesses. The ability to increasingly personalize customer experiences by capitalizing on historical data, for instance, can offer small businesses a competitive edge.
As natural language processing models keep evolving, generative AI tools will become more powerful and accurate. More and more tools are adopting this technology and applying it to new industries and specialized use cases.
AI tools can also enable predictive analytics, providing valuable insights to decision makers based on current and historical data. This can be particularly powerful in assisting small businesses with applications such as financial forecasting or inventory management.
What Are Some Free AI Tools for Small Businesses?
Many software suites are starting to incorporate AI; for example, Google Workspace Labs introduced AI-assisted capabilities to Google Docs, Sheets, and Slides. Free tools like ChatGPT, Dall-E, Canva, and Grammarly can assist with content generation, while software like Fireflies and Otter can help with transcription and meeting notes.
How Can I Use an AI Chatbot for Business?
Adding an AI chatbot to a business website can help address simple customer inquiries and reduce the volume of calls or emails that a business receives. Chatbots can also provide businesses with valuable insight on customer engagement and behavior.
Which AI Tools Are Best for Solo Entrepreneurs?
AI tools that offer automation or increased efficiency can be especially valuable for solo entrepreneurs with limited time and resources. Generative AI tools can assist with time-consuming or repetitive tasks such as writing captions or product descriptions, while recording technology can take meeting notes and provide call transcriptions. AI accounting tools can assist those unable to hire a dedicated or full-time bookkeeper.
The Bottom Line
Whether used to bolster an existing business need or provide valuable data for decision making, AI tools can have a major impact on the success of a small business. However, it’s important to consider their use cases thoughtfully and implement them well to capitalize on their benefits and ensure that any drawbacks in terms of privacy, security, accuracy, and bias are fully considered and safeguarded against.
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https://www.investopedia.com/small-business-grants-for-women-8417262 | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Of the 33.2 million small businesses in the United States, nearly 13 million of them are women-owned. These businesses employ almost 10 million people and generate nearly $1.8 trillion in revenue.<span class="ql-inline-citation" data-cite="1"></span> Despite driving significant economic growth, female-founded companies received just 2.1% of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/venturecapital.asp">venture capital</a> funding in the U.S. in 2022.<span class="ql-inline-citation" data-cite="30"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> With more women jumping into entrepreneurship, there’s a growing need for funding to support women-owned businesses. These organizations are answering the call.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Small business grants for women provide crucial financial support, enabling female-identifying entrepreneurs to kick-start or expand their businesses.</li><li>These grants often contribute to overcoming financial barriers, fostering economic empowerment and equality.</li><li>There are private and federal grant options available, as well as alternative funding options for women small business owners.</li><li>Women-owned businesses can gain access to resources, mentorship, and networking opportunities through grant programs, facilitating growth and sustainability.</li></ul></div></div></div>
<span class="heading-toc" id="toc-private-small-business-grants-for-women"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Private Small Business Grants for Women </span> </h2>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-subheading__text"> Amber Grant </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Each month, WomensNet gives away $30,000 in Amber Grant funds to a women-owned business or nonprofit. They also award three year-end grants of $25,000 each to one of the 12 monthly winners of the Monthly Amber Grant, the Startup Grant, and the Business Category Grant.<span class="ql-inline-citation" data-cite="3"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> To be eligible, you must be age 18 or older, and your business must be 50% women-owned, operating in the U.S. or Canada.<span class="ql-inline-citation" data-cite="4"></span> WomensNet’s straightforward process makes it easy to apply—just share your business story and how you would plan to use the grant.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-subheading__text"> IFundWomen Grant </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The IFundWomen marketplace has a mission to close the funding gap for women-led businesses. Simply fill out the Universal Grant Application, and anytime IFundWomen partners with a new brand, they’ll match that partner’s grant criteria to businesses in the database. If there’s a match, they’ll notify you immediately.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> So far, the program has deployed $170 million in grants to entrepreneurs through partnerships with brands like Visa, Caress, Johnnie Walker, Botox Cosmetic, and Comcast.<span class="ql-inline-citation" data-cite="5"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-subheading__text"> Women Founders Network Fast Pitch Competition </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> The Fast Pitch Competition provides $55,000 in cash grants and more than $100,000 in professional services to tech-focused business-to-business (B2B)/business-to-consumer (B2C) companies and consumer-focused businesses.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> To qualify, the founder/CEO must be a woman or the business must be majority-owned by a woman, and the company must be based in the U.S. It accepts pre-revenue plans but excludes life sciences, nonprofit, and cannabis/CBD companies.<span class="ql-inline-citation" data-cite="6"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> NASE Growth Grant </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> The National Association for the Self-Employed (NASE) chooses four winners each quarter to receive up to $4,000 in grant support. You can use your grant award for a range of growth purposes, including hiring employees, purchasing equipment, or investing in marketing.<span class="ql-inline-citation" data-cite="8"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> To apply, you must be a NASE member in good standing. The NASE evaluates your application based on identifiable business need, how you plan to use the grant money, and its potential impact on overall business growth and success.<span class="ql-inline-citation" data-cite="8"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> Freed Fellowship Grant </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Every month, one small business owner in the U.S. wins a $500 Freed grant to invest in their business. Just by applying, you’ll get feedback on your business and two months of free mentoring in the Freed Studio virtual community.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Winners get access to additional business coaching and a chance to receive an end-of-year bonus grant of $2,500.<span class="ql-inline-citation" data-cite="9"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> HerRise MicroGrant </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> HerSuiteSpot and The Yva Jourdan Foundation partner to help women-of-color entrepreneurs start or grow a business. The HerRise MicroGrant selects a winner each month to receive $1,000 to use for business needs such as computers, equipment, marketing materials, software purchase, and website creation.<span class="ql-inline-citation" data-cite="31"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> To apply, your business must be currently registered in the U.S., 51% owned by women of color, and have less than $1 million in gross revenue. This grant excludes nonprofits, franchises, direct sellers, authorized resellers, and independent consultants.<span class="ql-inline-citation" data-cite="10"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-subheading__text"> FoundHer Program </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> The FoundHer Program accelerates growth for women-founded businesses in Hawaii. The six-month program includes a $20,000 grant, a $4,000 care stipend, weekly educational workshops, a national network of business mentors and advisors, and monthly retreats.<span class="ql-inline-citation" data-cite="32"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> You must be a for-profit, Hawaii-based small business that is 50% Asian American and Native Hawaiian/Pacific Islander (AANHPI) women-led. The program focuses in five core markets of Hawaii’s economy: technology, fashion, health and wellness, food systems, and keiki/education. Applications for Cohort 3 are closed, but keep an eye out for the next round of applications beginning in 2024.<span class="ql-inline-citation" data-cite="32"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-subheading__text"> Cartier Women’s Initiative Award </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> All women-run and women-owned businesses can apply for the Cartier Women’s Initiative award, regardless of country or sector. For consideration, your business must demonstrate a strong and sustainable social and/or environmental impact.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Grants within this program include nine regional awards and two thematic awards: the Diversity, Equity & Inclusion Award (open to all genders), and the Science & Technology Pioneer Award. The next call for applications will run from May 22, 2024, through July 3, 2024.<span class="ql-inline-citation" data-cite="12"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-subheading__text"> Beyond Open Small Business Grant </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> This grant program focuses on diverse-owned small businesses within six underinvested areas in Charlotte, North Carolina, known as the Corridors of Opportunity. In partnership with the Foundation for the Carolinas, the Beyond Open program will award three rounds of grants at around $5 million per round, for a total of $15 million.<span class="ql-inline-citation" data-cite="13"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> This highly competitive grant program received thousands of applications for each of the first two rounds. The final round will take place in 2024. Eligibility requirements include: at least 51% ownership by minority, woman, veteran, LGBTQ+, or people with disabilities; physical location within one of the Corridors of Opportunity; annual revenue from $30,000 to $5 million; fewer than 200 full-time and/or part-time employees, and at least one full year of operation beginning on or before Aug. 1, 2022.<span class="ql-inline-citation" data-cite="14"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-subheading__text"> Tory Burch Foundation Fellowship </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> In partnership with the Fearless Fund, the Tory Burch Foundation Fellowship selects 75 women-of-color-owned businesses to receive $10,000 and $20,000 grants. Winners also gain access to education and community.<span class="ql-inline-citation" data-cite="15"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> For eligibility, your business must be operating in the United States as a for-profit company and be at least 51% woman-of-color-owned. Preference goes to businesses in the first five years of operation, with a minimum annual revenue of $100,000.<span class="ql-inline-citation" data-cite="15"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-subheading__text"> Launch Program by Ladies Who Launch </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> If you’re a women- or nonbinary-owned business in the consumer packaged goods sector, check out the Launch Program by Ladies Who Launch. The program provides a $10,000 cash grant, mentorship from industry experts, and six months of free education to support you on your business journey.<span class="ql-inline-citation" data-cite="16"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> Interested businesses must have an annual gross revenue from $100,000 to $499,000 and cannot currently be raising, have previously raised funds from, or intend to seek venture capital or angel investment, or a liquidity event, in the next 12 months.<span class="ql-inline-citation" data-cite="16"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_63-0"> <span class="mntl-sc-block-subheading__text"> Women’s Business Development Council Equity Match Grant </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> For Connecticut residents, the Women’s Business Development Council gives away equity matching grants from $2,500 to $10,000 to qualified woman-owned small businesses. If awarded, you’ll need to provide a minimum match of 25% (unless located in distressed economic municipalities).<span class="ql-inline-citation" data-cite="17"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> The awards committee is looking for a clear use of funds, with a direct link to growth and job creation potential. Additionally, you must have a record of annual sales of $25,000 to $2 million in the last 12 months.<span class="ql-inline-citation" data-cite="17"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_68-0"> <span class="mntl-sc-block-subheading__text"> High Five Grant for Moms </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> The Mama Ladder’s High Five Grant program is a one-of-a-kind opportunity for mom entrepreneurs to win financial support for growing their businesses. In 2023, The Mama Ladder awarded grants totaling $38,500 to 24 worthy recipients, with a grand prize of $10,000.<span class="ql-inline-citation" data-cite="18"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> Anyone who is a mother and owner (or 50% co-owner) of a revenue-generating business can apply. This includes foster moms, expecting moms, stepmoms, and mothers of adult children.<span class="ql-inline-citation" data-cite="18"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div>
<span class="heading-toc" id="toc-federal-business-grants-for-women"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_73-0"> <span class="mntl-sc-block-heading__text"> Federal Business Grants for Women </span> </h2>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_74-0"> <span class="mntl-sc-block-subheading__text"> Grants.gov </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> Here you can search an extensive list of available grants, plus get help on how to apply, find available forms, and track your application. The database lists grants from government agencies and funding instruments from the Department of Energy, NASA, Department of State, Department of Health and Human Services, Native American tribal governments, and others.<span class="ql-inline-citation" data-cite="19"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_77-0"> <span class="mntl-sc-block-subheading__text"> SBIR and SBTT Programs </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs support small U.S. businesses in doing research that could lead to new products. To be eligible, a business must be organized in the U.S., mostly owned by U.S. citizens, and have fewer than 500 employees.<span class="ql-inline-citation" data-cite="20"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> STTR involves working with a U.S. nonprofit research institution. STTR has some extra requirements, like agreeing on who owns the ideas that come out of the research and specifying how the work is shared between the small business and the research institution.<span class="ql-inline-citation" data-cite="20"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_82-0"> <span class="mntl-sc-block-subheading__text"> Program for Investment in Microentrepreneurs (PRIME) </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_83-0"> Congress established PRIME grants as part of the Program for Investment in Microentrepreneurs Act of 1999.<span class="ql-inline-citation" data-cite="21"></span> The program gives low-income entrepreneurs access to capital to help establish and expand their small businesses.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_84-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_85-0"> In 2023, individual PRIME grants ranged from $100,000 to $400,000, for a total of $8 million in awards. With emphasis on entrepreneurs in rural areas, PRIME grants typically require at least 50% in matching funds or in-kind contributions.<span class="ql-inline-citation" data-cite="21"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_86-0"></div>
<span class="heading-toc" id="toc-additional-resources-for-female-business-owners"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_87-0"> <span class="mntl-sc-block-heading__text"> Additional Resources for Female Business Owners </span> </h2>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_88-0"> <span class="mntl-sc-block-subheading__text"> Office of Women’s Business Ownership </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_89-0"> The Office of Women’s Business Ownership, established by the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a>, empowers women entrepreneurs in the U.S. by providing advocacy, outreach, education, and support. Through Women’s Business Centers across the country, the office offers comprehensive training and counseling, access to credit, and marketing opportunities.<span class="ql-inline-citation" data-cite="22"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_90-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_91-0"> <span class="mntl-sc-block-subheading__text"> DreamBuilder </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_92-0"> DreamBuilder offers free online courses in both Spanish and English to help women start or grow their businesses. The program includes a step-by-step framework for launching a small business and a course specifically focused on financing, providing a personalized business plan, and a Capital Action Plan.<span class="ql-inline-citation" data-cite="23"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_93-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_94-0"> <span class="mntl-sc-block-subheading__text"> Belle Capital USA </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_95-0"> Belle Capital USA is an early-stage fund investing in fast-growing companies led by women. Their goal is to achieve top returns by working closely with these companies, helping them grow quickly, and prepare for success. The fund also encourages other women to become early-stage investors, recognizing the significant impact it can have on shaping the funding landscape for startups.<span class="ql-inline-citation" data-cite="24"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_96-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_97-0"> <span class="mntl-sc-block-subheading__text"> Professional Associations and Industry Organizations </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_98-0"> Joining a professional women’s organization can make a massive difference in a woman’s career. Whether you are just starting your professional journey, making a switch to a new field, or considering launching a new enterprise, it’s likely there is an organization that can help. Some professional women’s organizations focus on minorities, some on specific industries, and some are general. Examples include:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_99-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_100-0"> <li>Minority Business Development Agency</li><li>Asian Women in Business</li><li>Association for Women in Science</li><li>Financial Women’s Association</li><li>American Business Women’s Association</li><li>Business and Professional Women International<span class="ql-inline-citation" data-cite="25"></span></li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_101-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_102-0"> <span class="mntl-sc-block-subheading__text"> National Women’s Business Council (NWBC) </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_103-0"> The National Women’s Business Council (NWBC) advises the president, Congress, and the Small Business Administration on issues affecting women business owners. The NWBC focuses on overcoming challenges like limited access to money and supports women in science, technology, engineering, and mathematics (STEM) through activities like webinars and roundtables, aiming to create a more inclusive entrepreneurial environment.<span class="ql-inline-citation" data-cite="29"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_104-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_105-0"> <span class="mntl-sc-block-subheading__text"> GrantsForWomen.org </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_106-0"> This site hosts a comprehensive directory of all the organizations and foundations that offer grant funding to women. The database includes federal, corporate, private, and professional grants, plus general information about the process.<span class="ql-inline-citation" data-cite="27"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_107-0"></div>
<span class="heading-toc" id="toc-funding-alternatives-to-small-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_108-0"> <span class="mntl-sc-block-heading__text"> Funding Alternatives to Small Business Grants </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_109-0"> Aside from grants, there are a number of alternative funding options available for women-owned businesses, such as:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_110-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_111-0"> <li>Traditional bank loans</li><li>Microloans</li><li>Venture capital and angel investment</li><li>Crowdfunding</li><li>Asset or invoice financing</li><li>Bridge loans</li><li>Peer-to-peer lending</li><li>Term loans</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_112-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_113-0"><span class="heading-toc" id="toc-what-defines-a-woman-owned-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Defines a Woman-Owned Business?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>If your business is at least 51% woman-owned and woman-operated, it may be classified as a woman-owned business. The National Women’s Business Council (NWBC) defines two options for official certification: women-owned small business (WOSB) and economically disadvantaged women-owned small business (EDWOSB).<span class="ql-inline-citation" data-cite="28"></span> <br/></p><p>Businesses may self-certify for free, or obtain certification from a Small Business Administration (SBA)-approved third-party certifier for a fee. The NWBC considers both methods to be valid and equally beneficial.</p><p>To qualify as a WOSB, a woman must hold the highest officer position, work at the business full-time, and be involved in making both day-to-day and long-term business decisions for the company. Qualifying as an EDWOSB means meeting all criteria of a WOSB, plus additional income, net worth, and asset requirements.<span class="ql-inline-citation" data-cite="28"></span></p><p>Obtaining this certification gives you access to federal contracts and economic resources, and adds credibility to your grant applications.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_114-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_115-0"><span class="heading-toc" id="toc-how-do-i-write-a-grant-proposal-for-a-small-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do I Write a Grant Proposal for a Small Business?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Applying for grants can be a bit of a waiting game. You fill out forms, submit them on time, and then cross your fingers as you wait for the decision from the committee or organization handling your request.</p><p>The key to a successful grant application is to follow instructions to a T. Failure to do so could mean removal from the consideration process. If you find the process a bit daunting, consider reaching out to a grant writer.</p><p>Follow these tips for a successful grant proposal:</p><ul><li>Make sure you meet the minimum eligibility requirements.</li><li>Understand and tailor your application to the goals, values, and objectives of the institution offering the grant.</li><li>Have a clear goal for why you want the funds and how you’ll use them.</li><li>Build your company’s credibility through clear and thorough documentation, including business records, testimonials, and research to back up any claims.</li></ul></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_116-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_117-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_118-0"> Women-owned businesses are on the rise. While female-run companies still receive disproportionately lower funding than their male counterparts, many businesses, foundations, government agencies, and organizations want to give more opportunities to women. Applying for and winning a grant specifically for women could boost your business financially, and could give you access to mentoring, exposure, and other resources for growth.<br/>
</p></div> | Of the 33.2 million small businesses in the United States, nearly 13 million of them are women-owned. These businesses employ almost 10 million people and generate nearly $1.8 trillion in revenue. Despite driving significant economic growth, female-founded companies received just 2.1% of [venture capital](https://www.investopedia.com/terms/v/venturecapital.asp) funding in the U.S. in 2022.
With more women jumping into entrepreneurship, there’s a growing need for funding to support women-owned businesses. These organizations are answering the call.
### Key Takeaways
* Small business grants for women provide crucial financial support, enabling female-identifying entrepreneurs to kick-start or expand their businesses.
* These grants often contribute to overcoming financial barriers, fostering economic empowerment and equality.
* There are private and federal grant options available, as well as alternative funding options for women small business owners.
* Women-owned businesses can gain access to resources, mentorship, and networking opportunities through grant programs, facilitating growth and sustainability.
## Private Small Business Grants for Women
### Amber Grant
Each month, WomensNet gives away $30,000 in Amber Grant funds to a women-owned business or nonprofit. They also award three year-end grants of $25,000 each to one of the 12 monthly winners of the Monthly Amber Grant, the Startup Grant, and the Business Category Grant.
To be eligible, you must be age 18 or older, and your business must be 50% women-owned, operating in the U.S. or Canada. WomensNet’s straightforward process makes it easy to apply—just share your business story and how you would plan to use the grant.
### IFundWomen Grant
The IFundWomen marketplace has a mission to close the funding gap for women-led businesses. Simply fill out the Universal Grant Application, and anytime IFundWomen partners with a new brand, they’ll match that partner’s grant criteria to businesses in the database. If there’s a match, they’ll notify you immediately.
So far, the program has deployed $170 million in grants to entrepreneurs through partnerships with brands like Visa, Caress, Johnnie Walker, Botox Cosmetic, and Comcast.
### Women Founders Network Fast Pitch Competition
The Fast Pitch Competition provides $55,000 in cash grants and more than $100,000 in professional services to tech-focused business-to-business (B2B)/business-to-consumer (B2C) companies and consumer-focused businesses.
To qualify, the founder/CEO must be a woman or the business must be majority-owned by a woman, and the company must be based in the U.S. It accepts pre-revenue plans but excludes life sciences, nonprofit, and cannabis/CBD companies.
### NASE Growth Grant
The National Association for the Self-Employed (NASE) chooses four winners each quarter to receive up to $4,000 in grant support. You can use your grant award for a range of growth purposes, including hiring employees, purchasing equipment, or investing in marketing.
To apply, you must be a NASE member in good standing. The NASE evaluates your application based on identifiable business need, how you plan to use the grant money, and its potential impact on overall business growth and success.
### Freed Fellowship Grant
Every month, one small business owner in the U.S. wins a $500 Freed grant to invest in their business. Just by applying, you’ll get feedback on your business and two months of free mentoring in the Freed Studio virtual community.
Winners get access to additional business coaching and a chance to receive an end-of-year bonus grant of $2,500.
### HerRise MicroGrant
HerSuiteSpot and The Yva Jourdan Foundation partner to help women-of-color entrepreneurs start or grow a business. The HerRise MicroGrant selects a winner each month to receive $1,000 to use for business needs such as computers, equipment, marketing materials, software purchase, and website creation.
To apply, your business must be currently registered in the U.S., 51% owned by women of color, and have less than $1 million in gross revenue. This grant excludes nonprofits, franchises, direct sellers, authorized resellers, and independent consultants.
### FoundHer Program
The FoundHer Program accelerates growth for women-founded businesses in Hawaii. The six-month program includes a $20,000 grant, a $4,000 care stipend, weekly educational workshops, a national network of business mentors and advisors, and monthly retreats.
You must be a for-profit, Hawaii-based small business that is 50% Asian American and Native Hawaiian/Pacific Islander (AANHPI) women-led. The program focuses in five core markets of Hawaii’s economy: technology, fashion, health and wellness, food systems, and keiki/education. Applications for Cohort 3 are closed, but keep an eye out for the next round of applications beginning in 2024.
### Cartier Women’s Initiative Award
All women-run and women-owned businesses can apply for the Cartier Women’s Initiative award, regardless of country or sector. For consideration, your business must demonstrate a strong and sustainable social and/or environmental impact.
Grants within this program include nine regional awards and two thematic awards: the Diversity, Equity & Inclusion Award (open to all genders), and the Science & Technology Pioneer Award. The next call for applications will run from May 22, 2024, through July 3, 2024.
### Beyond Open Small Business Grant
This grant program focuses on diverse-owned small businesses within six underinvested areas in Charlotte, North Carolina, known as the Corridors of Opportunity. In partnership with the Foundation for the Carolinas, the Beyond Open program will award three rounds of grants at around $5 million per round, for a total of $15 million.
This highly competitive grant program received thousands of applications for each of the first two rounds. The final round will take place in 2024. Eligibility requirements include: at least 51% ownership by minority, woman, veteran, LGBTQ+, or people with disabilities; physical location within one of the Corridors of Opportunity; annual revenue from $30,000 to $5 million; fewer than 200 full-time and/or part-time employees, and at least one full year of operation beginning on or before Aug. 1, 2022.
### Tory Burch Foundation Fellowship
In partnership with the Fearless Fund, the Tory Burch Foundation Fellowship selects 75 women-of-color-owned businesses to receive $10,000 and $20,000 grants. Winners also gain access to education and community.
For eligibility, your business must be operating in the United States as a for-profit company and be at least 51% woman-of-color-owned. Preference goes to businesses in the first five years of operation, with a minimum annual revenue of $100,000.
### Launch Program by Ladies Who Launch
If you’re a women- or nonbinary-owned business in the consumer packaged goods sector, check out the Launch Program by Ladies Who Launch. The program provides a $10,000 cash grant, mentorship from industry experts, and six months of free education to support you on your business journey.
Interested businesses must have an annual gross revenue from $100,000 to $499,000 and cannot currently be raising, have previously raised funds from, or intend to seek venture capital or angel investment, or a liquidity event, in the next 12 months.
### Women’s Business Development Council Equity Match Grant
For Connecticut residents, the Women’s Business Development Council gives away equity matching grants from $2,500 to $10,000 to qualified woman-owned small businesses. If awarded, you’ll need to provide a minimum match of 25% (unless located in distressed economic municipalities).
The awards committee is looking for a clear use of funds, with a direct link to growth and job creation potential. Additionally, you must have a record of annual sales of $25,000 to $2 million in the last 12 months.
### High Five Grant for Moms
The Mama Ladder’s High Five Grant program is a one-of-a-kind opportunity for mom entrepreneurs to win financial support for growing their businesses. In 2023, The Mama Ladder awarded grants totaling $38,500 to 24 worthy recipients, with a grand prize of $10,000.
Anyone who is a mother and owner (or 50% co-owner) of a revenue-generating business can apply. This includes foster moms, expecting moms, stepmoms, and mothers of adult children.
## Federal Business Grants for Women
### Grants.gov
Here you can search an extensive list of available grants, plus get help on how to apply, find available forms, and track your application. The database lists grants from government agencies and funding instruments from the Department of Energy, NASA, Department of State, Department of Health and Human Services, Native American tribal governments, and others.
### SBIR and SBTT Programs
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs support small U.S. businesses in doing research that could lead to new products. To be eligible, a business must be organized in the U.S., mostly owned by U.S. citizens, and have fewer than 500 employees.
STTR involves working with a U.S. nonprofit research institution. STTR has some extra requirements, like agreeing on who owns the ideas that come out of the research and specifying how the work is shared between the small business and the research institution.
### Program for Investment in Microentrepreneurs (PRIME)
Congress established PRIME grants as part of the Program for Investment in Microentrepreneurs Act of 1999. The program gives low-income entrepreneurs access to capital to help establish and expand their small businesses.
In 2023, individual PRIME grants ranged from $100,000 to $400,000, for a total of $8 million in awards. With emphasis on entrepreneurs in rural areas, PRIME grants typically require at least 50% in matching funds or in-kind contributions.
## Additional Resources for Female Business Owners
### Office of Women’s Business Ownership
The Office of Women’s Business Ownership, established by the U.S. [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp), empowers women entrepreneurs in the U.S. by providing advocacy, outreach, education, and support. Through Women’s Business Centers across the country, the office offers comprehensive training and counseling, access to credit, and marketing opportunities.
### DreamBuilder
DreamBuilder offers free online courses in both Spanish and English to help women start or grow their businesses. The program includes a step-by-step framework for launching a small business and a course specifically focused on financing, providing a personalized business plan, and a Capital Action Plan.
### Belle Capital USA
Belle Capital USA is an early-stage fund investing in fast-growing companies led by women. Their goal is to achieve top returns by working closely with these companies, helping them grow quickly, and prepare for success. The fund also encourages other women to become early-stage investors, recognizing the significant impact it can have on shaping the funding landscape for startups.
### Professional Associations and Industry Organizations
Joining a professional women’s organization can make a massive difference in a woman’s career. Whether you are just starting your professional journey, making a switch to a new field, or considering launching a new enterprise, it’s likely there is an organization that can help. Some professional women’s organizations focus on minorities, some on specific industries, and some are general. Examples include:
* Minority Business Development Agency
* Asian Women in Business
* Association for Women in Science
* Financial Women’s Association
* American Business Women’s Association
* Business and Professional Women International
### National Women’s Business Council (NWBC)
The National Women’s Business Council (NWBC) advises the president, Congress, and the Small Business Administration on issues affecting women business owners. The NWBC focuses on overcoming challenges like limited access to money and supports women in science, technology, engineering, and mathematics (STEM) through activities like webinars and roundtables, aiming to create a more inclusive entrepreneurial environment.
### GrantsForWomen.org
This site hosts a comprehensive directory of all the organizations and foundations that offer grant funding to women. The database includes federal, corporate, private, and professional grants, plus general information about the process.
## Funding Alternatives to Small Business Grants
Aside from grants, there are a number of alternative funding options available for women-owned businesses, such as:
* Traditional bank loans
* Microloans
* Venture capital and angel investment
* Crowdfunding
* Asset or invoice financing
* Bridge loans
* Peer-to-peer lending
* Term loans
## What Defines a Woman-Owned Business?
If your business is at least 51% woman-owned and woman-operated, it may be classified as a woman-owned business. The National Women’s Business Council (NWBC) defines two options for official certification: women-owned small business (WOSB) and economically disadvantaged women-owned small business (EDWOSB).
Businesses may self-certify for free, or obtain certification from a Small Business Administration (SBA)-approved third-party certifier for a fee. The NWBC considers both methods to be valid and equally beneficial.
To qualify as a WOSB, a woman must hold the highest officer position, work at the business full-time, and be involved in making both day-to-day and long-term business decisions for the company. Qualifying as an EDWOSB means meeting all criteria of a WOSB, plus additional income, net worth, and asset requirements.
Obtaining this certification gives you access to federal contracts and economic resources, and adds credibility to your grant applications.
## How Do I Write a Grant Proposal for a Small Business?
Applying for grants can be a bit of a waiting game. You fill out forms, submit them on time, and then cross your fingers as you wait for the decision from the committee or organization handling your request.
The key to a successful grant application is to follow instructions to a T. Failure to do so could mean removal from the consideration process. If you find the process a bit daunting, consider reaching out to a grant writer.
Follow these tips for a successful grant proposal:
* Make sure you meet the minimum eligibility requirements.
* Understand and tailor your application to the goals, values, and objectives of the institution offering the grant.
* Have a clear goal for why you want the funds and how you’ll use them.
* Build your company’s credibility through clear and thorough documentation, including business records, testimonials, and research to back up any claims.
## The Bottom Line
Women-owned businesses are on the rise. While female-run companies still receive disproportionately lower funding than their male counterparts, many businesses, foundations, government agencies, and organizations want to give more opportunities to women. Applying for and winning a grant specifically for women could boost your business financially, and could give you access to mentoring, exposure, and other resources for growth.
| Of the 33.2 million small businesses in the United States, nearly 13 million of them are women-owned. These businesses employ almost 10 million people and generate nearly $1.8 trillion in revenue. Despite driving significant economic growth, female-founded companies received just 2.1% of venture capital funding in the U.S. in 2022.
With more women jumping into entrepreneurship, there’s a growing need for funding to support women-owned businesses. These organizations are answering the call.
Key Takeaways
Small business grants for women provide crucial financial support, enabling female-identifying entrepreneurs to kick-start or expand their businesses.These grants often contribute to overcoming financial barriers, fostering economic empowerment and equality.There are private and federal grant options available, as well as alternative funding options for women small business owners.Women-owned businesses can gain access to resources, mentorship, and networking opportunities through grant programs, facilitating growth and sustainability.
Private Small Business Grants for Women
Amber Grant
Each month, WomensNet gives away $30,000 in Amber Grant funds to a women-owned business or nonprofit. They also award three year-end grants of $25,000 each to one of the 12 monthly winners of the Monthly Amber Grant, the Startup Grant, and the Business Category Grant.
To be eligible, you must be age 18 or older, and your business must be 50% women-owned, operating in the U.S. or Canada. WomensNet’s straightforward process makes it easy to apply—just share your business story and how you would plan to use the grant.
IFundWomen Grant
The IFundWomen marketplace has a mission to close the funding gap for women-led businesses. Simply fill out the Universal Grant Application, and anytime IFundWomen partners with a new brand, they’ll match that partner’s grant criteria to businesses in the database. If there’s a match, they’ll notify you immediately.
So far, the program has deployed $170 million in grants to entrepreneurs through partnerships with brands like Visa, Caress, Johnnie Walker, Botox Cosmetic, and Comcast.
Women Founders Network Fast Pitch Competition
The Fast Pitch Competition provides $55,000 in cash grants and more than $100,000 in professional services to tech-focused business-to-business (B2B)/business-to-consumer (B2C) companies and consumer-focused businesses.
To qualify, the founder/CEO must be a woman or the business must be majority-owned by a woman, and the company must be based in the U.S. It accepts pre-revenue plans but excludes life sciences, nonprofit, and cannabis/CBD companies.
NASE Growth Grant
The National Association for the Self-Employed (NASE) chooses four winners each quarter to receive up to $4,000 in grant support. You can use your grant award for a range of growth purposes, including hiring employees, purchasing equipment, or investing in marketing.
To apply, you must be a NASE member in good standing. The NASE evaluates your application based on identifiable business need, how you plan to use the grant money, and its potential impact on overall business growth and success.
Freed Fellowship Grant
Every month, one small business owner in the U.S. wins a $500 Freed grant to invest in their business. Just by applying, you’ll get feedback on your business and two months of free mentoring in the Freed Studio virtual community.
Winners get access to additional business coaching and a chance to receive an end-of-year bonus grant of $2,500.
HerRise MicroGrant
HerSuiteSpot and The Yva Jourdan Foundation partner to help women-of-color entrepreneurs start or grow a business. The HerRise MicroGrant selects a winner each month to receive $1,000 to use for business needs such as computers, equipment, marketing materials, software purchase, and website creation.
To apply, your business must be currently registered in the U.S., 51% owned by women of color, and have less than $1 million in gross revenue. This grant excludes nonprofits, franchises, direct sellers, authorized resellers, and independent consultants.
FoundHer Program
The FoundHer Program accelerates growth for women-founded businesses in Hawaii. The six-month program includes a $20,000 grant, a $4,000 care stipend, weekly educational workshops, a national network of business mentors and advisors, and monthly retreats.
You must be a for-profit, Hawaii-based small business that is 50% Asian American and Native Hawaiian/Pacific Islander (AANHPI) women-led. The program focuses in five core markets of Hawaii’s economy: technology, fashion, health and wellness, food systems, and keiki/education. Applications for Cohort 3 are closed, but keep an eye out for the next round of applications beginning in 2024.
Cartier Women’s Initiative Award
All women-run and women-owned businesses can apply for the Cartier Women’s Initiative award, regardless of country or sector. For consideration, your business must demonstrate a strong and sustainable social and/or environmental impact.
Grants within this program include nine regional awards and two thematic awards: the Diversity, Equity & Inclusion Award (open to all genders), and the Science & Technology Pioneer Award. The next call for applications will run from May 22, 2024, through July 3, 2024.
Beyond Open Small Business Grant
This grant program focuses on diverse-owned small businesses within six underinvested areas in Charlotte, North Carolina, known as the Corridors of Opportunity. In partnership with the Foundation for the Carolinas, the Beyond Open program will award three rounds of grants at around $5 million per round, for a total of $15 million.
This highly competitive grant program received thousands of applications for each of the first two rounds. The final round will take place in 2024. Eligibility requirements include: at least 51% ownership by minority, woman, veteran, LGBTQ+, or people with disabilities; physical location within one of the Corridors of Opportunity; annual revenue from $30,000 to $5 million; fewer than 200 full-time and/or part-time employees, and at least one full year of operation beginning on or before Aug. 1, 2022.
Tory Burch Foundation Fellowship
In partnership with the Fearless Fund, the Tory Burch Foundation Fellowship selects 75 women-of-color-owned businesses to receive $10,000 and $20,000 grants. Winners also gain access to education and community.
For eligibility, your business must be operating in the United States as a for-profit company and be at least 51% woman-of-color-owned. Preference goes to businesses in the first five years of operation, with a minimum annual revenue of $100,000.
Launch Program by Ladies Who Launch
If you’re a women- or nonbinary-owned business in the consumer packaged goods sector, check out the Launch Program by Ladies Who Launch. The program provides a $10,000 cash grant, mentorship from industry experts, and six months of free education to support you on your business journey.
Interested businesses must have an annual gross revenue from $100,000 to $499,000 and cannot currently be raising, have previously raised funds from, or intend to seek venture capital or angel investment, or a liquidity event, in the next 12 months.
Women’s Business Development Council Equity Match Grant
For Connecticut residents, the Women’s Business Development Council gives away equity matching grants from $2,500 to $10,000 to qualified woman-owned small businesses. If awarded, you’ll need to provide a minimum match of 25% (unless located in distressed economic municipalities).
The awards committee is looking for a clear use of funds, with a direct link to growth and job creation potential. Additionally, you must have a record of annual sales of $25,000 to $2 million in the last 12 months.
High Five Grant for Moms
The Mama Ladder’s High Five Grant program is a one-of-a-kind opportunity for mom entrepreneurs to win financial support for growing their businesses. In 2023, The Mama Ladder awarded grants totaling $38,500 to 24 worthy recipients, with a grand prize of $10,000.
Anyone who is a mother and owner (or 50% co-owner) of a revenue-generating business can apply. This includes foster moms, expecting moms, stepmoms, and mothers of adult children.
Federal Business Grants for Women
Grants.gov
Here you can search an extensive list of available grants, plus get help on how to apply, find available forms, and track your application. The database lists grants from government agencies and funding instruments from the Department of Energy, NASA, Department of State, Department of Health and Human Services, Native American tribal governments, and others.
SBIR and SBTT Programs
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs support small U.S. businesses in doing research that could lead to new products. To be eligible, a business must be organized in the U.S., mostly owned by U.S. citizens, and have fewer than 500 employees.
STTR involves working with a U.S. nonprofit research institution. STTR has some extra requirements, like agreeing on who owns the ideas that come out of the research and specifying how the work is shared between the small business and the research institution.
Program for Investment in Microentrepreneurs (PRIME)
Congress established PRIME grants as part of the Program for Investment in Microentrepreneurs Act of 1999. The program gives low-income entrepreneurs access to capital to help establish and expand their small businesses.
In 2023, individual PRIME grants ranged from $100,000 to $400,000, for a total of $8 million in awards. With emphasis on entrepreneurs in rural areas, PRIME grants typically require at least 50% in matching funds or in-kind contributions.
Additional Resources for Female Business Owners
Office of Women’s Business Ownership
The Office of Women’s Business Ownership, established by the U.S. Small Business Administration (SBA), empowers women entrepreneurs in the U.S. by providing advocacy, outreach, education, and support. Through Women’s Business Centers across the country, the office offers comprehensive training and counseling, access to credit, and marketing opportunities.
DreamBuilder
DreamBuilder offers free online courses in both Spanish and English to help women start or grow their businesses. The program includes a step-by-step framework for launching a small business and a course specifically focused on financing, providing a personalized business plan, and a Capital Action Plan.
Belle Capital USA
Belle Capital USA is an early-stage fund investing in fast-growing companies led by women. Their goal is to achieve top returns by working closely with these companies, helping them grow quickly, and prepare for success. The fund also encourages other women to become early-stage investors, recognizing the significant impact it can have on shaping the funding landscape for startups.
Professional Associations and Industry Organizations
Joining a professional women’s organization can make a massive difference in a woman’s career. Whether you are just starting your professional journey, making a switch to a new field, or considering launching a new enterprise, it’s likely there is an organization that can help. Some professional women’s organizations focus on minorities, some on specific industries, and some are general. Examples include:
Minority Business Development AgencyAsian Women in BusinessAssociation for Women in ScienceFinancial Women’s AssociationAmerican Business Women’s AssociationBusiness and Professional Women International
National Women’s Business Council (NWBC)
The National Women’s Business Council (NWBC) advises the president, Congress, and the Small Business Administration on issues affecting women business owners. The NWBC focuses on overcoming challenges like limited access to money and supports women in science, technology, engineering, and mathematics (STEM) through activities like webinars and roundtables, aiming to create a more inclusive entrepreneurial environment.
GrantsForWomen.org
This site hosts a comprehensive directory of all the organizations and foundations that offer grant funding to women. The database includes federal, corporate, private, and professional grants, plus general information about the process.
Funding Alternatives to Small Business Grants
Aside from grants, there are a number of alternative funding options available for women-owned businesses, such as:
Traditional bank loansMicroloansVenture capital and angel investmentCrowdfundingAsset or invoice financingBridge loansPeer-to-peer lendingTerm loans
What Defines a Woman-Owned Business?
If your business is at least 51% woman-owned and woman-operated, it may be classified as a woman-owned business. The National Women’s Business Council (NWBC) defines two options for official certification: women-owned small business (WOSB) and economically disadvantaged women-owned small business (EDWOSB). Businesses may self-certify for free, or obtain certification from a Small Business Administration (SBA)-approved third-party certifier for a fee. The NWBC considers both methods to be valid and equally beneficial.To qualify as a WOSB, a woman must hold the highest officer position, work at the business full-time, and be involved in making both day-to-day and long-term business decisions for the company. Qualifying as an EDWOSB means meeting all criteria of a WOSB, plus additional income, net worth, and asset requirements.Obtaining this certification gives you access to federal contracts and economic resources, and adds credibility to your grant applications.
How Do I Write a Grant Proposal for a Small Business?
Applying for grants can be a bit of a waiting game. You fill out forms, submit them on time, and then cross your fingers as you wait for the decision from the committee or organization handling your request.The key to a successful grant application is to follow instructions to a T. Failure to do so could mean removal from the consideration process. If you find the process a bit daunting, consider reaching out to a grant writer.Follow these tips for a successful grant proposal:Make sure you meet the minimum eligibility requirements.Understand and tailor your application to the goals, values, and objectives of the institution offering the grant.Have a clear goal for why you want the funds and how you’ll use them.Build your company’s credibility through clear and thorough documentation, including business records, testimonials, and research to back up any claims.
The Bottom Line
Women-owned businesses are on the rise. While female-run companies still receive disproportionately lower funding than their male counterparts, many businesses, foundations, government agencies, and organizations want to give more opportunities to women. Applying for and winning a grant specifically for women could boost your business financially, and could give you access to mentoring, exposure, and other resources for growth.
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According to our research, indinero is the best online accounting service for small businesses based on its wide range of services, easy-to-use online interface, access to experts, and its customer support. Investopedia narrowed the wide array of providers down to 20 and evaluated them on services offered, cost, ease of use, and other factors to arrive at the five firms highlighted here.
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<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best Basic Plan:</strong>
<a class="summary-list__item-top-pick" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://shareasale.com/r.cfm?b=1679958&u=2366409&m=104229&urllink=" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> 1-800Accountant</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Hiring Freelancers:</strong>
<a class="summary-list__item-top-pick" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://shareasale.com/r.cfm?b=1810427&u=2366409&m=112850&urllink=&afftrack=" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Paro</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Bookkeeping Services:</strong>
<a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://bench.co/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Bench Accounting</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Startups:</strong>
<a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://pilot.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Pilot</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
</ul>
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Best Online Accounting Firms for Small Business</span><!-- end: comp mntl-toc__heading-text mntl-text-block -->
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<div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Online Accounting Firms for Small Business" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0">
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Best Online Accounting Firms for Small Business</span><!-- end: comp mntl-toc__heading-text mntl-text-block -->
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<ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0">
<li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0">
<a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-indinero" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-indinero" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-indinero" rel="nocaes"> <span class="link__wrapper">indinero</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-1-800Accountant" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-1-800Accountant" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-basic-plan-1-800accountant" rel="nocaes"> <span class="link__wrapper">1-800Accountant</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Paro" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Paro" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-hiring-freelancers-paro" rel="nocaes"> <span class="link__wrapper">Paro</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Bench Accounting" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Bench Accounting" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-bookkeeping-services-bench-accounting" rel="nocaes"> <span class="link__wrapper">Bench Accounting</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Pilot" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4">
<a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Pilot" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-startups-pilot" rel="nocaes"> <span class="link__wrapper">Pilot</span>
</a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item -->
<li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0">
See More (2)</li><!-- end: comp toc-items__chop mntl-text-block -->
<li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0">
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<a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-The Bottom Line" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-the-bottom-line" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">The Bottom Line</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link -->
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<div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1">
<a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Compare Providers" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-providers" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare Providers</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link -->
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<div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2">
<a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Frequently Asked Questions (FAQs)" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-is-an-accounting-firm" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Frequently Asked Questions (FAQs)</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link -->
</div><!-- end: comp mntl-toc__list-item-heading mntl-block -->
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<li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3">
<div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3">
<a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-chose-the-best-online-accounting-firms" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link -->
</div><!-- end: comp mntl-toc__list-item-heading mntl-block -->
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<div class="loc article-body__inner article-body__inner">
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0">
<span class="heading-toc" id="toc-best-overall-indinero"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best Overall</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> indinero</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
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<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 0px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="Online accounting firm indinero's logo." class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/2Gr_DBdaNaw01ocKdFDhHHT-ckY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Indinero-logo-73ce07778c754abeb8877b9785b360ac.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/>
<noscript>
<img alt="Online accounting firm indinero's logo." class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/2Gr_DBdaNaw01ocKdFDhHHT-ckY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Indinero-logo-73ce07778c754abeb8877b9785b360ac.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0">
<span class="figure-article-caption-owner"><p>indinero</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
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<div class="tabbed-sc-block-intro__content">
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at indinero" data-retailer-type="other" data-tracking-container="true" href="https://www.indinero.com/" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
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</div>
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-2">
indinero blankets its clients with a wide range of accounting services, an easy-to-use platform, access to in-house experts, and a dedicated customer support team, making it our choice as the best overall accounting firm.
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<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-3">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Extensive array of services</p></li>
<li><p>Easy-to-use dashboard</p></li>
<li><p>Great customer support</p></li>
<li><p>Mobile app</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Base package on the expensive end of the spectrum</p></li>
<li><p>Lack of advanced features such as time-tracking and project manager</p></li>
</ul>
</div>
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4">
Since its founding in 2009, indinero has been perfecting its offering of an all-in-one accounting service for small businesses. In addition to one of the widest arrays of services, inDinero offers clients access to a team of staff <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accountant.asp">accountants</a> and financial experts, just a click or call away with its easy-to-use dashboard or mobile app. indinero checks all the boxes, making it our choice as the best overall accounting firm for small businesses.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-5">
While indinero's base plan may be a little pricier than other firms, its all-in-one accounting services still will save fledgling businesses time and money. For $750 a month, the Essential plan is stacked full of functions including easy invoicing, P&L and balance sheet creation, accounts payable and receivable tracking and reporting, monthly reconciliations, employee reimbursements, financial reporting, and document management. It also comes with a mobile app and a dedicated account manager. The Essential plan is designed for startups and smaller businesses that use cash basis accounting. If you need accrual basis accounting, you will need to step up to its Growth plan.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-6">
At $1250 per month, the Growth plan is designed for more established small and medium-sized businesses. It's pricier, but it adds some significant features, such as accrual accounting and regular controller support. Businesses that use the Growth plan are provided with processes that can be scaled as they grow.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-7">
<span class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">
Note</span><!-- end: comp mntl-sc-block-callout-heading mntl-text-block -->
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0">
<p>For additional fees, indinero offers tax support for filing state and federal taxes for current or previous years. You also can add a fractional CFO to help with financial projections, cash management, business analytics, and budgeting. Plus, if you've been neglecting your books, indinero offers catch-up bookkeeping.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block -->
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8">
For larger companies with more complex accounting needs and the need for business metrics analysis and audit support, indinero will design a custom plan that includes fractional <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cfo.asp">CFO</a> services, multiple entity support, cash flow projections, and payroll support.<br/>
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9">
In addition to its real-time dashboard, which offers self-support features, clients can tap into indinero's support team via phone, email, or live chat.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10">
On the downside, if you aren't using Gusto, Stripe, Expensify, Netsuite, or TriNet, you'll have to use indinero's software, which is powerful, but it's not portable if you ever decide to switch firms.
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<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1">
<span class="heading-toc" id="toc-best-basic-plan-1-800accountant"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best Basic Plan</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> 1-800Accountant</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-11" style="--imgWidth: 0px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="1-800Accountant" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/v9zj1D9gv5oItjFXy19fiJPG3L8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/1-800Accountant-f2fecd2d446e4b34baba46b5bf0550c8.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/>
<noscript>
<img alt="1-800Accountant" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/v9zj1D9gv5oItjFXy19fiJPG3L8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/1-800Accountant-f2fecd2d446e4b34baba46b5bf0550c8.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1">
<span class="figure-article-caption-owner"><p>1-800Accountant</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-12">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at 1-800Accountant" data-retailer-type="other" data-tracking-container="true" href="https://shareasale.com/r.cfm?b=1679958&u=2366409&m=104229&urllink=" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13">
For small businesses with straightforward accounting needs, 1-800Accountant offers a solid basic plan for a flat fee of $139 a month, making it our pick as the best accounting firm for basic plans.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-14">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Low flat fee regardless of the number of transactions</p></li>
<li><p>Dedicated local accountant</p></li>
<li><p>Reasonably priced tax preparation and filing services</p></li>
<li><p>Mobile app</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Base service is somewhat limited</p></li>
<li><p>Costs increase substantially for add-on services</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-15">
Founded in 1999 by two former members of Price Waterhouse, 1-800Accountant is one of the more established online accounting firms. It combines personal support from a nationwide team of experts with the convenience of digital technology for a flat rate, which is why we selected it as the best accounting firm for a basic plan.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16">
1-800Accountant offers a nationwide team of Certified Public Accountants (CPAs), <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/enrolled_agent.asp">enrolled agents</a>, tax professionals, and other experts lending their expertise to a full array of accounting services. Clients are matched with a local accountant or bookkeeper who can provide state- and industry-specific guidance in managing their books.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17">
For just $139 a month, clients receive a dedicated accountant and a detailed monthly reports. They also have the ability to create and send invoices and prepare financial reports. A dedicated bookkeeper sets up your account and connects your bank and credit accounts for synchronized transaction reporting. The software used by 1-800Accountant integrates with many of the top accounting software packages.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-18">
From there, clients can add services with an upgraded plan. For example, if your business reaches a growth threshold, you can pay $239 a month for a plan that will also prepare and file both your personal and business taxes.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19">
You also can add bookkeeping, priority support, and financial reports with the Enterprise plan for $399.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20">
Payroll services also are available from 1-800Accountant for getting your employees paid, withholding taxes, and taking care of your payroll taxes. The service maintains all required employee records.<br>
</br></p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21">
Also, 1-800Accountant offers every business a free tax savings consultation with an expert. Better yet, 1-800Accountant guarantees its customers maximum tax savings by finding every deduction.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22">
Once your account is set up, you have secure access to your assigned accountant via messaging, phone, email, or chat. A mobile app keeps you in contact with your financials.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2">
<span class="heading-toc" id="toc-best-for-hiring-freelancers-paro"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Hiring Freelancers</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> Paro</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-23" style="--imgWidth: 0px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="Paro" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/tijAWqtx0sflprxeyrnLSnGSnH8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Paro-1848d1d3c2d04f76b69a0fc4c7e5c784.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/>
<noscript>
<img alt="Paro" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/tijAWqtx0sflprxeyrnLSnGSnH8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Paro-1848d1d3c2d04f76b69a0fc4c7e5c784.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2">
<span class="figure-article-caption-owner"><p> Paro</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-24">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at Paro" data-retailer-type="other" data-tracking-container="true" href="https://shareasale.com/r.cfm?b=1810427&u=2366409&m=112850&urllink=&afftrack=" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
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</div>
</div>
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25">
Businesses that prefer more direct business relationships can use Paro to match with an accountant or bookkeeper that best meets their finance and accounting needs. That makes Paro our choice as the best accounting firm for hiring freelance accountants.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-26">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Flexibility to choose who to work with and dictate project scope</p></li>
<li><p>Direct relationship with a financial pro</p></li>
<li><p>Extensive vetting process</p></li>
<li><p>Pay base hourly rates</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Can be more expensive than paying a flat fee for services</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27">
Paro is not an accounting firm like others on this list. Instead, it operates as a marketplace that brings together businesses with vetted finance and accounting experts to directly work with you. For that, Paro makes our list as the best accounting firm for hiring freelancers.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28">
Paro uses a multi-step vetting process to review the applications they receive and build a database of thousands of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cpa.asp">CPAs</a>, financial analysts, internal auditors, finance vice presidents, and bookkeepers. The vetting process, which consists of background and reference checks, a skill assessment, interviews, and completion of a hands-on project, has screened out 98% of its applicants, leaving only the top talent in its database. Many of Paro's freelancers have worked at highly respected companies such as Deloitte, Ernst and Young, KPMG, and the IRS.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-29">
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1">
<p>Freelancers, who must be approved by Paro, establish their own fees, but Paro does not list a range of typical rates you should expect to pay. According to Indeed, Paro freelance accountants earn an average of $27 per hour with a low of $25 per hour and a high of $30 per hour.<span class="ql-inline-citation" data-cite="1"></span> The great thing about hiring a Paro freelancer is you pay only their base rate, which is a fraction of the cost of hiring one of these professionals through an accounting or bookkeeping firm.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block -->
</div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30">
Once you complete a short questionnaire, Paro works with you to find the right match based on the size of your business, the financial role that needs to be filled, and your industry. It also will look for candidates who are conversant in your software, such as QuickBooks, Xero, Netsuite, and many other programs.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-31">
Paro's algorithm matches you with a few candidates for you to screen, and, when you find one you want to hire, Paro makes the introduction. You also are assigned a dedicated account manager to help facilitate the completion of the project.<br/>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3">
<span class="heading-toc" id="toc-best-for-bookkeeping-services-bench-accounting"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Bookkeeping Services</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> Bench Accounting</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-32" style="--imgWidth: 0px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="Bench Accounting" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/TSlcXJ95mR0ckPqyMvIAHaf7R-c=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/BenchAccounting-5bb478dcc5d242d0897f70cc6c62c247.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/>
<noscript>
<img alt="Bench Accounting" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/TSlcXJ95mR0ckPqyMvIAHaf7R-c=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/BenchAccounting-5bb478dcc5d242d0897f70cc6c62c247.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3">
<span class="figure-article-caption-owner"><p>Bench Accounting</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-33">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Bench Accounting" data-retailer-type="other" data-tracking-container="true" href="https://bench.co/" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-34">
For businesses with straightforward financials that are ready to outsource their bookkeeping, Bench Accounting is equipped to take it all on, making it our pick as the best accounting firm for bookkeeping services.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-35">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Dedicated team</p></li>
<li><p>Offers both cash basis and accrual basis reporting</p></li>
<li><p>Reasonable prices</p></li>
<li><p>Supports tax preparation with a year-end financial package</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Proprietary software makes it difficult to switch providers</p></li>
<li><p>Services don't include bill pay, invoicing, or check writing</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-36">
Bench Accounting was launched in 2012 for the sole purpose of serving the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionals/091715/career-advice-accounting-vs-bookkeeping.asp">bookkeeping</a> needs of small businesses for both cash basis and accrual basis reporting. It's now the largest bookkeeping service, with in-house professionals doing the bookkeeping for more than 11,000 business owners, which is why we chose it as the best accounting firm for bookkeeping services.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37">
Although it's a virtual service, Bench personalizes its clients' experiences by assigning them a dedicated team of in-house professionals. The team takes over all bookkeeping functions, including setting up your account and linking it with all your financial accounts to upload data. The team then categorizes all your transactions, reconciles your bank accounts, and prepares monthly financial statements.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-38">
<span class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0-1">
Note</span><!-- end: comp mntl-sc-block-callout-heading mntl-text-block -->
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-2">
<p>For an additional fee, Bench offers catch-up bookkeeping if you're behind on your financials. It also offers limited support for business taxes by preparing a year-end financial package for your CPA. You can pay for additional tax services by adding BenchTax to your bookkeeping services. A licensed tax pro will prepare and file your taxes.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block -->
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-39">
One downside to Bench is its use of proprietary software. Although it is powerful and effective, it doesn't sync with industry standards such as QuickBooks or Xero. That will make it difficult to switch providers in the future. The other downside is that its services don't include bill pay, sending invoices, or writing checks.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-40">
Bench's reporting functions also are limited. If you already work with an accountant or CPA, chances are good they prefer to work with QuickBooks rather than with proprietary software like Bench.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41">
Clients can contact their team members during business hours from their computers or mobile app and expect a response within one business day or they can schedule a call.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42">
Bench's pricing starts at $249 per month for the Essential plan while the Premium plan that includes tax advisory and filing runs $399 per month.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
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<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4">
<span class="heading-toc" id="toc-best-for-startups-pilot"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Startups</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> Pilot</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-43" style="--imgWidth: 860px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:66.6%;">
<img alt="Pilot" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/rjBRq4VB2NeBjGo-QuycDNJS8F8=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Pilot-8c05b015ad4d4a54b60305eb6463c52c.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/>
<noscript>
<img alt="Pilot" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/rjBRq4VB2NeBjGo-QuycDNJS8F8=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Pilot-8c05b015ad4d4a54b60305eb6463c52c.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4">
<span class="figure-article-caption-owner"><p> Pilot</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res -->
<div class="tabbed-sc-block-intro__content">
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-44">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Pilot" data-retailer-type="other" data-tracking-container="true" href="https://pilot.com/" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
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</div>
</div>
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45">
Pilot is a relatively new firm established by former startup founders backed by entrepreneurs who clearly understand other startups and their accounting needs, making it our pick for the best accounting firm for startup companies.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-46">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Dedicated account manager</p></li>
<li><p>Quick setup</p></li>
<li><p>QuickBooks Integration</p></li>
<li><p>Accrual basis accounting</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>No cash-basis accounting</p></li>
<li><p>Fees on the higher end of the price spectrum</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47">
Started by successful startup entrepreneurs, Pilot understands the challenges other startup <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/entrepreneur.asp">entrepreneurs</a> face in keeping the books and preparing their businesses for growth. That's why we chose Pilot as the best accounting firm for startup businesses.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-48">
The handholding begins as soon as you sign up with Pilot and are immediately assigned a dedicated bookkeeper as your account manager. That person is your point of contact who will come to know you and your business.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-49">
The next step is to work with your account manager to integrate your existing software and processes with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/031215/quickbooks-vs-quicken.asp">QuickBooks</a>. From that point on, you will receive monthly reports, including cash flow, profit and loss, and balance sheet statements.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-50">
In addition, Pilot performs automatic transaction imports, monthly account reconciliations, and cash forecasting. Inventory tracking, accounts payable and receivable reporting, as well as tax preparation and filing, are add-on options for an additional fee. That's a comprehensive offering for startups or small businesses that want to scale up quickly.<br/>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-51">
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-3">
<p>If your business does only cash-basis accounting, you'll need to look elsewhere because Pilot does only accrual-basis accounting. They insist that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/09/accrual-accounting.asp">accrual-basis accounting</a> is better for businesses that want to grow. For companies on the fast track, Pilot also offers CFO services for an additional fee.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block -->
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52">
All price plans include unlimited accounts and are billed annually upfront with no early termination fee. The Starter plan starts at $499 per month for companies with monthly expenses between zero and $15,000. But the higher your monthly expenses go, the higher the fee. The Core plan starts at $699 per month and includes expedited books delivery and monthly phone reviews. This plan also has a sliding scale based on monthly expenses. Pilot offers custom pricing that includes support for multiple entities, accounts receivable, and payable reporting along with a fully customizable chart of accounts.
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</div>
<div class="article-outro article-container">
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<span class="heading-toc" id="toc-the-bottom-line"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1">
As this list shows, the offerings and pricing of accounting firms for small businesses vary widely. The key is understanding your accounting needs and the value of having someone from outside your business fulfilling those functions. Even the most expensive firm on this list is probably less costly than hiring someone to perform them in-house.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-2">
If your budget is a concern, you can consider low-cost options, such as 1-800Accountant or Bench Accounting. However, if you're looking for the best all-around accounting firm, you can’t go wrong with indinero for its comprehensive offering, excellent customer support, and reasonable pricing.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<span class="heading-toc" id="toc-compare-providers"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-3"> <span class="mntl-sc-block-heading__text"> Compare Providers </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading -->
<figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-4">
<div class="mntl-sc-block-table__table-wrapper">
<table class="mntl-sc-block-table__table">
<colgroup span="1" style=""></colgroup>
<colgroup span="1" style=""></colgroup>
<colgroup span="1" style=""></colgroup>
<thead>
<tr>
<th class="mntl-sc-block-table__title" colspan="3">Best Accounting Firms</th>
</tr>
<tr>
<th><b>Provider</b></th>
<th>Category</th>
<th>Costs</th>
</tr>
</thead>
<tbody data-check="0">
<tr>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.indinero.com/" rel="sponsored nofollow">indinero</a></td>
<td>Best Overall</td>
<td>Starting at $750/mo</td>
</tr>
<tr>
<td><a class="null" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://shareasale.com/r.cfm?b=1679958&u=2366409&m=104229&urllink=&afftrack=5094262-nbc7f0f23c8044f57add176b7fa4302ce21" rel="sponsored nofollow">1-800Accountant</a></td>
<td>Best Basic Plan</td>
<td>$139/mo</td>
</tr>
<tr>
<td><a class="null" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://shareasale.com/r.cfm?b=1810427&u=2366409&m=112850&urllink=&afftrack=&afftrack=5094262-nbc7f0f23c8044f57add176b7fa4302ce21" rel="sponsored nofollow">Paro</a></td>
<td>Best for Hiring Freelancers</td>
<td>Freelancers decide their own rate</td>
</tr>
<tr>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://bench.co/" rel="sponsored nofollow">Bench Accounting</a></td>
<td>Best for Bookkeeping Services</td>
<td>Starting at $249/mo</td>
</tr>
<tr>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://pilot.com/" rel="sponsored nofollow">Pilot</a></td>
<td>Best for Startups</td>
<td>Starting at $499/mo</td>
</tr>
</tbody>
</table>
</div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table -->
<div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-5">
<span class="heading-toc" id="toc-what-is-an-accounting-firm"></span>
<h2 class="mntl-sc-block-questionandanswer__question">What Is an Accounting Firm?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>An accounting firm is fully staffed with experts to offer bookkeeping and accounting services for your business. It prepares financial records to help you track your revenues and expenses. It can also conduct an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/audit.asp">audit</a> to organize your processes and controls to ensure records are properly kept with taxation services to help you prepare tax returns and advise you on how to reduce your tax liability. Accounting firms help you with your long-range planning with cash flow projections and advice on how to allocate your capital for an additional cost.</p><p>Online accounting firms use sophisticated data-encryption and communications technology to link clients to their services via an online platform. Source documents and data can be uploaded to cloud storage where they can be accessed from any remote location.</p><p>Firms typically bill for their services at a fixed monthly rate, benefiting a business from a budget planning standpoint. Some services may be billed on a pay-for-performance basis.</p></div>
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<span class="heading-toc" id="toc-who-should-use-accounting-firms"></span>
<h2 class="mntl-sc-block-questionandanswer__question">Who Should Use Accounting Firms?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>For businesses on a growth track, the cost of not outsourcing bookkeeping and accounting can be detrimental to the business. This happens when performing the functions in-house interferes with essential business growth activities. Every hour you spend on bookkeeping or accounting is one less hour spent <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketing.asp">marketing</a> your business, building client relationships, and other business development activities. At some point, the cost to your business in terms of lost growth opportunities becomes immeasurable. That's when you know it's time to outsource your accounting function.</p><p>You know you need to hire an accounting firm when </p><ul><li>The growth of your business outpaces your capacity to efficiently manage your cash flow</li><li>You need to raise capital through bank financing</li><li>You need to create a solid business plan</li><li>When you need advice about your business's legal structure</li><li>When you need help preparing your taxes</li></ul></div>
</div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer -->
<div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-7">
<span class="heading-toc" id="toc-how-do-you-choose-an-accounting-firm"></span>
<h2 class="mntl-sc-block-questionandanswer__question">How Do You Choose an Accounting Firm?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Small businesses have a wider range of needs than individuals, so it's essential to work with an accounting firm that caters to small businesses—even better, one with experience working with businesses in your industry. </p><p>Fees also are an important consideration. The cost of outsourcing these functions must make sense for your business based on the level of service it needs and your budget. You should expect to pay more for accounting services as a business than you would as an individual because there are more functions to perform.</p><p>If you already are using an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-accounting-software-for-small-business-5069679">accounting or bookkeeping software program</a>, it would be ideal to work with a firm that utilizes the same software. Many firms accommodate multiple software programs. If you don't already use a software program, the accounting firm will recommend a package.</p><p>Finally, look at the range of services offered. You may need only account reconciliation services now but will need to layer on financial and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/041515/why-cash-management-key-business-success.asp">cash flow management services</a> later. If a firm only offers a package that includes services you don't need, you may pay more than you should at this stage in your business.</p></div>
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<span class="heading-toc" id="toc-what-do-accounting-firms-cost"></span>
<h2 class="mntl-sc-block-questionandanswer__question">What Do Accounting Firms Cost?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Online accounting firms typically charge a monthly fee, which can help businesses to plan their expenses. For many firms, the monthly fee is based on the level of services you need. You can pay as low as $150 a month for a starter package that includes day-to-day bookkeeping, account reconciliation, and financial report preparation. With some firms, you can then layer on services or choose a mid-tier package that provides for cash flow management, accounts payable and receivable, and expense tracking for $300 to $500 a month.</p><p>Many firms that charge a flat monthly fee also offer tax filing services for an extra fixed annual fee in the range of $750 to $900. Some offer payroll services as an extra for $40 to $80 a month. </p><p>As you'll find with some of the firms in this review, billing methods can vary beyond a monthly fee, such as an hourly, pay-for-performance fee, or rates based on the number of monthly transactions. In all cases, it's important to crunch the numbers to see what rate or form of billing makes sense for your business.</p></div>
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<span class="heading-toc" id="toc-how-we-chose-the-best-online-accounting-firms"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-9"> <span class="mntl-sc-block-heading__text"> How We Chose the Best Online Accounting Firms </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading -->
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If you've done your own search for accounting firms, you know there are dozens from which to choose. So, narrowing your choices to the ones that best suit your needs can be daunting. With this review, we did most of the leg work to narrow the list from 20 of the top online accounting firms to five of the best in various categories. In reviewing the list through a small business lens, we applied a strict set of criteria that included length of operating history, small business focus, range of services, distinct features or services offered, cost, and level of customer support.
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According to our research, indinero is the best online accounting service for small businesses based on its wide range of services, easy-to-use online interface, access to experts, and its customer support. Investopedia narrowed the wide array of providers down to 20 and evaluated them on services offered, cost, ease of use, and other factors to arrive at the five firms highlighted here.
## The Best Online Accounting Firms for Small Business
* **Best Overall:**
[indinero](https://www.indinero.com/)
* **Best Basic Plan:**
[1-800Accountant](https://shareasale.com/r.cfm?b=1679958&u=2366409&m=104229&urllink=)
* **Best for Hiring Freelancers:**
[Paro](https://shareasale.com/r.cfm?b=1810427&u=2366409&m=112850&urllink=&afftrack=)
* **Best for Bookkeeping Services:**
[Bench Accounting](https://bench.co/)
* **Best for Startups:**
[Pilot](https://pilot.com/)
Best Online Accounting Firms for Small Business
Expand
Best Online Accounting Firms for Small Business
* [Our Top Picks](#summary-list)
* [indinero](#toc-best-overall-indinero)
* [1-800Accountant](#toc-best-basic-plan-1-800accountant)
* [Paro](#toc-best-for-hiring-freelancers-paro)
* [Bench Accounting](#toc-best-for-bookkeeping-services-bench-accounting)
* [Pilot](#toc-best-for-startups-pilot)
* See More (2)
* [The Bottom Line](#toc-the-bottom-line)
* [Compare Providers](#toc-compare-providers)
* [Frequently Asked Questions (FAQs)](#toc-what-is-an-accounting-firm)
* [Methodology](#toc-how-we-chose-the-best-online-accounting-firms)
### Best Overall
:
indinero
---
![Online accounting firm indinero's logo.]()
:fill(white):max_bytes(150000):strip_icc()/Indinero-logo-73ce07778c754abeb8877b9785b360ac.jpg)
indinero
[Learn More](https://www.indinero.com/)
indinero blankets its clients with a wide range of accounting services, an easy-to-use platform, access to in-house experts, and a dedicated customer support team, making it our choice as the best overall accounting firm.
Pros
* Extensive array of services
* Easy-to-use dashboard
* Great customer support
* Mobile app
Cons
* Base package on the expensive end of the spectrum
* Lack of advanced features such as time-tracking and project manager
Since its founding in 2009, indinero has been perfecting its offering of an all-in-one accounting service for small businesses. In addition to one of the widest arrays of services, inDinero offers clients access to a team of staff [accountants](https://www.investopedia.com/terms/a/accountant.asp) and financial experts, just a click or call away with its easy-to-use dashboard or mobile app. indinero checks all the boxes, making it our choice as the best overall accounting firm for small businesses.
While indinero's base plan may be a little pricier than other firms, its all-in-one accounting services still will save fledgling businesses time and money. For $750 a month, the Essential plan is stacked full of functions including easy invoicing, P&L and balance sheet creation, accounts payable and receivable tracking and reporting, monthly reconciliations, employee reimbursements, financial reporting, and document management. It also comes with a mobile app and a dedicated account manager. The Essential plan is designed for startups and smaller businesses that use cash basis accounting. If you need accrual basis accounting, you will need to step up to its Growth plan.
At $1250 per month, the Growth plan is designed for more established small and medium-sized businesses. It's pricier, but it adds some significant features, such as accrual accounting and regular controller support. Businesses that use the Growth plan are provided with processes that can be scaled as they grow.
Note
For additional fees, indinero offers tax support for filing state and federal taxes for current or previous years. You also can add a fractional CFO to help with financial projections, cash management, business analytics, and budgeting. Plus, if you've been neglecting your books, indinero offers catch-up bookkeeping.
For larger companies with more complex accounting needs and the need for business metrics analysis and audit support, indinero will design a custom plan that includes fractional [CFO](https://www.investopedia.com/terms/c/cfo.asp) services, multiple entity support, cash flow projections, and payroll support.
In addition to its real-time dashboard, which offers self-support features, clients can tap into indinero's support team via phone, email, or live chat.
On the downside, if you aren't using Gusto, Stripe, Expensify, Netsuite, or TriNet, you'll have to use indinero's software, which is powerful, but it's not portable if you ever decide to switch firms.
### Best Basic Plan
:
1-800Accountant
---
![1-800Accountant]()
:fill(white):max_bytes(150000):strip_icc()/1-800Accountant-f2fecd2d446e4b34baba46b5bf0550c8.jpg)
1-800Accountant
[Learn More](https://shareasale.com/r.cfm?b=1679958&u=2366409&m=104229&urllink=)
For small businesses with straightforward accounting needs, 1-800Accountant offers a solid basic plan for a flat fee of $139 a month, making it our pick as the best accounting firm for basic plans.
Pros
* Low flat fee regardless of the number of transactions
* Dedicated local accountant
* Reasonably priced tax preparation and filing services
* Mobile app
Cons
* Base service is somewhat limited
* Costs increase substantially for add-on services
Founded in 1999 by two former members of Price Waterhouse, 1-800Accountant is one of the more established online accounting firms. It combines personal support from a nationwide team of experts with the convenience of digital technology for a flat rate, which is why we selected it as the best accounting firm for a basic plan.
1-800Accountant offers a nationwide team of Certified Public Accountants (CPAs), [enrolled agents](https://www.investopedia.com/terms/e/enrolled_agent.asp), tax professionals, and other experts lending their expertise to a full array of accounting services. Clients are matched with a local accountant or bookkeeper who can provide state- and industry-specific guidance in managing their books.
For just $139 a month, clients receive a dedicated accountant and a detailed monthly reports. They also have the ability to create and send invoices and prepare financial reports. A dedicated bookkeeper sets up your account and connects your bank and credit accounts for synchronized transaction reporting. The software used by 1-800Accountant integrates with many of the top accounting software packages.
From there, clients can add services with an upgraded plan. For example, if your business reaches a growth threshold, you can pay $239 a month for a plan that will also prepare and file both your personal and business taxes.
You also can add bookkeeping, priority support, and financial reports with the Enterprise plan for $399.
Payroll services also are available from 1-800Accountant for getting your employees paid, withholding taxes, and taking care of your payroll taxes. The service maintains all required employee records.
Also, 1-800Accountant offers every business a free tax savings consultation with an expert. Better yet, 1-800Accountant guarantees its customers maximum tax savings by finding every deduction.
Once your account is set up, you have secure access to your assigned accountant via messaging, phone, email, or chat. A mobile app keeps you in contact with your financials.
### Best for Hiring Freelancers
:
Paro
---
![Paro]()
:fill(white):max_bytes(150000):strip_icc()/Paro-1848d1d3c2d04f76b69a0fc4c7e5c784.jpg)
Paro
[Learn More](https://shareasale.com/r.cfm?b=1810427&u=2366409&m=112850&urllink=&afftrack=)
Businesses that prefer more direct business relationships can use Paro to match with an accountant or bookkeeper that best meets their finance and accounting needs. That makes Paro our choice as the best accounting firm for hiring freelance accountants.
Pros
* Flexibility to choose who to work with and dictate project scope
* Direct relationship with a financial pro
* Extensive vetting process
* Pay base hourly rates
Cons
* Can be more expensive than paying a flat fee for services
Paro is not an accounting firm like others on this list. Instead, it operates as a marketplace that brings together businesses with vetted finance and accounting experts to directly work with you. For that, Paro makes our list as the best accounting firm for hiring freelancers.
Paro uses a multi-step vetting process to review the applications they receive and build a database of thousands of [CPAs](https://www.investopedia.com/terms/c/cpa.asp), financial analysts, internal auditors, finance vice presidents, and bookkeepers. The vetting process, which consists of background and reference checks, a skill assessment, interviews, and completion of a hands-on project, has screened out 98% of its applicants, leaving only the top talent in its database. Many of Paro's freelancers have worked at highly respected companies such as Deloitte, Ernst and Young, KPMG, and the IRS.
Freelancers, who must be approved by Paro, establish their own fees, but Paro does not list a range of typical rates you should expect to pay. According to Indeed, Paro freelance accountants earn an average of $27 per hour with a low of $25 per hour and a high of $30 per hour. The great thing about hiring a Paro freelancer is you pay only their base rate, which is a fraction of the cost of hiring one of these professionals through an accounting or bookkeeping firm.
Once you complete a short questionnaire, Paro works with you to find the right match based on the size of your business, the financial role that needs to be filled, and your industry. It also will look for candidates who are conversant in your software, such as QuickBooks, Xero, Netsuite, and many other programs.
Paro's algorithm matches you with a few candidates for you to screen, and, when you find one you want to hire, Paro makes the introduction. You also are assigned a dedicated account manager to help facilitate the completion of the project.
### Best for Bookkeeping Services
:
Bench Accounting
---
![Bench Accounting]()
:fill(white):max_bytes(150000):strip_icc()/BenchAccounting-5bb478dcc5d242d0897f70cc6c62c247.jpg)
Bench Accounting
[Learn More](https://bench.co/)
For businesses with straightforward financials that are ready to outsource their bookkeeping, Bench Accounting is equipped to take it all on, making it our pick as the best accounting firm for bookkeeping services.
Pros
* Dedicated team
* Offers both cash basis and accrual basis reporting
* Reasonable prices
* Supports tax preparation with a year-end financial package
Cons
* Proprietary software makes it difficult to switch providers
* Services don't include bill pay, invoicing, or check writing
Bench Accounting was launched in 2012 for the sole purpose of serving the [bookkeeping](https://www.investopedia.com/articles/professionals/091715/career-advice-accounting-vs-bookkeeping.asp) needs of small businesses for both cash basis and accrual basis reporting. It's now the largest bookkeeping service, with in-house professionals doing the bookkeeping for more than 11,000 business owners, which is why we chose it as the best accounting firm for bookkeeping services.
Although it's a virtual service, Bench personalizes its clients' experiences by assigning them a dedicated team of in-house professionals. The team takes over all bookkeeping functions, including setting up your account and linking it with all your financial accounts to upload data. The team then categorizes all your transactions, reconciles your bank accounts, and prepares monthly financial statements.
Note
For an additional fee, Bench offers catch-up bookkeeping if you're behind on your financials. It also offers limited support for business taxes by preparing a year-end financial package for your CPA. You can pay for additional tax services by adding BenchTax to your bookkeeping services. A licensed tax pro will prepare and file your taxes.
One downside to Bench is its use of proprietary software. Although it is powerful and effective, it doesn't sync with industry standards such as QuickBooks or Xero. That will make it difficult to switch providers in the future. The other downside is that its services don't include bill pay, sending invoices, or writing checks.
Bench's reporting functions also are limited. If you already work with an accountant or CPA, chances are good they prefer to work with QuickBooks rather than with proprietary software like Bench.
Clients can contact their team members during business hours from their computers or mobile app and expect a response within one business day or they can schedule a call.
Bench's pricing starts at $249 per month for the Essential plan while the Premium plan that includes tax advisory and filing runs $399 per month.
### Best for Startups
:
Pilot
---
![Pilot]()
:fill(white):max_bytes(150000):strip_icc()/Pilot-8c05b015ad4d4a54b60305eb6463c52c.jpg)
Pilot
[Learn More](https://pilot.com/)
Pilot is a relatively new firm established by former startup founders backed by entrepreneurs who clearly understand other startups and their accounting needs, making it our pick for the best accounting firm for startup companies.
Pros
* Dedicated account manager
* Quick setup
* QuickBooks Integration
* Accrual basis accounting
Cons
* No cash-basis accounting
* Fees on the higher end of the price spectrum
Started by successful startup entrepreneurs, Pilot understands the challenges other startup [entrepreneurs](https://www.investopedia.com/terms/e/entrepreneur.asp) face in keeping the books and preparing their businesses for growth. That's why we chose Pilot as the best accounting firm for startup businesses.
The handholding begins as soon as you sign up with Pilot and are immediately assigned a dedicated bookkeeper as your account manager. That person is your point of contact who will come to know you and your business.
The next step is to work with your account manager to integrate your existing software and processes with [QuickBooks](https://www.investopedia.com/articles/personal-finance/031215/quickbooks-vs-quicken.asp). From that point on, you will receive monthly reports, including cash flow, profit and loss, and balance sheet statements.
In addition, Pilot performs automatic transaction imports, monthly account reconciliations, and cash forecasting. Inventory tracking, accounts payable and receivable reporting, as well as tax preparation and filing, are add-on options for an additional fee. That's a comprehensive offering for startups or small businesses that want to scale up quickly.
If your business does only cash-basis accounting, you'll need to look elsewhere because Pilot does only accrual-basis accounting. They insist that [accrual-basis accounting](https://www.investopedia.com/ask/answers/09/accrual-accounting.asp) is better for businesses that want to grow. For companies on the fast track, Pilot also offers CFO services for an additional fee.
All price plans include unlimited accounts and are billed annually upfront with no early termination fee. The Starter plan starts at $499 per month for companies with monthly expenses between zero and $15,000. But the higher your monthly expenses go, the higher the fee. The Core plan starts at $699 per month and includes expedited books delivery and monthly phone reviews. This plan also has a sliding scale based on monthly expenses. Pilot offers custom pricing that includes support for multiple entities, accounts receivable, and payable reporting along with a fully customizable chart of accounts.
## The Bottom Line
As this list shows, the offerings and pricing of accounting firms for small businesses vary widely. The key is understanding your accounting needs and the value of having someone from outside your business fulfilling those functions. Even the most expensive firm on this list is probably less costly than hiring someone to perform them in-house.
If your budget is a concern, you can consider low-cost options, such as 1-800Accountant or Bench Accounting. However, if you're looking for the best all-around accounting firm, you can’t go wrong with indinero for its comprehensive offering, excellent customer support, and reasonable pricing.
## Compare Providers
| Best Accounting Firms | | |
| --- | --- | --- |
| **Provider** | Category | Costs |
| [indinero](https://www.indinero.com/) | Best Overall | Starting at $750/mo |
| [1-800Accountant](https://shareasale.com/r.cfm?b=1679958&u=2366409&m=104229&urllink=&afftrack=5094262-nbc7f0f23c8044f57add176b7fa4302ce21) | Best Basic Plan | $139/mo |
| [Paro](https://shareasale.com/r.cfm?b=1810427&u=2366409&m=112850&urllink=&afftrack=&afftrack=5094262-nbc7f0f23c8044f57add176b7fa4302ce21) | Best for Hiring Freelancers | Freelancers decide their own rate |
| [Bench Accounting](https://bench.co/) | Best for Bookkeeping Services | Starting at $249/mo |
| [Pilot](https://pilot.com/) | Best for Startups | Starting at $499/mo |
## What Is an Accounting Firm?
An accounting firm is fully staffed with experts to offer bookkeeping and accounting services for your business. It prepares financial records to help you track your revenues and expenses. It can also conduct an [audit](https://www.investopedia.com/terms/a/audit.asp) to organize your processes and controls to ensure records are properly kept with taxation services to help you prepare tax returns and advise you on how to reduce your tax liability. Accounting firms help you with your long-range planning with cash flow projections and advice on how to allocate your capital for an additional cost.
Online accounting firms use sophisticated data-encryption and communications technology to link clients to their services via an online platform. Source documents and data can be uploaded to cloud storage where they can be accessed from any remote location.
Firms typically bill for their services at a fixed monthly rate, benefiting a business from a budget planning standpoint. Some services may be billed on a pay-for-performance basis.
## Who Should Use Accounting Firms?
For businesses on a growth track, the cost of not outsourcing bookkeeping and accounting can be detrimental to the business. This happens when performing the functions in-house interferes with essential business growth activities. Every hour you spend on bookkeeping or accounting is one less hour spent [marketing](https://www.investopedia.com/terms/m/marketing.asp) your business, building client relationships, and other business development activities. At some point, the cost to your business in terms of lost growth opportunities becomes immeasurable. That's when you know it's time to outsource your accounting function.
You know you need to hire an accounting firm when
* The growth of your business outpaces your capacity to efficiently manage your cash flow
* You need to raise capital through bank financing
* You need to create a solid business plan
* When you need advice about your business's legal structure
* When you need help preparing your taxes
## How Do You Choose an Accounting Firm?
Small businesses have a wider range of needs than individuals, so it's essential to work with an accounting firm that caters to small businesses—even better, one with experience working with businesses in your industry.
Fees also are an important consideration. The cost of outsourcing these functions must make sense for your business based on the level of service it needs and your budget. You should expect to pay more for accounting services as a business than you would as an individual because there are more functions to perform.
If you already are using an [accounting or bookkeeping software program](https://www.investopedia.com/best-accounting-software-for-small-business-5069679), it would be ideal to work with a firm that utilizes the same software. Many firms accommodate multiple software programs. If you don't already use a software program, the accounting firm will recommend a package.
Finally, look at the range of services offered. You may need only account reconciliation services now but will need to layer on financial and [cash flow management services](https://www.investopedia.com/articles/investing/041515/why-cash-management-key-business-success.asp) later. If a firm only offers a package that includes services you don't need, you may pay more than you should at this stage in your business.
## What Do Accounting Firms Cost?
Online accounting firms typically charge a monthly fee, which can help businesses to plan their expenses. For many firms, the monthly fee is based on the level of services you need. You can pay as low as $150 a month for a starter package that includes day-to-day bookkeeping, account reconciliation, and financial report preparation. With some firms, you can then layer on services or choose a mid-tier package that provides for cash flow management, accounts payable and receivable, and expense tracking for $300 to $500 a month.
Many firms that charge a flat monthly fee also offer tax filing services for an extra fixed annual fee in the range of $750 to $900. Some offer payroll services as an extra for $40 to $80 a month.
As you'll find with some of the firms in this review, billing methods can vary beyond a monthly fee, such as an hourly, pay-for-performance fee, or rates based on the number of monthly transactions. In all cases, it's important to crunch the numbers to see what rate or form of billing makes sense for your business.
## How We Chose the Best Online Accounting Firms
If you've done your own search for accounting firms, you know there are dozens from which to choose. So, narrowing your choices to the ones that best suit your needs can be daunting. With this review, we did most of the leg work to narrow the list from 20 of the top online accounting firms to five of the best in various categories. In reviewing the list through a small business lens, we applied a strict set of criteria that included length of operating history, small business focus, range of services, distinct features or services offered, cost, and level of customer support.
:max_bytes(150000):strip_icc()/GettyImages-1206456759-a84f4b58dacf454c9e8d3d466df1801f.jpg)
:max_bytes(150000):strip_icc()/GettyImages-1206456759-a84f4b58dacf454c9e8d3d466df1801f.jpg)
sturti / Getty Images
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our
[editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy)
1. Indeed.com. "[Freelancer Hourly Salaries in the United States at Paro](https://www.indeed.com/cmp/Paro/salaries/freelancer)."
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|
According to our research, indinero is the best online accounting service for small businesses based on its wide range of services, easy-to-use online interface, access to experts, and its customer support. Investopedia narrowed the wide array of providers down to 20 and evaluated them on services offered, cost, ease of use, and other factors to arrive at the five firms highlighted here.
The Best Online Accounting Firms for Small Business
Best Overall:
indinero
Best Basic Plan:
1-800Accountant
Best for Hiring Freelancers:
Paro
Best for Bookkeeping Services:
Bench Accounting
Best for Startups:
Pilot
Best Online Accounting Firms for Small Business
Expand
Best Online Accounting Firms for Small Business
Our Top Picks
indinero
1-800Accountant
Paro
Bench Accounting
Pilot
See More (2)
The Bottom Line
Compare Providers
Frequently Asked Questions (FAQs)
Methodology
Best Overall
:
indinero
indinero
Learn More
indinero blankets its clients with a wide range of accounting services, an easy-to-use platform, access to in-house experts, and a dedicated customer support team, making it our choice as the best overall accounting firm.
Pros
Extensive array of services
Easy-to-use dashboard
Great customer support
Mobile app
Cons
Base package on the expensive end of the spectrum
Lack of advanced features such as time-tracking and project manager
Since its founding in 2009, indinero has been perfecting its offering of an all-in-one accounting service for small businesses. In addition to one of the widest arrays of services, inDinero offers clients access to a team of staff accountants and financial experts, just a click or call away with its easy-to-use dashboard or mobile app. indinero checks all the boxes, making it our choice as the best overall accounting firm for small businesses.
While indinero's base plan may be a little pricier than other firms, its all-in-one accounting services still will save fledgling businesses time and money. For $750 a month, the Essential plan is stacked full of functions including easy invoicing, P&L and balance sheet creation, accounts payable and receivable tracking and reporting, monthly reconciliations, employee reimbursements, financial reporting, and document management. It also comes with a mobile app and a dedicated account manager. The Essential plan is designed for startups and smaller businesses that use cash basis accounting. If you need accrual basis accounting, you will need to step up to its Growth plan.
At $1250 per month, the Growth plan is designed for more established small and medium-sized businesses. It's pricier, but it adds some significant features, such as accrual accounting and regular controller support. Businesses that use the Growth plan are provided with processes that can be scaled as they grow.
Note
For additional fees, indinero offers tax support for filing state and federal taxes for current or previous years. You also can add a fractional CFO to help with financial projections, cash management, business analytics, and budgeting. Plus, if you've been neglecting your books, indinero offers catch-up bookkeeping.
For larger companies with more complex accounting needs and the need for business metrics analysis and audit support, indinero will design a custom plan that includes fractional CFO services, multiple entity support, cash flow projections, and payroll support.
In addition to its real-time dashboard, which offers self-support features, clients can tap into indinero's support team via phone, email, or live chat.
On the downside, if you aren't using Gusto, Stripe, Expensify, Netsuite, or TriNet, you'll have to use indinero's software, which is powerful, but it's not portable if you ever decide to switch firms.
Best Basic Plan
:
1-800Accountant
1-800Accountant
Learn More
For small businesses with straightforward accounting needs, 1-800Accountant offers a solid basic plan for a flat fee of $139 a month, making it our pick as the best accounting firm for basic plans.
Pros
Low flat fee regardless of the number of transactions
Dedicated local accountant
Reasonably priced tax preparation and filing services
Mobile app
Cons
Base service is somewhat limited
Costs increase substantially for add-on services
Founded in 1999 by two former members of Price Waterhouse, 1-800Accountant is one of the more established online accounting firms. It combines personal support from a nationwide team of experts with the convenience of digital technology for a flat rate, which is why we selected it as the best accounting firm for a basic plan.
1-800Accountant offers a nationwide team of Certified Public Accountants (CPAs), enrolled agents, tax professionals, and other experts lending their expertise to a full array of accounting services. Clients are matched with a local accountant or bookkeeper who can provide state- and industry-specific guidance in managing their books.
For just $139 a month, clients receive a dedicated accountant and a detailed monthly reports. They also have the ability to create and send invoices and prepare financial reports. A dedicated bookkeeper sets up your account and connects your bank and credit accounts for synchronized transaction reporting. The software used by 1-800Accountant integrates with many of the top accounting software packages.
From there, clients can add services with an upgraded plan. For example, if your business reaches a growth threshold, you can pay $239 a month for a plan that will also prepare and file both your personal and business taxes.
You also can add bookkeeping, priority support, and financial reports with the Enterprise plan for $399.
Payroll services also are available from 1-800Accountant for getting your employees paid, withholding taxes, and taking care of your payroll taxes. The service maintains all required employee records.
Also, 1-800Accountant offers every business a free tax savings consultation with an expert. Better yet, 1-800Accountant guarantees its customers maximum tax savings by finding every deduction.
Once your account is set up, you have secure access to your assigned accountant via messaging, phone, email, or chat. A mobile app keeps you in contact with your financials.
Best for Hiring Freelancers
:
Paro
Paro
Learn More
Businesses that prefer more direct business relationships can use Paro to match with an accountant or bookkeeper that best meets their finance and accounting needs. That makes Paro our choice as the best accounting firm for hiring freelance accountants.
Pros
Flexibility to choose who to work with and dictate project scope
Direct relationship with a financial pro
Extensive vetting process
Pay base hourly rates
Cons
Can be more expensive than paying a flat fee for services
Paro is not an accounting firm like others on this list. Instead, it operates as a marketplace that brings together businesses with vetted finance and accounting experts to directly work with you. For that, Paro makes our list as the best accounting firm for hiring freelancers.
Paro uses a multi-step vetting process to review the applications they receive and build a database of thousands of CPAs, financial analysts, internal auditors, finance vice presidents, and bookkeepers. The vetting process, which consists of background and reference checks, a skill assessment, interviews, and completion of a hands-on project, has screened out 98% of its applicants, leaving only the top talent in its database. Many of Paro's freelancers have worked at highly respected companies such as Deloitte, Ernst and Young, KPMG, and the IRS.
Freelancers, who must be approved by Paro, establish their own fees, but Paro does not list a range of typical rates you should expect to pay. According to Indeed, Paro freelance accountants earn an average of $27 per hour with a low of $25 per hour and a high of $30 per hour. The great thing about hiring a Paro freelancer is you pay only their base rate, which is a fraction of the cost of hiring one of these professionals through an accounting or bookkeeping firm.
Once you complete a short questionnaire, Paro works with you to find the right match based on the size of your business, the financial role that needs to be filled, and your industry. It also will look for candidates who are conversant in your software, such as QuickBooks, Xero, Netsuite, and many other programs.
Paro's algorithm matches you with a few candidates for you to screen, and, when you find one you want to hire, Paro makes the introduction. You also are assigned a dedicated account manager to help facilitate the completion of the project.
Best for Bookkeeping Services
:
Bench Accounting
Bench Accounting
Learn More
For businesses with straightforward financials that are ready to outsource their bookkeeping, Bench Accounting is equipped to take it all on, making it our pick as the best accounting firm for bookkeeping services.
Pros
Dedicated team
Offers both cash basis and accrual basis reporting
Reasonable prices
Supports tax preparation with a year-end financial package
Cons
Proprietary software makes it difficult to switch providers
Services don't include bill pay, invoicing, or check writing
Bench Accounting was launched in 2012 for the sole purpose of serving the bookkeeping needs of small businesses for both cash basis and accrual basis reporting. It's now the largest bookkeeping service, with in-house professionals doing the bookkeeping for more than 11,000 business owners, which is why we chose it as the best accounting firm for bookkeeping services.
Although it's a virtual service, Bench personalizes its clients' experiences by assigning them a dedicated team of in-house professionals. The team takes over all bookkeeping functions, including setting up your account and linking it with all your financial accounts to upload data. The team then categorizes all your transactions, reconciles your bank accounts, and prepares monthly financial statements.
Note
For an additional fee, Bench offers catch-up bookkeeping if you're behind on your financials. It also offers limited support for business taxes by preparing a year-end financial package for your CPA. You can pay for additional tax services by adding BenchTax to your bookkeeping services. A licensed tax pro will prepare and file your taxes.
One downside to Bench is its use of proprietary software. Although it is powerful and effective, it doesn't sync with industry standards such as QuickBooks or Xero. That will make it difficult to switch providers in the future. The other downside is that its services don't include bill pay, sending invoices, or writing checks.
Bench's reporting functions also are limited. If you already work with an accountant or CPA, chances are good they prefer to work with QuickBooks rather than with proprietary software like Bench.
Clients can contact their team members during business hours from their computers or mobile app and expect a response within one business day or they can schedule a call.
Bench's pricing starts at $249 per month for the Essential plan while the Premium plan that includes tax advisory and filing runs $399 per month.
Best for Startups
:
Pilot
Pilot
Learn More
Pilot is a relatively new firm established by former startup founders backed by entrepreneurs who clearly understand other startups and their accounting needs, making it our pick for the best accounting firm for startup companies.
Pros
Dedicated account manager
Quick setup
QuickBooks Integration
Accrual basis accounting
Cons
No cash-basis accounting
Fees on the higher end of the price spectrum
Started by successful startup entrepreneurs, Pilot understands the challenges other startup entrepreneurs face in keeping the books and preparing their businesses for growth. That's why we chose Pilot as the best accounting firm for startup businesses.
The handholding begins as soon as you sign up with Pilot and are immediately assigned a dedicated bookkeeper as your account manager. That person is your point of contact who will come to know you and your business.
The next step is to work with your account manager to integrate your existing software and processes with QuickBooks. From that point on, you will receive monthly reports, including cash flow, profit and loss, and balance sheet statements.
In addition, Pilot performs automatic transaction imports, monthly account reconciliations, and cash forecasting. Inventory tracking, accounts payable and receivable reporting, as well as tax preparation and filing, are add-on options for an additional fee. That's a comprehensive offering for startups or small businesses that want to scale up quickly.
If your business does only cash-basis accounting, you'll need to look elsewhere because Pilot does only accrual-basis accounting. They insist that accrual-basis accounting is better for businesses that want to grow. For companies on the fast track, Pilot also offers CFO services for an additional fee.
All price plans include unlimited accounts and are billed annually upfront with no early termination fee. The Starter plan starts at $499 per month for companies with monthly expenses between zero and $15,000. But the higher your monthly expenses go, the higher the fee. The Core plan starts at $699 per month and includes expedited books delivery and monthly phone reviews. This plan also has a sliding scale based on monthly expenses. Pilot offers custom pricing that includes support for multiple entities, accounts receivable, and payable reporting along with a fully customizable chart of accounts.
The Bottom Line
As this list shows, the offerings and pricing of accounting firms for small businesses vary widely. The key is understanding your accounting needs and the value of having someone from outside your business fulfilling those functions. Even the most expensive firm on this list is probably less costly than hiring someone to perform them in-house.
If your budget is a concern, you can consider low-cost options, such as 1-800Accountant or Bench Accounting. However, if you're looking for the best all-around accounting firm, you can’t go wrong with indinero for its comprehensive offering, excellent customer support, and reasonable pricing.
Compare Providers
Best Accounting Firms
Provider
Category
Costs
indinero
Best Overall
Starting at $750/mo
1-800Accountant
Best Basic Plan
$139/mo
Paro
Best for Hiring Freelancers
Freelancers decide their own rate
Bench Accounting
Best for Bookkeeping Services
Starting at $249/mo
Pilot
Best for Startups
Starting at $499/mo
What Is an Accounting Firm?
An accounting firm is fully staffed with experts to offer bookkeeping and accounting services for your business. It prepares financial records to help you track your revenues and expenses. It can also conduct an audit to organize your processes and controls to ensure records are properly kept with taxation services to help you prepare tax returns and advise you on how to reduce your tax liability. Accounting firms help you with your long-range planning with cash flow projections and advice on how to allocate your capital for an additional cost.Online accounting firms use sophisticated data-encryption and communications technology to link clients to their services via an online platform. Source documents and data can be uploaded to cloud storage where they can be accessed from any remote location.Firms typically bill for their services at a fixed monthly rate, benefiting a business from a budget planning standpoint. Some services may be billed on a pay-for-performance basis.
Who Should Use Accounting Firms?
For businesses on a growth track, the cost of not outsourcing bookkeeping and accounting can be detrimental to the business. This happens when performing the functions in-house interferes with essential business growth activities. Every hour you spend on bookkeeping or accounting is one less hour spent marketing your business, building client relationships, and other business development activities. At some point, the cost to your business in terms of lost growth opportunities becomes immeasurable. That's when you know it's time to outsource your accounting function.You know you need to hire an accounting firm when The growth of your business outpaces your capacity to efficiently manage your cash flowYou need to raise capital through bank financingYou need to create a solid business planWhen you need advice about your business's legal structureWhen you need help preparing your taxes
How Do You Choose an Accounting Firm?
Small businesses have a wider range of needs than individuals, so it's essential to work with an accounting firm that caters to small businesses—even better, one with experience working with businesses in your industry. Fees also are an important consideration. The cost of outsourcing these functions must make sense for your business based on the level of service it needs and your budget. You should expect to pay more for accounting services as a business than you would as an individual because there are more functions to perform.If you already are using an accounting or bookkeeping software program, it would be ideal to work with a firm that utilizes the same software. Many firms accommodate multiple software programs. If you don't already use a software program, the accounting firm will recommend a package.Finally, look at the range of services offered. You may need only account reconciliation services now but will need to layer on financial and cash flow management services later. If a firm only offers a package that includes services you don't need, you may pay more than you should at this stage in your business.
What Do Accounting Firms Cost?
Online accounting firms typically charge a monthly fee, which can help businesses to plan their expenses. For many firms, the monthly fee is based on the level of services you need. You can pay as low as $150 a month for a starter package that includes day-to-day bookkeeping, account reconciliation, and financial report preparation. With some firms, you can then layer on services or choose a mid-tier package that provides for cash flow management, accounts payable and receivable, and expense tracking for $300 to $500 a month.Many firms that charge a flat monthly fee also offer tax filing services for an extra fixed annual fee in the range of $750 to $900. Some offer payroll services as an extra for $40 to $80 a month. As you'll find with some of the firms in this review, billing methods can vary beyond a monthly fee, such as an hourly, pay-for-performance fee, or rates based on the number of monthly transactions. In all cases, it's important to crunch the numbers to see what rate or form of billing makes sense for your business.
How We Chose the Best Online Accounting Firms
If you've done your own search for accounting firms, you know there are dozens from which to choose. So, narrowing your choices to the ones that best suit your needs can be daunting. With this review, we did most of the leg work to narrow the list from 20 of the top online accounting firms to five of the best in various categories. In reviewing the list through a small business lens, we applied a strict set of criteria that included length of operating history, small business focus, range of services, distinct features or services offered, cost, and level of customer support.
sturti / Getty Images
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our
editorial policy.
Indeed.com. "Freelancer Hourly Salaries in the United States at Paro."
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https://www.investopedia.com/terms/p/public-relations-pr.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-public-relations-pr"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Public Relations (PR)? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Public relations (PR) is the set of techniques and strategies related to managing how information about an individual or company is disseminated to the public, and especially the media. Its primary goals are to disseminate important company news or events, maintain a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brand-identity.asp">brand image</a>, and put a positive spin on negative events to minimize their fallout. PR may occur in the form of a company <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pressrelease.asp">press release</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/press-conference.asp">news conference</a>, interviews with journalists, social media posting, or other venues.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Every individual or entity operating in the public eye faces the spread of information about them or their practices to the public. While public relations is an industry unto itself, any attempt to portray oneself in a certain way to others can be considered a form of public relations.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Public relations (PR) refers to managing how others see and feel about a person, brand, or company. </li><li>PR for corporations, notably publicly traded companies, focuses on maintaining a positive corporate image while handling media requests and shareholder inquiries. </li><li>PR is especially important to defray public or investor outcry following negative news announcements.</li><li>PR is different from advertising or marketing as it’s often meant to look organic and may not necessarily try to promote a product or service.</li><li>Public relations can be used to mitigate negative events, though history has shown PR may cause problems to become worse.</li></ul></div></div></div>
<span class="heading-toc" id="toc-understanding-public-relations-pr"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding Public Relations (PR) </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Although not inherent in the definition, PR is often thought of as "spin," with the goal being to present the person, company, or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brand.asp">brand</a> in the best light possible. PR differs from advertising in that PR attempts to represent a person or brand's image in ways that will appear organic, such as generating good press from independent sources and recommending business decisions that will incur public support. Loosely defined until the mid-twentieth century, PR is one of the fastest-growing industries in the United States.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> PR is essential to any company's success, especially when shares in the company are publicly traded and the value of a share depends on the public's confidence in a company or brand. In addition to handling media requests, information queries, and shareholder concerns, PR personnel are frequently responsible for crafting and maintaining the corporation's image. Occasionally, PR professionals engage in negative PR or willful attempts to discredit a rival brand or company, although such practices are not in keeping with the industry's code of ethics.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<span class="heading-toc" id="toc-types-of-public-relations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-heading__text"> Types of Public Relations </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Public relations is often divided into different agencies or departments. Each department is specifically suited to handle a specific aspect below:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0">
<li><strong>Media relations</strong> is the emphasis of forging a strong relationship with public media organizations. A media relations team often works directly with external media by directly delivering them company news, providing validated content sources, and being accessible for public comment on other news stories.</li>
<li><strong>Production relations</strong> is closely related to the direct operations of a company. This department supports broad marketing plans and is often related to specific, one-time endeavors such as the launch of a new product, a special campaign, or management of a major product change.</li>
<li><strong>Investor relations</strong> is the oversight of the relationship between the company and its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investor.asp">investors</a>. This aspect of public relations handles investor events, oversees the communication of the release of financial reports, and handles the complaints of investors.</li>
<li><strong>Internal relations</strong> is the public relations branch between a company and its employees. Internal relations pertain to counseling employees, ensuring all workers are satisfied with their working conditions, and mediating issues internally to avoid public disclosure of dissatisfaction.</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span>
<li><strong>Government relations</strong> is the connection between a company and related governing bodies. Some public relations departments want to forge a strong relationship to provide feedback to politicians, sway decision-makers to act in specific ways, and ensure fair treatment of the company's clients.</li>
<li><strong>Community relations</strong> is public relations focused on brand and reputation within a specific community. The community could be physical (i.e. a specific city) or non-physical (i.e. the dog-owner community). This branch of public relations keys in on the social niche of the community to align itself with its members.</li>
<li><strong>Customer relations</strong> is the bridge that connects the company and its <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/customer.asp">customers</a>. Public relations often involves handling key relationships, conducting market research, understanding the priorities of its customers, and addressing major concerns.</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_18-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_19-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Many public companies have a separate <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investorrelations.asp">investor relations</a> (IR) department for dealing with communications to shareholders and analysts.</p></div></div></div>
<span class="heading-toc" id="toc-public-relations-vs-other-departments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Public Relations vs. Other Departments </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Public relations may overlap or be confused with other similar departments. Here's an overview how PR may or may not relate to marketing, advertising, or communications.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> Public Relations vs. Marketing </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Marketing is sometimes more squarely focused on driving sales, promoting products or services, and ensuring financial success. Meanwhile, public relations is sometimes more focused on managing the reputation of a company or brand.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Both departments may embark on very similar types of activities. For instance, both may interact with customers to garner feedback. From a more direct marketing lens, this information is used to better understand <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/trading/09/what-factors-create-trends.asp">sales trends</a>, product demands, and ways to generate more sales. From a more direct public relations lens, this information is used to understand customer satisfaction, ensure customers are happy, and make sure any dissatisfaction is managed quickly.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> Public Relations vs. Advertising </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Advertising is the act of garnering public attention, often through the use of various types of media. A company may want to advertise to promote a product, announce expansion into a new market for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/growthcompany.asp">growth company</a>, or reveal pricing changes.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> While advertising is the intentional act of trying to be in the spotlight, public relations is a more strategic and thoughtful approach about how a company should be interacting with internal and external stakeholders. Sometimes, it may be in the company's best interest in "lay low" and strengthen its relationship with the public by not being front and center.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> Public Relations vs. Communications </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Public relations and communications are heavily intertwined. Both involve portraying information outwardly in hopes of creating a brand, image, or relationship that fosters value. Communications may be a separate department within a company solely responsible for written or verbal comments issued internally or externally.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> One potential difference between public relations and communications is the exchange of information. Sometimes, public relations is a one-way channel that imposes information in an attempt to have a more favorable public image. Communications may be more rooted in the two-way functionality of receiving feedback and making changes based on information collected. In general, most companies will see overlap between public relations and communications.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_38-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_39-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>There's many titles and roles an individual working in public relation can hold. As of December 2021, individuals working as a publicist in the United States reported average total compensation of $73,164.<span class="ql-inline-citation" data-cite="4"></span></p></div></div></div>
<span class="heading-toc" id="toc-working-in-public-relations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-heading__text"> Working in Public Relations </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> A career in public relations has no defined career path. An individual can obtain a degree in a number of different fields such as public relations, communications, marketing, journalism, broadcasting, or political science.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Professionals in PR must have soft skills including strong written and oral communication skills, the ability to solve problems, and the ability to think critically and creatively.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> A career in public relations can take many different turns. Some aspects of public relations emphasize digital media; potential careers include content creators, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/social-media.asp">social media</a> managers, or digital artists. Individuals can specialize in an industry (i.e. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finance.asp">finance</a>) to emphasize working between a company and its investors. Individuals interested in working for nonprofit organizations may find the branch of fundraising overlaps many aspects of public relations.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div>
<span class="heading-toc" id="toc-public-relations-in-practice"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-heading__text"> Public Relations in Practice </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> PR also involves managing a company's reputation in the eyes of its customers. In a 2012 PR crisis, restaurant chain Chick-fil-A was forced to issue emergency statements with respect to its stance on same-sex marriage after a Chick-fil-A executive publicly came out against marriage equality. The statement stressed the company's "biblically-based principles" and its belief in treating "every person with honor, dignity, and respect."<span class="ql-inline-citation" data-cite="2"></span> It was an example of how companies must exercise good PR. Most major companies have a PR department or utilize the services of an outside firm.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> A company often has multiple publics to impress. Internally, a company will want to present itself as competently operated to its investors and biggest shareholders, which can involve arranging product demonstrations or other events directed towards shareholders.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_52-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_53-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_4-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>In response to the 2010 oil spill off the Gulf of Mexico, BP issued a public statement outlining its course of action.<span class="ql-inline-citation" data-cite="3"></span> Some felt the response missed its mark, a stark reminder of how public relations may sometimes make matters worse.</p></div></div></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Externally, a company that sells a good or service directly to consumers will want to present a public image that will encourage genuine, lasting brand support, which extends beyond the somewhat knowingly specious goals of advertising.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> This can involve reassuring customers during a crisis, such as when Target (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=tgt">TGT</a>) offered an $18.5 million settlement to its customers following a 2013 credit card hack in an attempt to restore good faith or the promotion of a lifestyle that would make the company's product or service attractive.<span class="ql-inline-citation" data-cite="1"></span> The company also generates PR to attract investors. In this respect, good PR is especially important for startups or rapidly expanding companies.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_58-0"><span class="heading-toc" id="toc-what-is-the-primary-role-of-public-relations"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Primary Role of Public Relations?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Public relations often boils down maintaining the image of a company, individual, or brand. Public relations creates media, connects with external media, crafts public opinion, and ensures customers have a positive disposition towards the company's brand.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_60-0"><span class="heading-toc" id="toc-what-skills-do-you-need-for-pr"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Skills Do You Need for PR?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Public relation specialists often have strong communication skills. Their role is to absorb information, process how it may impact a company's image, and how to externally communicate to shift this image. Public relation specialists often forge relationships with many different types of people including key customers, government officials, and external media.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_62-0"><span class="heading-toc" id="toc-why-is-public-relations-important"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Is Public Relations Important?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Customers make decisions for a number of reasons. One of those reasons is the relationship they feel they have with a company. If a company has a negative image or is ensnarled in a controversial public issue, a customer may no longer feel as connected with the brand, image, and product. Public relations often manages this brand and ensures customers, employees, investors, and other external parties have a positive disposition to continue involvement with the company.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_64-0"><span class="heading-toc" id="toc-who-uses-public-relations"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Uses Public Relations?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Public relations is useful for any party that wants to have a positive public imagine. Most often, corporations and publicly traded companies will embark on public relations. A company may have a different public relations team or public relations strategy for specific brands or products. Also, individuals such as celebrities or high net worth individuals may have private public relation teams. These teams are used to maintain a positive public image as well as handle media requests.</p></div>
</div></div> | ## What Is Public Relations (PR)?
Public relations (PR) is the set of techniques and strategies related to managing how information about an individual or company is disseminated to the public, and especially the media. Its primary goals are to disseminate important company news or events, maintain a [brand image](https://www.investopedia.com/terms/b/brand-identity.asp), and put a positive spin on negative events to minimize their fallout. PR may occur in the form of a company [press release](https://www.investopedia.com/terms/p/pressrelease.asp), [news conference](https://www.investopedia.com/terms/p/press-conference.asp), interviews with journalists, social media posting, or other venues.
Every individual or entity operating in the public eye faces the spread of information about them or their practices to the public. While public relations is an industry unto itself, any attempt to portray oneself in a certain way to others can be considered a form of public relations.
### Key Takeaways
* Public relations (PR) refers to managing how others see and feel about a person, brand, or company.
* PR for corporations, notably publicly traded companies, focuses on maintaining a positive corporate image while handling media requests and shareholder inquiries.
* PR is especially important to defray public or investor outcry following negative news announcements.
* PR is different from advertising or marketing as it’s often meant to look organic and may not necessarily try to promote a product or service.
* Public relations can be used to mitigate negative events, though history has shown PR may cause problems to become worse.
## Understanding Public Relations (PR)
Although not inherent in the definition, PR is often thought of as "spin," with the goal being to present the person, company, or [brand](https://www.investopedia.com/terms/b/brand.asp) in the best light possible. PR differs from advertising in that PR attempts to represent a person or brand's image in ways that will appear organic, such as generating good press from independent sources and recommending business decisions that will incur public support. Loosely defined until the mid-twentieth century, PR is one of the fastest-growing industries in the United States.
PR is essential to any company's success, especially when shares in the company are publicly traded and the value of a share depends on the public's confidence in a company or brand. In addition to handling media requests, information queries, and shareholder concerns, PR personnel are frequently responsible for crafting and maintaining the corporation's image. Occasionally, PR professionals engage in negative PR or willful attempts to discredit a rival brand or company, although such practices are not in keeping with the industry's code of ethics.
## Types of Public Relations
Public relations is often divided into different agencies or departments. Each department is specifically suited to handle a specific aspect below:
* **Media relations** is the emphasis of forging a strong relationship with public media organizations. A media relations team often works directly with external media by directly delivering them company news, providing validated content sources, and being accessible for public comment on other news stories.
* **Production relations** is closely related to the direct operations of a company. This department supports broad marketing plans and is often related to specific, one-time endeavors such as the launch of a new product, a special campaign, or management of a major product change.
* **Investor relations** is the oversight of the relationship between the company and its [investors](https://www.investopedia.com/terms/i/investor.asp). This aspect of public relations handles investor events, oversees the communication of the release of financial reports, and handles the complaints of investors.
* **Internal relations** is the public relations branch between a company and its employees. Internal relations pertain to counseling employees, ensuring all workers are satisfied with their working conditions, and mediating issues internally to avoid public disclosure of dissatisfaction.
* **Government relations** is the connection between a company and related governing bodies. Some public relations departments want to forge a strong relationship to provide feedback to politicians, sway decision-makers to act in specific ways, and ensure fair treatment of the company's clients.
* **Community relations** is public relations focused on brand and reputation within a specific community. The community could be physical (i.e. a specific city) or non-physical (i.e. the dog-owner community). This branch of public relations keys in on the social niche of the community to align itself with its members.
* **Customer relations** is the bridge that connects the company and its [customers](https://www.investopedia.com/terms/c/customer.asp). Public relations often involves handling key relationships, conducting market research, understanding the priorities of its customers, and addressing major concerns.
###
Many public companies have a separate [investor relations](https://www.investopedia.com/terms/i/investorrelations.asp) (IR) department for dealing with communications to shareholders and analysts.
## Public Relations vs. Other Departments
Public relations may overlap or be confused with other similar departments. Here's an overview how PR may or may not relate to marketing, advertising, or communications.
### Public Relations vs. Marketing
Marketing is sometimes more squarely focused on driving sales, promoting products or services, and ensuring financial success. Meanwhile, public relations is sometimes more focused on managing the reputation of a company or brand.
Both departments may embark on very similar types of activities. For instance, both may interact with customers to garner feedback. From a more direct marketing lens, this information is used to better understand [sales trends](https://www.investopedia.com/articles/trading/09/what-factors-create-trends.asp), product demands, and ways to generate more sales. From a more direct public relations lens, this information is used to understand customer satisfaction, ensure customers are happy, and make sure any dissatisfaction is managed quickly.
### Public Relations vs. Advertising
Advertising is the act of garnering public attention, often through the use of various types of media. A company may want to advertise to promote a product, announce expansion into a new market for a [growth company](https://www.investopedia.com/terms/g/growthcompany.asp), or reveal pricing changes.
While advertising is the intentional act of trying to be in the spotlight, public relations is a more strategic and thoughtful approach about how a company should be interacting with internal and external stakeholders. Sometimes, it may be in the company's best interest in "lay low" and strengthen its relationship with the public by not being front and center.
### Public Relations vs. Communications
Public relations and communications are heavily intertwined. Both involve portraying information outwardly in hopes of creating a brand, image, or relationship that fosters value. Communications may be a separate department within a company solely responsible for written or verbal comments issued internally or externally.
One potential difference between public relations and communications is the exchange of information. Sometimes, public relations is a one-way channel that imposes information in an attempt to have a more favorable public image. Communications may be more rooted in the two-way functionality of receiving feedback and making changes based on information collected. In general, most companies will see overlap between public relations and communications.
###
There's many titles and roles an individual working in public relation can hold. As of December 2021, individuals working as a publicist in the United States reported average total compensation of $73,164.
## Working in Public Relations
A career in public relations has no defined career path. An individual can obtain a degree in a number of different fields such as public relations, communications, marketing, journalism, broadcasting, or political science.
Professionals in PR must have soft skills including strong written and oral communication skills, the ability to solve problems, and the ability to think critically and creatively.
A career in public relations can take many different turns. Some aspects of public relations emphasize digital media; potential careers include content creators, [social media](https://www.investopedia.com/terms/s/social-media.asp) managers, or digital artists. Individuals can specialize in an industry (i.e. [finance](https://www.investopedia.com/terms/f/finance.asp)) to emphasize working between a company and its investors. Individuals interested in working for nonprofit organizations may find the branch of fundraising overlaps many aspects of public relations.
## Public Relations in Practice
PR also involves managing a company's reputation in the eyes of its customers. In a 2012 PR crisis, restaurant chain Chick-fil-A was forced to issue emergency statements with respect to its stance on same-sex marriage after a Chick-fil-A executive publicly came out against marriage equality. The statement stressed the company's "biblically-based principles" and its belief in treating "every person with honor, dignity, and respect." It was an example of how companies must exercise good PR. Most major companies have a PR department or utilize the services of an outside firm.
A company often has multiple publics to impress. Internally, a company will want to present itself as competently operated to its investors and biggest shareholders, which can involve arranging product demonstrations or other events directed towards shareholders.
###
In response to the 2010 oil spill off the Gulf of Mexico, BP issued a public statement outlining its course of action. Some felt the response missed its mark, a stark reminder of how public relations may sometimes make matters worse.
Externally, a company that sells a good or service directly to consumers will want to present a public image that will encourage genuine, lasting brand support, which extends beyond the somewhat knowingly specious goals of advertising.
This can involve reassuring customers during a crisis, such as when Target ([TGT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=tgt)) offered an $18.5 million settlement to its customers following a 2013 credit card hack in an attempt to restore good faith or the promotion of a lifestyle that would make the company's product or service attractive. The company also generates PR to attract investors. In this respect, good PR is especially important for startups or rapidly expanding companies.
## What Is the Primary Role of Public Relations?
Public relations often boils down maintaining the image of a company, individual, or brand. Public relations creates media, connects with external media, crafts public opinion, and ensures customers have a positive disposition towards the company's brand.
## What Skills Do You Need for PR?
Public relation specialists often have strong communication skills. Their role is to absorb information, process how it may impact a company's image, and how to externally communicate to shift this image. Public relation specialists often forge relationships with many different types of people including key customers, government officials, and external media.
## Why Is Public Relations Important?
Customers make decisions for a number of reasons. One of those reasons is the relationship they feel they have with a company. If a company has a negative image or is ensnarled in a controversial public issue, a customer may no longer feel as connected with the brand, image, and product. Public relations often manages this brand and ensures customers, employees, investors, and other external parties have a positive disposition to continue involvement with the company.
## Who Uses Public Relations?
Public relations is useful for any party that wants to have a positive public imagine. Most often, corporations and publicly traded companies will embark on public relations. A company may have a different public relations team or public relations strategy for specific brands or products. Also, individuals such as celebrities or high net worth individuals may have private public relation teams. These teams are used to maintain a positive public image as well as handle media requests.
| What Is Public Relations (PR)?
Public relations (PR) is the set of techniques and strategies related to managing how information about an individual or company is disseminated to the public, and especially the media. Its primary goals are to disseminate important company news or events, maintain a brand image, and put a positive spin on negative events to minimize their fallout. PR may occur in the form of a company press release, news conference, interviews with journalists, social media posting, or other venues.
Every individual or entity operating in the public eye faces the spread of information about them or their practices to the public. While public relations is an industry unto itself, any attempt to portray oneself in a certain way to others can be considered a form of public relations.
Key Takeaways
Public relations (PR) refers to managing how others see and feel about a person, brand, or company. PR for corporations, notably publicly traded companies, focuses on maintaining a positive corporate image while handling media requests and shareholder inquiries. PR is especially important to defray public or investor outcry following negative news announcements.PR is different from advertising or marketing as it’s often meant to look organic and may not necessarily try to promote a product or service.Public relations can be used to mitigate negative events, though history has shown PR may cause problems to become worse.
Understanding Public Relations (PR)
Although not inherent in the definition, PR is often thought of as "spin," with the goal being to present the person, company, or brand in the best light possible. PR differs from advertising in that PR attempts to represent a person or brand's image in ways that will appear organic, such as generating good press from independent sources and recommending business decisions that will incur public support. Loosely defined until the mid-twentieth century, PR is one of the fastest-growing industries in the United States.
PR is essential to any company's success, especially when shares in the company are publicly traded and the value of a share depends on the public's confidence in a company or brand. In addition to handling media requests, information queries, and shareholder concerns, PR personnel are frequently responsible for crafting and maintaining the corporation's image. Occasionally, PR professionals engage in negative PR or willful attempts to discredit a rival brand or company, although such practices are not in keeping with the industry's code of ethics.
Types of Public Relations
Public relations is often divided into different agencies or departments. Each department is specifically suited to handle a specific aspect below:
Media relations is the emphasis of forging a strong relationship with public media organizations. A media relations team often works directly with external media by directly delivering them company news, providing validated content sources, and being accessible for public comment on other news stories.
Production relations is closely related to the direct operations of a company. This department supports broad marketing plans and is often related to specific, one-time endeavors such as the launch of a new product, a special campaign, or management of a major product change.
Investor relations is the oversight of the relationship between the company and its investors. This aspect of public relations handles investor events, oversees the communication of the release of financial reports, and handles the complaints of investors.
Internal relations is the public relations branch between a company and its employees. Internal relations pertain to counseling employees, ensuring all workers are satisfied with their working conditions, and mediating issues internally to avoid public disclosure of dissatisfaction.
Government relations is the connection between a company and related governing bodies. Some public relations departments want to forge a strong relationship to provide feedback to politicians, sway decision-makers to act in specific ways, and ensure fair treatment of the company's clients.
Community relations is public relations focused on brand and reputation within a specific community. The community could be physical (i.e. a specific city) or non-physical (i.e. the dog-owner community). This branch of public relations keys in on the social niche of the community to align itself with its members.
Customer relations is the bridge that connects the company and its customers. Public relations often involves handling key relationships, conducting market research, understanding the priorities of its customers, and addressing major concerns.
Many public companies have a separate investor relations (IR) department for dealing with communications to shareholders and analysts.
Public Relations vs. Other Departments
Public relations may overlap or be confused with other similar departments. Here's an overview how PR may or may not relate to marketing, advertising, or communications.
Public Relations vs. Marketing
Marketing is sometimes more squarely focused on driving sales, promoting products or services, and ensuring financial success. Meanwhile, public relations is sometimes more focused on managing the reputation of a company or brand.
Both departments may embark on very similar types of activities. For instance, both may interact with customers to garner feedback. From a more direct marketing lens, this information is used to better understand sales trends, product demands, and ways to generate more sales. From a more direct public relations lens, this information is used to understand customer satisfaction, ensure customers are happy, and make sure any dissatisfaction is managed quickly.
Public Relations vs. Advertising
Advertising is the act of garnering public attention, often through the use of various types of media. A company may want to advertise to promote a product, announce expansion into a new market for a growth company, or reveal pricing changes.
While advertising is the intentional act of trying to be in the spotlight, public relations is a more strategic and thoughtful approach about how a company should be interacting with internal and external stakeholders. Sometimes, it may be in the company's best interest in "lay low" and strengthen its relationship with the public by not being front and center.
Public Relations vs. Communications
Public relations and communications are heavily intertwined. Both involve portraying information outwardly in hopes of creating a brand, image, or relationship that fosters value. Communications may be a separate department within a company solely responsible for written or verbal comments issued internally or externally.
One potential difference between public relations and communications is the exchange of information. Sometimes, public relations is a one-way channel that imposes information in an attempt to have a more favorable public image. Communications may be more rooted in the two-way functionality of receiving feedback and making changes based on information collected. In general, most companies will see overlap between public relations and communications.
There's many titles and roles an individual working in public relation can hold. As of December 2021, individuals working as a publicist in the United States reported average total compensation of $73,164.
Working in Public Relations
A career in public relations has no defined career path. An individual can obtain a degree in a number of different fields such as public relations, communications, marketing, journalism, broadcasting, or political science.
Professionals in PR must have soft skills including strong written and oral communication skills, the ability to solve problems, and the ability to think critically and creatively.
A career in public relations can take many different turns. Some aspects of public relations emphasize digital media; potential careers include content creators, social media managers, or digital artists. Individuals can specialize in an industry (i.e. finance) to emphasize working between a company and its investors. Individuals interested in working for nonprofit organizations may find the branch of fundraising overlaps many aspects of public relations.
Public Relations in Practice
PR also involves managing a company's reputation in the eyes of its customers. In a 2012 PR crisis, restaurant chain Chick-fil-A was forced to issue emergency statements with respect to its stance on same-sex marriage after a Chick-fil-A executive publicly came out against marriage equality. The statement stressed the company's "biblically-based principles" and its belief in treating "every person with honor, dignity, and respect." It was an example of how companies must exercise good PR. Most major companies have a PR department or utilize the services of an outside firm.
A company often has multiple publics to impress. Internally, a company will want to present itself as competently operated to its investors and biggest shareholders, which can involve arranging product demonstrations or other events directed towards shareholders.
In response to the 2010 oil spill off the Gulf of Mexico, BP issued a public statement outlining its course of action. Some felt the response missed its mark, a stark reminder of how public relations may sometimes make matters worse.
Externally, a company that sells a good or service directly to consumers will want to present a public image that will encourage genuine, lasting brand support, which extends beyond the somewhat knowingly specious goals of advertising.
This can involve reassuring customers during a crisis, such as when Target (TGT) offered an $18.5 million settlement to its customers following a 2013 credit card hack in an attempt to restore good faith or the promotion of a lifestyle that would make the company's product or service attractive. The company also generates PR to attract investors. In this respect, good PR is especially important for startups or rapidly expanding companies.
What Is the Primary Role of Public Relations?
Public relations often boils down maintaining the image of a company, individual, or brand. Public relations creates media, connects with external media, crafts public opinion, and ensures customers have a positive disposition towards the company's brand.
What Skills Do You Need for PR?
Public relation specialists often have strong communication skills. Their role is to absorb information, process how it may impact a company's image, and how to externally communicate to shift this image. Public relation specialists often forge relationships with many different types of people including key customers, government officials, and external media.
Why Is Public Relations Important?
Customers make decisions for a number of reasons. One of those reasons is the relationship they feel they have with a company. If a company has a negative image or is ensnarled in a controversial public issue, a customer may no longer feel as connected with the brand, image, and product. Public relations often manages this brand and ensures customers, employees, investors, and other external parties have a positive disposition to continue involvement with the company.
Who Uses Public Relations?
Public relations is useful for any party that wants to have a positive public imagine. Most often, corporations and publicly traded companies will embark on public relations. A company may have a different public relations team or public relations strategy for specific brands or products. Also, individuals such as celebrities or high net worth individuals may have private public relation teams. These teams are used to maintain a positive public image as well as handle media requests.
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https://www.investopedia.com/what-is-an-sba-microloan-7552644 | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> SBA microloans are loans that the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a> provides for up to $50,000 through intermediary lenders to help entrepreneurs grow their small businesses.
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Microloans can be used for many different purposes, such as for working capital or inventory. But they have some limitations—for example, they cannot be used to pay debt. The loan terms and rates on SBA microloans will vary depending on the intermediary lender. The typical microloan applicants are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-sba-loans-for-startups-7509414">startups</a> and existing <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp">small businesses</a>.
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<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>SBA microloans provide up to $50,000 in funding to small businesses via funding intermediaries.</li><li>You can use microloans to expand, repair, and reopen your small businesses to pay for expenses like working capital, inventory, or supplies.</li><li>You cannot use the funds from an SBA microloan to buy real estate or pay off debt.</li><li>SBA-approved intermediary lenders have individual lending and credit requirements.</li></ul></div></div></div>
<span class="heading-toc" id="toc-how-sba-microloans-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> How SBA Microloans Work </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The SBA supplies funds to intermediary lenders, which administer the loan program. These lenders are nonprofit community-based organizations. SBA borrowers submit their SBA microloan applications to a local SBA-approved intermediary. The SBA provides a list of of designated intermediary <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-sba-lenders-5091699">SBA microlenders</a>.<span class="ql-inline-citation" data-cite="4"></span>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The SBA provides up to $5 million to an intermediary lender to issue SBA microloans. Then, the loans require a 15% nonfederal cash match.<span class="ql-inline-citation" data-cite="13"></span>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> SBA microloans are generally issued to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/startup.asp">startups</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/smallandmidsizeenterprises.asp">small businesses</a>, but not-for-profit child care centers may also qualify.<span class="ql-inline-citation" data-cite="4"></span> SBA microloans are closed within 120 days of being approved.<span class="ql-inline-citation" data-cite="14"></span>
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<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The terms of SBA microloans will vary, but most intermediaries will require you to provide a personal guarantee and some kind of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collateral.asp">collateral</a>, which are assets pledged to secure the loan.<span class="ql-inline-citation" data-cite="4"></span></p></div></div></div>
<span class="heading-toc" id="toc-main-features-of-an-sba-microloan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Main Features of an SBA Microloan </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Like other types of loans, SBA microloans have specific terms, interest rates, fees, and other features. Let’s look in more detail at what they provide and what they require.
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-subheading__text"> Maximum Amount </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The SBA microloan program provides loans up to $50,000. The average loan amount is $13,000.<span class="ql-inline-citation" data-cite="4"></span>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> Terms </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> SBA-backed intermediaries set <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/repayment.asp">repayment</a> terms, so they may vary from loan to loan. The terms will be determined in part by the loan amount and the borrower’s needs. The maximum repayment term for an SBA microloan is six years, and the average term is 40 months.<span class="ql-inline-citation" data-cite="4"></span><span class="ql-inline-citation" data-cite="8"></span>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-subheading__text"> Interest Rates </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Intermediaries determine the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest rates</a> for microloans. You can expect interest to be about 8% to 13%.<span class="ql-inline-citation" data-cite="4"></span>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> Fees </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> You are responsible for paying a number of fees associated with an SBA microloan. For example, intermediaries may charge a packaging fee. The packaging fee is limited to 3% of the total loan amount for loans with terms of a year or more. For loans with terms of less than a year, the packaging fee is limited to 2% of the total amount of the loan.<span class="ql-inline-citation" data-cite="15"></span>
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<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_31-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_32-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_3-0">Note</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>You may also have to pay closing costs, which could include fees for filing, credit reports, and collateral appraisal.<span class="ql-inline-citation" data-cite="15"></span></p></div></div></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> Collateral </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> The SBA does not give intermediaries specific criteria regarding collateral for specific loans. But intermediaries typically require microloan borrowers to provide collateral because intermediaries must maintain cash reserves and loan balances that equal 115% of what the SBA provided the intermediary.<span class="ql-inline-citation" data-cite="16"></span>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-subheading__text"> Personal Guarantee </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> In addition to collateral, intermediaries may also require you to provide a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/personal-guarantee.asp">personal guarantee</a>.<span class="ql-inline-citation" data-cite="4"></span> Essentially, if the business is unable to repay the loan, then you, as the business owner, would be responsible.
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<span class="heading-toc" id="toc-sba-microloan-uses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-heading__text"> SBA Microloan Uses </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> You can use microloans for a number of purposes, including:
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<li>Machinery and equipment</li>
<li>Supplies</li>
<li>Inventory</li>
<li>Furniture and fixtures</li>
<li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/workingcapital.asp">Working capital</a></li>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> You cannot use the funds from an SBA microloan to pay off debts or buy real estate.<span class="ql-inline-citation" data-cite="4"></span><br/>
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<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_46-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_47-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_4-0">SBA Microloans By The Numbers</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>$82.6 million in Microloan funding went to 5,055 small businesses in 2022, with 76 percent of loans going to underserved communities, including Hispanic-owned and Black-owned small businesses. Additionally, $7.9 billion in funding was made through private debt and equity funds licensed as Small Business Investment Corporations (SBICs) in 2022 to 1,217 small businesses and startups, of which 26 percent were women-owned, minority-owned, and veteran-owned small businesses or located in underserved geographic areas.<span class="ql-inline-citation" data-cite="19"></span><br/></p></div></div></div>
<span class="heading-toc" id="toc-eligibility-requirements-to-get-an-sba-microloan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> Eligibility Requirements to Get an SBA Microloan </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> How can you <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-qualify-for-an-sba-loan-7507410">qualify for an SBA loan</a>? SBA microloan requirements will vary depending on the intermediary lender. Common eligibility requirements include:
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<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> <li>Operating as a for-profit business (some nonprofit child care centers may be eligible)</li><li>Operating in the intermediary’s approved area</li><li>Meeting SBA small business size standards</li><li>No disbarment from receiving federal funds<span class="ql-inline-citation" data-cite="17"></span></li>
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<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-subheading__text"> Requirements for Startups </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> The SBA considers businesses that have been operating for two years or less to be startups.<span class="ql-inline-citation" data-cite="18"></span> Intermediaries may have specific <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-credit-score.asp">credit score</a> and collateral requirements for startups.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-subheading__text"> Requirements for Existing Businesses Over 2 Years Old </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Intermediaries may also have specific requirements relating to an applicant’s credit score and business cash flow if their business has been operating for more than two years. Borrowers with existing businesses will likely still need to provide collateral.<br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div>
<span class="heading-toc" id="toc-pros-and-cons-of-an-sba-microloan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_59-0"> <span class="mntl-sc-block-heading__text"> Pros and Cons of an SBA Microloan </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> SBA microloans can be a good option for small businesses that need a relatively small amount of money to help them grow or open, but it is important to consider the potential benefits and downsides.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div>
<div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_62-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_63-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list">
<li><p>Microloan funds can be used for many different purposes.</p></li>
<li><p>SBA microloans can be a good option if you do not qualify for other financing options.</p></li>
</ul>
</div>
<div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list">
<li><p>A low credit score can make it difficult to qualify for a microloan.</p></li>
<li><p>Each intermediary lender can have different eligibility requirements.</p></li>
<li><p>You will likely need to supply collateral.</p></li>
</ul>
</div>
</div></div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_65-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_66-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_5-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_5-0"><p>Other financing options for small business owners include conventional business loans, different SBA loan programs, or SBA grants.<br/></p></div></div></div>
<span class="heading-toc" id="toc-sba-microloan-vs-sba-7a-loan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> SBA Microloan vs. SBA 7(a) Loan </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> The SBA microloan program and the SBA 7(a) loan program have some similarities and differences.<br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div>
<div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_70-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_71-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">SBA Microloan</span>
<ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list">
<li><p><strong>Amount</strong>: Up to $50,000</p></li>
<li><p><strong>Eligibility</strong>: Varies depending on the intermediary</p></li>
<li><p><strong>Terms</strong>: Maximum of six years</p></li>
<li><p><strong>Interest rates</strong>: 8% to 13%</p></li>
<li><p><strong>Fees</strong>: Vary depending on the intermediary</p></li>
<li><p><strong>Collateral</strong>: Usually required</p></li>
<li><p><strong>Uses</strong>: Working capital, inventory, supplies, furniture, fixtures, machinery, and equipment</p></li>
</ul>
</div>
<div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">SBA 7(a) Loan</span>
<ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list">
<li><p><strong>Amount</strong>: Up to $5 million</p></li>
<li><p><strong>Eligibility</strong>: Must operate as a for-profit business in the United States; must seek other sources of financial assistance first</p></li>
<li><p><strong>Terms</strong>: 10 years for working capital, inventory, or equipment loans; 25 years for real estate loans</p></li>
<li><p><strong>Interest rates</strong>: Vary depending on the loan amount</p></li>
<li><p><strong>Fees</strong>: Vary</p></li>
<li><p><strong>Collateral</strong>: Collateral required for loans of more than $25,000</p></li>
<li><p><strong>Uses</strong>: Working capital, revolving funds, purchase of real estate, construction of new buildings, establishing a new business, refinancing business debt, and purchase of equipment, machinery, furniture, fixtures, and supplies</p></li>
</ul>
</div>
</div></div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div>
<span class="heading-toc" id="toc-how-to-apply-for-an-sba-microloan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_73-0"> <span class="mntl-sc-block-heading__text"> How to Apply for an SBA Microloan </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> To apply for an SBA microloan, submit your microloan application to an intermediary lender. The SBA provides a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/funding-programs/loans/microloans/list-microlenders">list of participating microlenders</a>.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> Each intermediary lender may have specific application requirements. They may ask you to provide financial documentation about your business and personal finances. An SBA microloan is funded within 120 days.<br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_78-0"><span class="heading-toc" id="toc-what-is-the-smallest-sba-loan-amount"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Smallest SBA Loan Amount?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>The SBA offers small business loans from $500 to $5.5 million.<span class="ql-inline-citation" data-cite="1"></span> Loan minimums and maximums will vary depending on the SBA program.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_80-0"><span class="heading-toc" id="toc-how-long-does-it-take-to-get-an-sba-microloan"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Long Does It Take to Get an SBA Microloan?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Once your loan is approved, it can take up to 120 days to close.<span class="ql-inline-citation" data-cite="14"></span> SBA loans generally take longer to get because you must meet more approvals. Both the SBA and the intermediary lender will have requirements.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_82-0"><span class="heading-toc" id="toc-can-you-get-more-than-one-sba-microloan"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Get More than One SBA Microloan?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>You can get more than one SBA microloan. The total amount borrowed with SBA microloans cannot exceed $50,000 at any one time.<span class="ql-inline-citation" data-cite="8"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_84-0"><span class="heading-toc" id="toc-what-is-the-minimum-credit-score-required-for-an-sba-microloan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Minimum Credit Score Required for an SBA Microloan?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>The SBA does not list specific credit score requirements for its microloans, but <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-get-a-business-loan-7480931">business loan</a> lenders may have their own specific criteria for minimum credit scores or other financial requirements.<span class="ql-inline-citation" data-cite="4"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_86-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_87-0"> SBA microloans can help startups and other small businesses seeking a relatively small amount of financing. Microloans can be used for many different purposes. While interest rates, fees, and terms will vary depending on the intermediary lender, you will have a maximum of six years to repay the loan.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_88-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_89-0"> If you need more funding or more flexible repayment terms, you can explore the SBA’s other loan programs or conventional financing options.
</p></div> | SBA microloans are loans that the U.S. [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) provides for up to $50,000 through intermediary lenders to help entrepreneurs grow their small businesses.
Microloans can be used for many different purposes, such as for working capital or inventory. But they have some limitations—for example, they cannot be used to pay debt. The loan terms and rates on SBA microloans will vary depending on the intermediary lender. The typical microloan applicants are [startups](https://www.investopedia.com/best-sba-loans-for-startups-7509414) and existing [small businesses](https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp).
### Key Takeaways
* SBA microloans provide up to $50,000 in funding to small businesses via funding intermediaries.
* You can use microloans to expand, repair, and reopen your small businesses to pay for expenses like working capital, inventory, or supplies.
* You cannot use the funds from an SBA microloan to buy real estate or pay off debt.
* SBA-approved intermediary lenders have individual lending and credit requirements.
## How SBA Microloans Work
The SBA supplies funds to intermediary lenders, which administer the loan program. These lenders are nonprofit community-based organizations. SBA borrowers submit their SBA microloan applications to a local SBA-approved intermediary. The SBA provides a list of of designated intermediary [SBA microlenders](https://www.investopedia.com/best-sba-lenders-5091699).
The SBA provides up to $5 million to an intermediary lender to issue SBA microloans. Then, the loans require a 15% nonfederal cash match.
SBA microloans are generally issued to [startups](https://www.investopedia.com/terms/s/startup.asp) and [small businesses](https://www.investopedia.com/terms/s/smallandmidsizeenterprises.asp), but not-for-profit child care centers may also qualify. SBA microloans are closed within 120 days of being approved.
###
The terms of SBA microloans will vary, but most intermediaries will require you to provide a personal guarantee and some kind of [collateral](https://www.investopedia.com/terms/c/collateral.asp), which are assets pledged to secure the loan.
## Main Features of an SBA Microloan
Like other types of loans, SBA microloans have specific terms, interest rates, fees, and other features. Let’s look in more detail at what they provide and what they require.
### Maximum Amount
The SBA microloan program provides loans up to $50,000. The average loan amount is $13,000.
### Terms
SBA-backed intermediaries set [repayment](https://www.investopedia.com/terms/r/repayment.asp) terms, so they may vary from loan to loan. The terms will be determined in part by the loan amount and the borrower’s needs. The maximum repayment term for an SBA microloan is six years, and the average term is 40 months.
### Interest Rates
Intermediaries determine the [interest rates](https://www.investopedia.com/terms/i/interestrate.asp) for microloans. You can expect interest to be about 8% to 13%.
### Fees
You are responsible for paying a number of fees associated with an SBA microloan. For example, intermediaries may charge a packaging fee. The packaging fee is limited to 3% of the total loan amount for loans with terms of a year or more. For loans with terms of less than a year, the packaging fee is limited to 2% of the total amount of the loan.
### Note
You may also have to pay closing costs, which could include fees for filing, credit reports, and collateral appraisal.
### Collateral
The SBA does not give intermediaries specific criteria regarding collateral for specific loans. But intermediaries typically require microloan borrowers to provide collateral because intermediaries must maintain cash reserves and loan balances that equal 115% of what the SBA provided the intermediary.
### Personal Guarantee
In addition to collateral, intermediaries may also require you to provide a [personal guarantee](https://www.investopedia.com/terms/p/personal-guarantee.asp). Essentially, if the business is unable to repay the loan, then you, as the business owner, would be responsible.
## SBA Microloan Uses
You can use microloans for a number of purposes, including:
* Machinery and equipment
* Supplies
* Inventory
* Furniture and fixtures
* [Working capital](https://www.investopedia.com/terms/w/workingcapital.asp)
You cannot use the funds from an SBA microloan to pay off debts or buy real estate.
### SBA Microloans By The Numbers
$82.6 million in Microloan funding went to 5,055 small businesses in 2022, with 76 percent of loans going to underserved communities, including Hispanic-owned and Black-owned small businesses. Additionally, $7.9 billion in funding was made through private debt and equity funds licensed as Small Business Investment Corporations (SBICs) in 2022 to 1,217 small businesses and startups, of which 26 percent were women-owned, minority-owned, and veteran-owned small businesses or located in underserved geographic areas.
## Eligibility Requirements to Get an SBA Microloan
How can you [qualify for an SBA loan](https://www.investopedia.com/how-to-qualify-for-an-sba-loan-7507410)? SBA microloan requirements will vary depending on the intermediary lender. Common eligibility requirements include:
* Operating as a for-profit business (some nonprofit child care centers may be eligible)
* Operating in the intermediary’s approved area
* Meeting SBA small business size standards
* No disbarment from receiving federal funds
### Requirements for Startups
The SBA considers businesses that have been operating for two years or less to be startups. Intermediaries may have specific [credit score](https://www.investopedia.com/terms/b/business-credit-score.asp) and collateral requirements for startups.
### Requirements for Existing Businesses Over 2 Years Old
Intermediaries may also have specific requirements relating to an applicant’s credit score and business cash flow if their business has been operating for more than two years. Borrowers with existing businesses will likely still need to provide collateral.
## Pros and Cons of an SBA Microloan
SBA microloans can be a good option for small businesses that need a relatively small amount of money to help them grow or open, but it is important to consider the potential benefits and downsides.
Pros
* Microloan funds can be used for many different purposes.
* SBA microloans can be a good option if you do not qualify for other financing options.
Cons
* A low credit score can make it difficult to qualify for a microloan.
* Each intermediary lender can have different eligibility requirements.
* You will likely need to supply collateral.
###
Other financing options for small business owners include conventional business loans, different SBA loan programs, or SBA grants.
## SBA Microloan vs. SBA 7(a) Loan
The SBA microloan program and the SBA 7(a) loan program have some similarities and differences.
SBA Microloan
* **Amount**: Up to $50,000
* **Eligibility**: Varies depending on the intermediary
* **Terms**: Maximum of six years
* **Interest rates**: 8% to 13%
* **Fees**: Vary depending on the intermediary
* **Collateral**: Usually required
* **Uses**: Working capital, inventory, supplies, furniture, fixtures, machinery, and equipment
SBA 7(a) Loan
* **Amount**: Up to $5 million
* **Eligibility**: Must operate as a for-profit business in the United States; must seek other sources of financial assistance first
* **Terms**: 10 years for working capital, inventory, or equipment loans; 25 years for real estate loans
* **Interest rates**: Vary depending on the loan amount
* **Fees**: Vary
* **Collateral**: Collateral required for loans of more than $25,000
* **Uses**: Working capital, revolving funds, purchase of real estate, construction of new buildings, establishing a new business, refinancing business debt, and purchase of equipment, machinery, furniture, fixtures, and supplies
## How to Apply for an SBA Microloan
To apply for an SBA microloan, submit your microloan application to an intermediary lender. The SBA provides a [list of participating microlenders](https://www.sba.gov/funding-programs/loans/microloans/list-microlenders).
Each intermediary lender may have specific application requirements. They may ask you to provide financial documentation about your business and personal finances. An SBA microloan is funded within 120 days.
## What Is the Smallest SBA Loan Amount?
The SBA offers small business loans from $500 to $5.5 million. Loan minimums and maximums will vary depending on the SBA program.
## How Long Does It Take to Get an SBA Microloan?
Once your loan is approved, it can take up to 120 days to close. SBA loans generally take longer to get because you must meet more approvals. Both the SBA and the intermediary lender will have requirements.
## Can You Get More than One SBA Microloan?
You can get more than one SBA microloan. The total amount borrowed with SBA microloans cannot exceed $50,000 at any one time.
## What Is the Minimum Credit Score Required for an SBA Microloan?
The SBA does not list specific credit score requirements for its microloans, but [business loan](https://www.investopedia.com/how-to-get-a-business-loan-7480931) lenders may have their own specific criteria for minimum credit scores or other financial requirements.
## The Bottom Line
SBA microloans can help startups and other small businesses seeking a relatively small amount of financing. Microloans can be used for many different purposes. While interest rates, fees, and terms will vary depending on the intermediary lender, you will have a maximum of six years to repay the loan.
If you need more funding or more flexible repayment terms, you can explore the SBA’s other loan programs or conventional financing options.
| SBA microloans are loans that the U.S. Small Business Administration (SBA) provides for up to $50,000 through intermediary lenders to help entrepreneurs grow their small businesses.
Microloans can be used for many different purposes, such as for working capital or inventory. But they have some limitations—for example, they cannot be used to pay debt. The loan terms and rates on SBA microloans will vary depending on the intermediary lender. The typical microloan applicants are startups and existing small businesses.
Key Takeaways
SBA microloans provide up to $50,000 in funding to small businesses via funding intermediaries.You can use microloans to expand, repair, and reopen your small businesses to pay for expenses like working capital, inventory, or supplies.You cannot use the funds from an SBA microloan to buy real estate or pay off debt.SBA-approved intermediary lenders have individual lending and credit requirements.
How SBA Microloans Work
The SBA supplies funds to intermediary lenders, which administer the loan program. These lenders are nonprofit community-based organizations. SBA borrowers submit their SBA microloan applications to a local SBA-approved intermediary. The SBA provides a list of of designated intermediary SBA microlenders.
The SBA provides up to $5 million to an intermediary lender to issue SBA microloans. Then, the loans require a 15% nonfederal cash match.
SBA microloans are generally issued to startups and small businesses, but not-for-profit child care centers may also qualify. SBA microloans are closed within 120 days of being approved.
The terms of SBA microloans will vary, but most intermediaries will require you to provide a personal guarantee and some kind of collateral, which are assets pledged to secure the loan.
Main Features of an SBA Microloan
Like other types of loans, SBA microloans have specific terms, interest rates, fees, and other features. Let’s look in more detail at what they provide and what they require.
Maximum Amount
The SBA microloan program provides loans up to $50,000. The average loan amount is $13,000.
Terms
SBA-backed intermediaries set repayment terms, so they may vary from loan to loan. The terms will be determined in part by the loan amount and the borrower’s needs. The maximum repayment term for an SBA microloan is six years, and the average term is 40 months.
Interest Rates
Intermediaries determine the interest rates for microloans. You can expect interest to be about 8% to 13%.
Fees
You are responsible for paying a number of fees associated with an SBA microloan. For example, intermediaries may charge a packaging fee. The packaging fee is limited to 3% of the total loan amount for loans with terms of a year or more. For loans with terms of less than a year, the packaging fee is limited to 2% of the total amount of the loan.
Note
You may also have to pay closing costs, which could include fees for filing, credit reports, and collateral appraisal.
Collateral
The SBA does not give intermediaries specific criteria regarding collateral for specific loans. But intermediaries typically require microloan borrowers to provide collateral because intermediaries must maintain cash reserves and loan balances that equal 115% of what the SBA provided the intermediary.
Personal Guarantee
In addition to collateral, intermediaries may also require you to provide a personal guarantee. Essentially, if the business is unable to repay the loan, then you, as the business owner, would be responsible.
SBA Microloan Uses
You can use microloans for a number of purposes, including:
Machinery and equipment
Supplies
Inventory
Furniture and fixtures
Working capital
You cannot use the funds from an SBA microloan to pay off debts or buy real estate.
SBA Microloans By The Numbers
$82.6 million in Microloan funding went to 5,055 small businesses in 2022, with 76 percent of loans going to underserved communities, including Hispanic-owned and Black-owned small businesses. Additionally, $7.9 billion in funding was made through private debt and equity funds licensed as Small Business Investment Corporations (SBICs) in 2022 to 1,217 small businesses and startups, of which 26 percent were women-owned, minority-owned, and veteran-owned small businesses or located in underserved geographic areas.
Eligibility Requirements to Get an SBA Microloan
How can you qualify for an SBA loan? SBA microloan requirements will vary depending on the intermediary lender. Common eligibility requirements include:
Operating as a for-profit business (some nonprofit child care centers may be eligible)Operating in the intermediary’s approved areaMeeting SBA small business size standardsNo disbarment from receiving federal funds
Requirements for Startups
The SBA considers businesses that have been operating for two years or less to be startups. Intermediaries may have specific credit score and collateral requirements for startups.
Requirements for Existing Businesses Over 2 Years Old
Intermediaries may also have specific requirements relating to an applicant’s credit score and business cash flow if their business has been operating for more than two years. Borrowers with existing businesses will likely still need to provide collateral.
Pros and Cons of an SBA Microloan
SBA microloans can be a good option for small businesses that need a relatively small amount of money to help them grow or open, but it is important to consider the potential benefits and downsides.
Pros
Microloan funds can be used for many different purposes.
SBA microloans can be a good option if you do not qualify for other financing options.
Cons
A low credit score can make it difficult to qualify for a microloan.
Each intermediary lender can have different eligibility requirements.
You will likely need to supply collateral.
Other financing options for small business owners include conventional business loans, different SBA loan programs, or SBA grants.
SBA Microloan vs. SBA 7(a) Loan
The SBA microloan program and the SBA 7(a) loan program have some similarities and differences.
SBA Microloan
Amount: Up to $50,000
Eligibility: Varies depending on the intermediary
Terms: Maximum of six years
Interest rates: 8% to 13%
Fees: Vary depending on the intermediary
Collateral: Usually required
Uses: Working capital, inventory, supplies, furniture, fixtures, machinery, and equipment
SBA 7(a) Loan
Amount: Up to $5 million
Eligibility: Must operate as a for-profit business in the United States; must seek other sources of financial assistance first
Terms: 10 years for working capital, inventory, or equipment loans; 25 years for real estate loans
Interest rates: Vary depending on the loan amount
Fees: Vary
Collateral: Collateral required for loans of more than $25,000
Uses: Working capital, revolving funds, purchase of real estate, construction of new buildings, establishing a new business, refinancing business debt, and purchase of equipment, machinery, furniture, fixtures, and supplies
How to Apply for an SBA Microloan
To apply for an SBA microloan, submit your microloan application to an intermediary lender. The SBA provides a list of participating microlenders.
Each intermediary lender may have specific application requirements. They may ask you to provide financial documentation about your business and personal finances. An SBA microloan is funded within 120 days.
What Is the Smallest SBA Loan Amount?
The SBA offers small business loans from $500 to $5.5 million. Loan minimums and maximums will vary depending on the SBA program.
How Long Does It Take to Get an SBA Microloan?
Once your loan is approved, it can take up to 120 days to close. SBA loans generally take longer to get because you must meet more approvals. Both the SBA and the intermediary lender will have requirements.
Can You Get More than One SBA Microloan?
You can get more than one SBA microloan. The total amount borrowed with SBA microloans cannot exceed $50,000 at any one time.
What Is the Minimum Credit Score Required for an SBA Microloan?
The SBA does not list specific credit score requirements for its microloans, but business loan lenders may have their own specific criteria for minimum credit scores or other financial requirements.
The Bottom Line
SBA microloans can help startups and other small businesses seeking a relatively small amount of financing. Microloans can be used for many different purposes. While interest rates, fees, and terms will vary depending on the intermediary lender, you will have a maximum of six years to repay the loan.
If you need more funding or more flexible repayment terms, you can explore the SBA’s other loan programs or conventional financing options.
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https://www.investopedia.com/best-equipment-financing-companies-5083500 | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body">
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0">
There are many times when a business may need to purchase equipment. The right equipment can not only be necessary for day-to-day operations but can also help a business grow, expand, and improve efficiency. But costly equipment may be out of the budget for many small- and medium-sized businesses.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1">
Equipment doesn’t just mean heavy machinery. For instance, small companies up to $50 million a year in revenue spend 6.9% of that revenue on IT costs.<span class="ql-inline-citation" data-cite="5"></span> This is enough to impact many businesses' bottom line.
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-2">
Similar to personal loan products, companies can get the equipment they need through loans from equipment financing lenders. These loans provide flexible access to tens (or even hundreds) of thousands of dollars when your business needs them most.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-3">
To help you find the best equipment financing for you and your unique business needs, we have provided the following guide. We compared more than 10 of the top industry leaders looking at factors like repayment terms, loan limits, credit score and business history requirements, fees, and even the types of equipment that can be purchased with those funds.
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<h2 class="summary-list__title">
The Best Equipment Financing Companies of 2024
</h2>
<ul class="summary-list__content">
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best Overall:</strong>
<a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=crest&bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> Crest Capital</a><!-- end: summary-list__item-top-pick -->
</span>
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<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Expanding Businesses:</strong>
<a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://funnel.naturaltracking.com/v2?url=https%3A%2F%2Fnationalfunding.pxf.io%2Fc%2F34020%2F1591774%2F15709%3FsubId1%3D%5Btracking-subid%5D&link_id=77743&site_id=10199&bi%5Bblrs%5D=77743&bi%5Bp%5D=3412&utm_source=dotdashmeredith&vertid=5fe352b14e39dc2cce94d6fb&nrf=1&wid_id=63a2dbc4b31f4f86b6febcc8&tkn=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0eXBlIjoiYWZmaWxpYXRlIiwidmVyc2lvbiI6MSwiaGFzaCI6IkxJLzdxZi9Hbm9vaWd6aDM2a0hyV3BiU05aVT0iLCJpYXQiOjE2ODE4MTI0MzR9.Thunxp4L7PPKepRMcgO5CKwJcHfZuHx8U79s7FEgJ08" rel="nofollow noskim noopener nocaes" target="_blank"> National Funding</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Bad Credit:</strong>
<a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=currency&bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> Currency</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Heavy Equipment:</strong>
<a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://balboa.1west.com/" rel="nofollow noskim noopener nocaes" target="_blank"> Balboa Capital</a><!-- end: summary-list__item-top-pick -->
</span>
</li>
<li class="summary-list__item">
<span class="summary-list__item-top-pick-container">
<strong class="summary-list__item-category">Best for Used Equipment:</strong>
<a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=cit&bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> US Business Funding</a><!-- end: summary-list__item-top-pick -->
</span>
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<strong class="summary-list__item-category">Best for Large Loans:</strong>
<a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=cit&bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> CIT Bank</a><!-- end: summary-list__item-top-pick -->
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Best Equipment Financing Companies</span><!-- end: comp mntl-toc__heading-text mntl-text-block -->
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<a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span>
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</li><!-- end: comp mntl-toc__list-item mntl-block -->
<li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3">
<div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3">
<a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Required Credit Score for Financing" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-credit-score-is-needed-to-finance-equipment" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Required Credit Score for Financing</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link -->
</div><!-- end: comp mntl-toc__list-item-heading mntl-block -->
</li><!-- end: comp mntl-toc__list-item mntl-block -->
<li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4">
<div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4">
<a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-chose-the-best-equipment-financing-companies" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link -->
</div><!-- end: comp mntl-toc__list-item-heading mntl-block -->
</li><!-- end: comp mntl-toc__list-item mntl-block -->
</ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list -->
</div><!-- end: comp mntl-toc__inner mntl-block -->
</div><!-- end: comp toc-wrapper mntl-toc mntl-block -->
</div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block -->
</div>
<div class="loc article-body__inner article-body__inner">
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0">
<span class="heading-toc" id="toc-best-overall-crest-capital"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best Overall</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> Crest Capital</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 258px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="Crest Capital" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/RNUYurVm9VvJHk3etPeJV1WCBD8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Crest_Capital-5e105643692a4ed589e9f058b29c5129.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/>
<noscript>
<img alt="Crest Capital" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/RNUYurVm9VvJHk3etPeJV1WCBD8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Crest_Capital-5e105643692a4ed589e9f058b29c5129.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0">
<span class="figure-article-caption-owner"><p>Crest Capital</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=crest&bwid_id=6388b14276b3780decf128fd" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-2">
Our top overall pick for the best equipment financing for small businesses is Crest Capital because it offers equipment loans of up to $500,000 and many of the loans receive a decision in just a few hours.<span class="ql-inline-citation" data-cite="8"></span>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-3">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Same-day approval for most loans</p></li>
<li><p>Will finance 100% of costs</p></li>
<li><p>No closing costs</p></li>
<li><p>Loans up to $500,000</p></li>
<li><p>Only requires 2 years financial history to apply</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Financing not offered to startups</p></li>
<li><p>Collateral requirements are vague</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4">
Crest Capital was established in 1989 as a small- and medium-sized business funding and leasing lender, growing establishments across the nation. This lender prides itself on saying "yes" when the bank says "no" and makes it easy to get fast approvals on the funds businesses need most.<span class="ql-inline-citation" data-cite="9"></span>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-5">
We chose Crest Capital as our overall top pick for the best equipment financing because it offers such a broad (yet competitive) range of products and services. Through Crest, businesses can get up to $500,000 in equipment funding with loan repayment terms ranging from 24 to 72 months.<span class="ql-inline-citation" data-cite="17"></span> If you’re borrowing less than $250,000, there are no income statements required, speeding up the process even more.<span class="ql-inline-citation" data-cite="18"></span>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-6">
Both new and used equipment can be financed with Crest, from a variety of different industries. Businesses are able to finance up to 100% of the equipment expenses—including “soft costs” like delivery fees, taxes, or installation—with same-day approval in many cases.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7">
Crest offers financing with no closing costs or business liens. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collateral.asp">Collateral</a> may be required, though this lender doesn’t publish specifics.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8">
Equipment financing from Crest is offered to both small, mom and pop establishments as well as medium-sized businesses. While you will need to have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/120414/what-good-credit-score.asp">good credit score</a>, it’s OK if your credit history is limited. Crest just won’t approve your funding request if your credit includes a past history of missed payments, discharged balances, or irresponsible credit account management (i.e.: a limited history is OK here while a bad history is not).
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9">
Crest Capital does not offer larger loans to startups. Generally, your business will need to have been operational for at least two years in order to get approved for a credit equipment.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1">
<span class="heading-toc" id="toc-best-for-expanding-businesses-national-funding"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Expanding Businesses</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> National Funding</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-10" style="--imgWidth: 431px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="National Funding" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/e5fxwpr4xFPrMm5I92rSTDU6IBo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/National_Funding-5e4ae8b61ded4268b99131f5d5112df6.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/>
<noscript>
<img alt="National Funding" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/e5fxwpr4xFPrMm5I92rSTDU6IBo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/National_Funding-5e4ae8b61ded4268b99131f5d5112df6.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1">
<span class="figure-article-caption-owner"><p>National Funding</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-11">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at National Funding" data-retailer-type="other" data-tracking-container="true" href="https://funnel.naturaltracking.com/v2?url=https%3A%2F%2Fnationalfunding.pxf.io%2Fc%2F34020%2F1591774%2F15709%3FsubId1%3D%5Btracking-subid%5D&link_id=77743&site_id=10199&bi%5Bblrs%5D=77743&bi%5Bp%5D=3412&utm_source=dotdashmeredith&vertid=5fe352b14e39dc2cce94d6fb&nrf=1&wid_id=63a2dbc4b31f4f86b6febcc8&tkn=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0eXBlIjoiYWZmaWxpYXRlIiwidmVyc2lvbiI6MSwiaGFzaCI6IkxJLzdxZi9Hbm9vaWd6aDM2a0hyV3BiU05aVT0iLCJpYXQiOjE2ODE4MTI0MzR9.Thunxp4L7PPKepRMcgO5CKwJcHfZuHx8U79s7FEgJ08" id="button_1-0-1" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12">
For expanding businesses, National Funding is the best choice for equipment financing. It only requires you to be in business for only six months and has a low credit score requirement for approval.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-13">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>No down payment</p></li>
<li><p>Low FICO score requirement</p></li>
<li><p>Excellent consumer reviews</p></li>
<li><p>Equipment can be new or used</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Equipment financing maxes out at $150,000</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14">
No matter the industry or type of equipment necessary, National Funding is there to help businesses with at least six months in business get the funding they need most to expand.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-15">
National Funding offers equipment financing of up to $150,000 with credit decisions in as little as 24 hours. There are no equipment limits through this lender, either. Whether you want to buy or lease either new or used equipment, National Funding is willing to provide the funds.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16">
Borrower requirements are fairly straightforward: you’ll need to have been in business for at least 6 months, have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/ficoscore.asp">FICO credit score</a> of fair to excellent, and be able to provide an equipment quote from the vendor or seller.<span class="ql-inline-citation" data-cite="10"></span>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17">
Financing is available to businesses in all 50 states and the District of Columbia. There is no down payment required. In determining the length of the loan, the company is flexible and things are done on a case by case basis. Terms can be short or over a decade.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2">
<span class="heading-toc" id="toc-best-for-bad-credit-currency"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Bad Credit</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> Currency</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-18" style="--imgWidth: 0px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="Currency" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/4rx-8F0evLK8dHGi7nmxjbi92os=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Currency-77c98292a7fa49c6a7e7ae952b26f72d.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/>
<noscript>
<img alt="Currency" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/4rx-8F0evLK8dHGi7nmxjbi92os=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Currency-77c98292a7fa49c6a7e7ae952b26f72d.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2">
<span class="figure-article-caption-owner"><p> Currency</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-19">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=currency&bwid_id=6388b14276b3780decf128fd" id="button_1-0-2" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20">
It’s tough to get any business loan with bad credit, but this is especially true when you’re buying equipment that can run into the hundreds of thousands of dollars. With loan options for all credit profiles, Currency is our top lender choice for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/subprime.asp" rel="noopener noreferrer">subprime</a> equipment financing.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-21">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Loans for most credit profiles</p></li>
<li><p>Financing up to $500,000</p></li>
<li><p>Online approval is usually fast and same-day funding is possible</p></li>
<li><p>No down payment required</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Maximum repayment term is 72 months</p></li>
<li><p>Loan fees may apply</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22">
When it comes to shopping around for the best equipment funding for your business, credit can play a significant role. Not only will your credit score impact the rate you’ll receive, but it can even limit the terms you’re offered or exclude you from certain lenders altogether.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-23">
That’s why Currency is our top lender pick for business borrowers with bad credit. The company offers funding to customers with most credit profiles. Just expect subprime credit scores to potentially result in lower funding limits and/or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">higher interest rates</a>.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24">
Equipment financing through Currency provides borrowers with up to $500,000. No down payment is required, though choosing to put cash down may result in better financing terms.<span class="ql-inline-citation" data-cite="19"></span>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25">
Five years is the most common term and six is sometimes possible. Loan origination fees may apply.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3">
<span class="heading-toc" id="toc-best-for-heavy-equipment-balboa-capital"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Heavy Equipment</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> Balboa Capital</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-26" style="--imgWidth: 378px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="Balboa Capital" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/lMdObhnx4mU6Ao5meCroKB07uao=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Balboa_Capital-0cf8ba4f2d354c89b4d86df1bfa83e69.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/>
<noscript>
<img alt="Balboa Capital" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/lMdObhnx4mU6Ao5meCroKB07uao=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Balboa_Capital-0cf8ba4f2d354c89b4d86df1bfa83e69.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3">
<span class="figure-article-caption-owner"><p> Balboa Capital</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-27">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at 1West" data-retailer-type="other" data-tracking-container="true" href="https://balboa.1west.com/" id="button_1-0-3" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28">
With reasonable eligibility requirements and same-day funding in many cases, Balboa Capital earns our top nod for heavy equipment financing. They offer up to $500,000 with competitive interest rates to boot.<span class="ql-inline-citation" data-cite="11"></span>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-29">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Qualify for financing in an hour</p></li>
<li><p>Same-day funding is available</p></li>
<li><p>Financing up to $500,000</p></li>
<li><p>Excellent consumer ratings</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Credit score requirements are contradictory</p></li>
<li><p>Limited repayment terms available</p></li>
<li><p>$100,000 annual revenue requirement</p></li>
<li><p>Doesn't lend to brand new businesses or startups</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30">
Heavy equipment is one of the most expensive pieces of machinery that a small business could need or purchase. It’s no wonder, then, that so many businesses turn to equipment financing when shopping around for heavy machinery, versus buying with cash.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-31">
Our top choice for heavy machinery financing would be Balboa Capital. This lender offers up to $500,000 in equipment funding with repayment terms from 24 to 60 months. Applying online is simple and doesn’t require a bunch of business financials; you’ll usually have a credit decision within an hour, and same-day funding is available in many cases.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-32">
In order to get heavy machinery financing through Balboa, your business will need to be operational for at least a year and have an annual revenue of $100,000 or more. The company says that all credit is considered, but also says they look for at least a score of 620. This is slightly confusing.<span class="ql-inline-citation" data-cite="11"></span>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4">
<span class="heading-toc" id="toc-best-for-used-equipment-us-business-funding"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Used Equipment</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> US Business Funding</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block -->
<div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4">
<div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4">
<div class="tabbed-sc-block-intro">
<figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-33" style="--imgWidth: 0px">
<div class="figure-media">
<div class="img-placeholder" style="padding-bottom:50.0%;">
<img alt="US Business Funding" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/wBOow5ZE4TnOncotz-oHt0kICjo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/US_Business_Funding-0717c19e2c644967ae446c96bd4b7264.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/>
<noscript>
<img alt="US Business Funding" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/wBOow5ZE4TnOncotz-oHt0kICjo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/US_Business_Funding-0717c19e2c644967ae446c96bd4b7264.jpg" width="1500"/>
</noscript>
</div>
</div>
<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4">
<span class="figure-article-caption-owner"><p> US Business Funding</p></span>
</figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption -->
</figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res -->
<div class="tabbed-sc-block-intro__content">
<div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-34">
<div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4">
<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=cit&bwid_id=6388b14276b3780decf128fd" id="button_1-0-4" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
</div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block -->
</div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block -->
</div>
</div>
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-35">
Whether you’re looking to purchase new or used business equipment—or even purchase directly from a third-party—US Business Funding is willing to finance the transaction, earning it our top spot for used equipment.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-36">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>New, used, and third-party sales accepted</p></li>
<li><p>Equipment loans from $5,000 to $50 million</p></li>
<li><p>Credit decision in 60 seconds</p></li>
<li><p>24-hour funding available</p></li>
<li><p>Repayment terms up to 72 months</p></li>
<li><p>100% soft cost roll-in allowed</p></li>
<li><p>95% loan approval</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Only $75,000 available with short-form application (no financials)</p></li>
<li><p>Most programs require a two-year business history</p></li>
<li><p>All financing is technically a “lease”</p></li>
</ul>
</div>
</div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37">
Offering financing options in any number of industries, US Business Funding is there for a variety of businesses and equipment needs.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38">
With US Business Funding most equipment loans are between $10,000 and $2 million. However, loans as $50 million are possible. If you plan to borrow $75,000 or less, you can do so with a one-page credit application, and there is no need for lengthy financials. Beyond $75,000, however, you should expect to provide a range of business and financial documentation.<span class="ql-inline-citation" data-cite="13"></span><span class="ql-inline-citation" data-cite="12"></span>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-39">
Equipment financing is offered for new or used equipment. Where US Business Funding stands out, though, is that it also allows for purchases of equipment from third parties, which may be helpful depending on your industry and the exact equipment you’re looking to buy.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-40">
In order to qualify for most financing programs through US Business Funding, your business will need to have been operational for at least two years. However, there is a program option for businesses that are at least six months old and another for one year old businesses.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41">
Credit approval takes only 60 seconds. Many applicants receive funding in as little as 24 hours, and the lender currently boasts a 95% approval rate. Repayment terms are up to 72 months depending on the program. Interest rates are as low as 3.5% APR right now, though you can expect your rate to vary based on things like the financing terms you request, your business’ history, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/05/creditscorecalculation.asp">credit score</a>.<span class="ql-inline-citation" data-cite="20"></span>
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42">
Lastly, you can roll in 100% of the costs involved with your equipment purchase, including “soft costs” like installation, delivery, training, and more.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43">
It’s important to note that all of this lender’s programs are equipment leases. With that said, there are programs where at the end of the lease, you can purchase the equipment for $1 if you want to keep it ($1 Buy Out).
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
</div><!-- end: comp list-sc-item__intro mntl-block -->
</div><!-- end: comp list-sc-item__content mntl-block -->
</div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block -->
<div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5">
<span class="heading-toc" id="toc-best-for-large-loans-cit-bank"></span>
<h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5">
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary">Best for Large Loans</span> </span>
</span>:
<span class="split-text__item">
<span class="split-text__secondary-wrapper">
<span class="split-text__item-secondary"> CIT Bank</span> </span>
</span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text -->
<hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block -->
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<figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5">
<span class="figure-article-caption-owner"><p> CIT Bank</p></span>
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<a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=cit&bwid_id=6388b14276b3780decf128fd" id="button_1-0-5" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button -->
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46">
Offering up to $500,000 with a quick online application (and up to $1 million with financials), CIT Bank makes it quick and easy to get a large equipment financing loan for your business.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-47">
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Up to $500,000 without financials</p></li>
<li><p>Online application takes as little as three minutes</p></li>
<li><p>Flexible repayment terms</p></li>
<li><p>New or used equipment allowed</p></li>
<li><p>With capital equipment financing, up to $100 million is possible</p></li>
</ul>
</div>
<div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list">
<li><p>Same-day funding not available</p></li>
<li><p>Credit score thresholds may be high</p></li>
<li><p>Business history required</p></li>
</ul>
</div>
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-48">
Earning our pick for best large equipment financing is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cit-bank-review-4801295">CIT Bank</a>, an institution that has been offering financing options to consumers for more than a century. CIT is a division of First Citizens Bank. The bank is a top 20 U.S. financial institution and has over 600 branches across 22 states.<span class="ql-inline-citation" data-cite="14"></span>
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-49">
CIT Bank offers equipment loans of up to $1 million to small businesses, with repayment terms ranging from six to 72 months in length. With a simple application-only loan, you can borrow up to $500,000 without needing to submit any additional records. If you’re willing to compile and turn over financials, you can borrow up to $1 million. Need even more money? CIT’s Capital Equipment Financing program offers up to $100 million (and beyond, in some cases), with repayment terms up to 10 years in length.<span class="ql-inline-citation" data-cite="16"></span><span class="ql-inline-citation" data-cite="15"></span>
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-50">
CIT Bank’s online application takes only three minutes to complete and submit, and funding can take as little as one business day. Financing is offered for both new and used equipment, and rates are currently as low as 5.49% APR.<span class="ql-inline-citation" data-cite="7"></span>
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<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-51">
You will be asked to show business history of some length. In many cases, credit score requirements can be quite high. Also, same-day financing is not available, but approved funds can be in your account as soon as the next day.
</p><!-- end: comp mntl-sc-block mntl-sc-block-html -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52">
Financing options are quite flexible as well. You can choose between monthly, seasonal, and deferred repayment options, depending on what works for you and your business. CIT Bank also offers a $1 Buyout option, either as a lease or as an equipment financing agreement (EFA). With a fair market value lease, you have the option to purchase your equipment at the end of the term or simply return it, and CIT also allows for net 30-, 60-, or 90-day payments.
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<div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0">
<span class="heading-toc" id="toc-what-is-equipment-financing"></span>
<h2 class="mntl-sc-block-questionandanswer__question">What Is Equipment Financing?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>If you own a small business and need to purchase equipment of any kind, the cost can often be prohibitive. With equipment financing, though, you can either take out a loan or lease that equipment from an equipment financing lender.</p><p>This allows you to get the machinery or other equipment you may need to operate, expand, or profit, without needing to pay the full cost upfront.</p></div>
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<div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-1">
<span class="heading-toc" id="toc-what-are-the-3-types-of-financing"></span>
<h2 class="mntl-sc-block-questionandanswer__question">What Are the 3 Types of Financing?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>There are three different types of financing that you may encounter: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/042215/what-are-benefits-company-using-equity-financing-vs-debt-financing.asp">debt financing, equity financing</a>, and combination financing. Each of these differs from leasing.</p><p>Debt financing is your typical installment loan; you borrow a one-time, fixed amount from a lender and then pay it back over time according to your loan agreement. Equity financing is where you receive funding in exchange for a portion of the equity in your business; you are not obligated to repay the capital you received as part of an equity financing.</p><p>Combination financing is a blend of the two. In many cases, this means accepting <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital.asp">capital</a> in exchange for equity in a business, with the understanding that at least a portion of those funds will be paid back over time.</p><p>All three of these differ from leasing in that leasing is not necessarily a path to ownership. Rather than receiving funding and purchasing equipment, for instance, a lease agreement purchases the equipment <em>for</em> you. At the end of your lease term, you will no longer have a payment to make but the equipment won’t belong to you, either.</p><p>In some cases, there may be a buy-out clause, where you can purchase the equipment for a very small price if you still want it at the end of the lease.</p></div>
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<div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-2">
<span class="heading-toc" id="toc-how-long-can-you-finance-used-equipment"></span>
<h2 class="mntl-sc-block-questionandanswer__question">How Long Can You Finance Used Equipment?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Finance terms may vary by lender, borrowed amount, and equipment type. You can typically expect to finance used equipment for somewhere between two and seven years, however.</p><p>Some lenders may cut this off at five years, especially for used or lower-cost equipment, while others might give you as many as 10 years to repay the loan.</p></div>
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<div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-3">
<span class="heading-toc" id="toc-what-credit-score-is-needed-to-finance-equipment"></span>
<h2 class="mntl-sc-block-questionandanswer__question">What Credit Score Is Needed to Finance Equipment?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>As with most financial products, the better your credit, the better the financing options and products offered to you. When it comes to equipment financing for your business, you should plan to have a credit score of at least 650 to 700 if you want to receive the most competitive interest rates and repayment terms.</p><p>There are some lenders willing to forgo these limits, though, accepting scores as low as 575 or even considering <em>all</em> credit scores. However, a low score or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0212/common-things-that-improve-and-lower-credit-scores.aspx">negative credit history</a> may result in limited financing options and more expensive lending in the end.</p></div>
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<span class="heading-toc" id="toc-how-we-chose-the-best-equipment-financing-companies"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-4"> <span class="mntl-sc-block-heading__text"> How We Chose the Best Equipment Financing Companies </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading -->
<p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5">
We looked at and compared the top 10 equipment financing lenders in order to provide this comprehensive guide. In order to choose the top company for each category, we compared factors such as financing options offered and the type of equipment that could be purchased. We also looked at the typical speed for both credit decisions and funding, fees and penalties involved in the loan, and what sort of borrower requirements were in place.
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<li class="mntl-sources__source" id="citation-5"><p>Techvera. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://techvera.com/how-much-should-a-company-spend-on-it/">How Much Should a Company Spend on IT?</a>"</p></li>
<li class="mntl-sources__source" id="citation-8"><p>Crest Capital. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.crestcapital.com/" rel="nofollow sponsored">Financing On Your Terms</a>."</p></li>
<li class="mntl-sources__source" id="citation-9"><p>Crest Capital. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.crestcapital.com/about-equipment-leasing-company" rel="nofollow sponsored">About Us</a>."</p></li>
<li class="mntl-sources__source" id="citation-17"><p>Crest Capital. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.crestcapital.com/working_capital" rel="nofollow sponsored">Working Capital</a>."</p></li>
<li class="mntl-sources__source" id="citation-18"><p>Crest Capital. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.crestcapital.com/portal/" rel="nofollow sponsored">Payment Options</a>," See footer.</p></li>
<li class="mntl-sources__source" id="citation-10"><p>National Funding. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.nationalfunding.com/equipment-leasing/" rel="nofollow sponsored">Equipment Leasing</a>."</p></li>
<li class="mntl-sources__source" id="citation-19"><p>Currency. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.gocurrency.com/finance/" rel="nofollow sponsored">Hassle-Free Customer Financing Options to Build Your Business</a>."</p></li>
<li class="mntl-sources__source" id="citation-11"><p>Balboa Capital. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.balboacapital.com/equipment-financing/" rel="nofollow sponsored">Equipment Financing</a>."</p></li>
<li class="mntl-sources__source" id="citation-13"><p>US Business Funding. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.usbfund.com/equipment-financing/faq/" rel="nofollow sponsored">FAQ</a>."</p></li>
<li class="mntl-sources__source" id="citation-12"><p>US Business Funding. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.usbfund.com/equipment-financing/" rel="nofollow sponsored">Equipment Financing</a>."</p></li>
<li class="mntl-sources__source" id="citation-20"><p>US Business Funding. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.usbfund.com/business-loans/" rel="nofollow sponsored">Business Loans</a>."</p></li>
<li class="mntl-sources__source" id="citation-14"><p>CIT. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.cit.com/about-us" rel="nofollow sponsored">About Us</a>."</p></li>
<li class="mntl-sources__source" id="citation-16"><p>CIT. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.cit.com/commercial/solutions/capital-equipment" rel="nofollow sponsored">Capital Equipment</a>."</p></li>
<li class="mntl-sources__source" id="citation-15"><p>CIT. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.cit.com/business/solutions/get-financing/finance-equipment" rel="nofollow sponsored">Finance Equipment</a>."</p></li>
<li class="mntl-sources__source" id="citation-7"><p>CIT Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.cit.com/business/solutions/get-financing/finance-equipment" rel="nofollow sponsored">Business Equipment Financing</a>."</p></li>
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There are many times when a business may need to purchase equipment. The right equipment can not only be necessary for day-to-day operations but can also help a business grow, expand, and improve efficiency. But costly equipment may be out of the budget for many small- and medium-sized businesses.
Equipment doesn’t just mean heavy machinery. For instance, small companies up to $50 million a year in revenue spend 6.9% of that revenue on IT costs. This is enough to impact many businesses' bottom line.
Similar to personal loan products, companies can get the equipment they need through loans from equipment financing lenders. These loans provide flexible access to tens (or even hundreds) of thousands of dollars when your business needs them most.
To help you find the best equipment financing for you and your unique business needs, we have provided the following guide. We compared more than 10 of the top industry leaders looking at factors like repayment terms, loan limits, credit score and business history requirements, fees, and even the types of equipment that can be purchased with those funds.
## The Best Equipment Financing Companies of 2024
* **Best Overall:**
[Crest Capital](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=crest&bwid_id=6388b14276b3780decf128fd)
* **Best for Expanding Businesses:**
[National Funding](https://funnel.naturaltracking.com/v2?url=https%3A%2F%2Fnationalfunding.pxf.io%2Fc%2F34020%2F1591774%2F15709%3FsubId1%3D%5Btracking-subid%5D&link_id=77743&site_id=10199&bi%5Bblrs%5D=77743&bi%5Bp%5D=3412&utm_source=dotdashmeredith&vertid=5fe352b14e39dc2cce94d6fb&nrf=1&wid_id=63a2dbc4b31f4f86b6febcc8&tkn=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0eXBlIjoiYWZmaWxpYXRlIiwidmVyc2lvbiI6MSwiaGFzaCI6IkxJLzdxZi9Hbm9vaWd6aDM2a0hyV3BiU05aVT0iLCJpYXQiOjE2ODE4MTI0MzR9.Thunxp4L7PPKepRMcgO5CKwJcHfZuHx8U79s7FEgJ08)
* **Best for Bad Credit:**
[Currency](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=currency&bwid_id=6388b14276b3780decf128fd)
* **Best for Heavy Equipment:**
[Balboa Capital](https://balboa.1west.com/)
* **Best for Used Equipment:**
[US Business Funding](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=cit&bwid_id=6388b14276b3780decf128fd)
* **Best for Large Loans:**
[CIT Bank](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=cit&bwid_id=6388b14276b3780decf128fd)
Best Equipment Financing Companies
Expand
Best Equipment Financing Companies
* [Our Top Picks](#summary-list)
* [Crest Capital](#toc-best-overall-crest-capital)
* [National Funding](#toc-best-for-expanding-businesses-national-funding)
* [Currency](#toc-best-for-bad-credit-currency)
* [Balboa Capital](#toc-best-for-heavy-equipment-balboa-capital)
* [US Business Funding](#toc-best-for-used-equipment-us-business-funding)
* [CIT Bank](#toc-best-for-large-loans-cit-bank)
* See More (3)
* [What Is Equipment Financing?](#toc-what-is-equipment-financing)
* [What Are the 3 Types of Financing?](#toc-what-are-the-3-types-of-financing)
* [Finance Terms for Used Equipment](#toc-how-long-can-you-finance-used-equipment)
* [Required Credit Score for Financing](#toc-what-credit-score-is-needed-to-finance-equipment)
* [Methodology](#toc-how-we-chose-the-best-equipment-financing-companies)
### Best Overall
:
Crest Capital
---
![Crest Capital]()
:fill(white):max_bytes(150000):strip_icc()/Crest_Capital-5e105643692a4ed589e9f058b29c5129.jpg)
Crest Capital
[Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=crest&bwid_id=6388b14276b3780decf128fd)
Our top overall pick for the best equipment financing for small businesses is Crest Capital because it offers equipment loans of up to $500,000 and many of the loans receive a decision in just a few hours.
Pros
* Same-day approval for most loans
* Will finance 100% of costs
* No closing costs
* Loans up to $500,000
* Only requires 2 years financial history to apply
Cons
* Financing not offered to startups
* Collateral requirements are vague
Crest Capital was established in 1989 as a small- and medium-sized business funding and leasing lender, growing establishments across the nation. This lender prides itself on saying "yes" when the bank says "no" and makes it easy to get fast approvals on the funds businesses need most.
We chose Crest Capital as our overall top pick for the best equipment financing because it offers such a broad (yet competitive) range of products and services. Through Crest, businesses can get up to $500,000 in equipment funding with loan repayment terms ranging from 24 to 72 months. If you’re borrowing less than $250,000, there are no income statements required, speeding up the process even more.
Both new and used equipment can be financed with Crest, from a variety of different industries. Businesses are able to finance up to 100% of the equipment expenses—including “soft costs” like delivery fees, taxes, or installation—with same-day approval in many cases.
Crest offers financing with no closing costs or business liens. [Collateral](https://www.investopedia.com/terms/c/collateral.asp) may be required, though this lender doesn’t publish specifics.
Equipment financing from Crest is offered to both small, mom and pop establishments as well as medium-sized businesses. While you will need to have a [good credit score](https://www.investopedia.com/articles/personal-finance/120414/what-good-credit-score.asp), it’s OK if your credit history is limited. Crest just won’t approve your funding request if your credit includes a past history of missed payments, discharged balances, or irresponsible credit account management (i.e.: a limited history is OK here while a bad history is not).
Crest Capital does not offer larger loans to startups. Generally, your business will need to have been operational for at least two years in order to get approved for a credit equipment.
### Best for Expanding Businesses
:
National Funding
---
![National Funding]()
:fill(white):max_bytes(150000):strip_icc()/National_Funding-5e4ae8b61ded4268b99131f5d5112df6.jpg)
National Funding
[Apply Now](https://funnel.naturaltracking.com/v2?url=https%3A%2F%2Fnationalfunding.pxf.io%2Fc%2F34020%2F1591774%2F15709%3FsubId1%3D%5Btracking-subid%5D&link_id=77743&site_id=10199&bi%5Bblrs%5D=77743&bi%5Bp%5D=3412&utm_source=dotdashmeredith&vertid=5fe352b14e39dc2cce94d6fb&nrf=1&wid_id=63a2dbc4b31f4f86b6febcc8&tkn=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0eXBlIjoiYWZmaWxpYXRlIiwidmVyc2lvbiI6MSwiaGFzaCI6IkxJLzdxZi9Hbm9vaWd6aDM2a0hyV3BiU05aVT0iLCJpYXQiOjE2ODE4MTI0MzR9.Thunxp4L7PPKepRMcgO5CKwJcHfZuHx8U79s7FEgJ08)
For expanding businesses, National Funding is the best choice for equipment financing. It only requires you to be in business for only six months and has a low credit score requirement for approval.
Pros
* No down payment
* Low FICO score requirement
* Excellent consumer reviews
* Equipment can be new or used
Cons
* Equipment financing maxes out at $150,000
No matter the industry or type of equipment necessary, National Funding is there to help businesses with at least six months in business get the funding they need most to expand.
National Funding offers equipment financing of up to $150,000 with credit decisions in as little as 24 hours. There are no equipment limits through this lender, either. Whether you want to buy or lease either new or used equipment, National Funding is willing to provide the funds.
Borrower requirements are fairly straightforward: you’ll need to have been in business for at least 6 months, have a [FICO credit score](https://www.investopedia.com/terms/f/ficoscore.asp) of fair to excellent, and be able to provide an equipment quote from the vendor or seller.
Financing is available to businesses in all 50 states and the District of Columbia. There is no down payment required. In determining the length of the loan, the company is flexible and things are done on a case by case basis. Terms can be short or over a decade.
### Best for Bad Credit
:
Currency
---
![Currency]()
:fill(white):max_bytes(150000):strip_icc()/Currency-77c98292a7fa49c6a7e7ae952b26f72d.jpg)
Currency
[Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=currency&bwid_id=6388b14276b3780decf128fd)
It’s tough to get any business loan with bad credit, but this is especially true when you’re buying equipment that can run into the hundreds of thousands of dollars. With loan options for all credit profiles, Currency is our top lender choice for [subprime](https://www.investopedia.com/terms/s/subprime.asp) equipment financing.
Pros
* Loans for most credit profiles
* Financing up to $500,000
* Online approval is usually fast and same-day funding is possible
* No down payment required
Cons
* Maximum repayment term is 72 months
* Loan fees may apply
When it comes to shopping around for the best equipment funding for your business, credit can play a significant role. Not only will your credit score impact the rate you’ll receive, but it can even limit the terms you’re offered or exclude you from certain lenders altogether.
That’s why Currency is our top lender pick for business borrowers with bad credit. The company offers funding to customers with most credit profiles. Just expect subprime credit scores to potentially result in lower funding limits and/or [higher interest rates](https://www.investopedia.com/terms/i/interestrate.asp).
Equipment financing through Currency provides borrowers with up to $500,000. No down payment is required, though choosing to put cash down may result in better financing terms.
Five years is the most common term and six is sometimes possible. Loan origination fees may apply.
### Best for Heavy Equipment
:
Balboa Capital
---
![Balboa Capital]()
:fill(white):max_bytes(150000):strip_icc()/Balboa_Capital-0cf8ba4f2d354c89b4d86df1bfa83e69.jpg)
Balboa Capital
[Apply Now](https://balboa.1west.com/)
With reasonable eligibility requirements and same-day funding in many cases, Balboa Capital earns our top nod for heavy equipment financing. They offer up to $500,000 with competitive interest rates to boot.
Pros
* Qualify for financing in an hour
* Same-day funding is available
* Financing up to $500,000
* Excellent consumer ratings
Cons
* Credit score requirements are contradictory
* Limited repayment terms available
* $100,000 annual revenue requirement
* Doesn't lend to brand new businesses or startups
Heavy equipment is one of the most expensive pieces of machinery that a small business could need or purchase. It’s no wonder, then, that so many businesses turn to equipment financing when shopping around for heavy machinery, versus buying with cash.
Our top choice for heavy machinery financing would be Balboa Capital. This lender offers up to $500,000 in equipment funding with repayment terms from 24 to 60 months. Applying online is simple and doesn’t require a bunch of business financials; you’ll usually have a credit decision within an hour, and same-day funding is available in many cases.
In order to get heavy machinery financing through Balboa, your business will need to be operational for at least a year and have an annual revenue of $100,000 or more. The company says that all credit is considered, but also says they look for at least a score of 620. This is slightly confusing.
### Best for Used Equipment
:
US Business Funding
---
![US Business Funding]()
:fill(white):max_bytes(150000):strip_icc()/US_Business_Funding-0717c19e2c644967ae446c96bd4b7264.jpg)
US Business Funding
[Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=cit&bwid_id=6388b14276b3780decf128fd)
Whether you’re looking to purchase new or used business equipment—or even purchase directly from a third-party—US Business Funding is willing to finance the transaction, earning it our top spot for used equipment.
Pros
* New, used, and third-party sales accepted
* Equipment loans from $5,000 to $50 million
* Credit decision in 60 seconds
* 24-hour funding available
* Repayment terms up to 72 months
* 100% soft cost roll-in allowed
* 95% loan approval
Cons
* Only $75,000 available with short-form application (no financials)
* Most programs require a two-year business history
* All financing is technically a “lease”
Offering financing options in any number of industries, US Business Funding is there for a variety of businesses and equipment needs.
With US Business Funding most equipment loans are between $10,000 and $2 million. However, loans as $50 million are possible. If you plan to borrow $75,000 or less, you can do so with a one-page credit application, and there is no need for lengthy financials. Beyond $75,000, however, you should expect to provide a range of business and financial documentation.
Equipment financing is offered for new or used equipment. Where US Business Funding stands out, though, is that it also allows for purchases of equipment from third parties, which may be helpful depending on your industry and the exact equipment you’re looking to buy.
In order to qualify for most financing programs through US Business Funding, your business will need to have been operational for at least two years. However, there is a program option for businesses that are at least six months old and another for one year old businesses.
Credit approval takes only 60 seconds. Many applicants receive funding in as little as 24 hours, and the lender currently boasts a 95% approval rate. Repayment terms are up to 72 months depending on the program. Interest rates are as low as 3.5% APR right now, though you can expect your rate to vary based on things like the financing terms you request, your business’ history, and [credit score](https://www.investopedia.com/ask/answers/05/creditscorecalculation.asp).
Lastly, you can roll in 100% of the costs involved with your equipment purchase, including “soft costs” like installation, delivery, training, and more.
It’s important to note that all of this lender’s programs are equipment leases. With that said, there are programs where at the end of the lease, you can purchase the equipment for $1 if you want to keep it ($1 Buy Out).
### Best for Large Loans
:
CIT Bank
---
![CIT Bank]()
:fill(white):max_bytes(150000):strip_icc()/1200px-Cit-logo.svg-64f9da4090a1433dbfcc202120b4cbee.jpg)
CIT Bank
[Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=cit&bwid_id=6388b14276b3780decf128fd)
Offering up to $500,000 with a quick online application (and up to $1 million with financials), CIT Bank makes it quick and easy to get a large equipment financing loan for your business.
Pros
* Up to $500,000 without financials
* Online application takes as little as three minutes
* Flexible repayment terms
* New or used equipment allowed
* With capital equipment financing, up to $100 million is possible
Cons
* Same-day funding not available
* Credit score thresholds may be high
* Business history required
Earning our pick for best large equipment financing is [CIT Bank](https://www.investopedia.com/cit-bank-review-4801295), an institution that has been offering financing options to consumers for more than a century. CIT is a division of First Citizens Bank. The bank is a top 20 U.S. financial institution and has over 600 branches across 22 states.
CIT Bank offers equipment loans of up to $1 million to small businesses, with repayment terms ranging from six to 72 months in length. With a simple application-only loan, you can borrow up to $500,000 without needing to submit any additional records. If you’re willing to compile and turn over financials, you can borrow up to $1 million. Need even more money? CIT’s Capital Equipment Financing program offers up to $100 million (and beyond, in some cases), with repayment terms up to 10 years in length.
CIT Bank’s online application takes only three minutes to complete and submit, and funding can take as little as one business day. Financing is offered for both new and used equipment, and rates are currently as low as 5.49% APR.
You will be asked to show business history of some length. In many cases, credit score requirements can be quite high. Also, same-day financing is not available, but approved funds can be in your account as soon as the next day.
Financing options are quite flexible as well. You can choose between monthly, seasonal, and deferred repayment options, depending on what works for you and your business. CIT Bank also offers a $1 Buyout option, either as a lease or as an equipment financing agreement (EFA). With a fair market value lease, you have the option to purchase your equipment at the end of the term or simply return it, and CIT also allows for net 30-, 60-, or 90-day payments.
## What Is Equipment Financing?
If you own a small business and need to purchase equipment of any kind, the cost can often be prohibitive. With equipment financing, though, you can either take out a loan or lease that equipment from an equipment financing lender.
This allows you to get the machinery or other equipment you may need to operate, expand, or profit, without needing to pay the full cost upfront.
## What Are the 3 Types of Financing?
There are three different types of financing that you may encounter: [debt financing, equity financing](https://www.investopedia.com/ask/answers/042215/what-are-benefits-company-using-equity-financing-vs-debt-financing.asp), and combination financing. Each of these differs from leasing.
Debt financing is your typical installment loan; you borrow a one-time, fixed amount from a lender and then pay it back over time according to your loan agreement. Equity financing is where you receive funding in exchange for a portion of the equity in your business; you are not obligated to repay the capital you received as part of an equity financing.
Combination financing is a blend of the two. In many cases, this means accepting [capital](https://www.investopedia.com/terms/c/capital.asp) in exchange for equity in a business, with the understanding that at least a portion of those funds will be paid back over time.
All three of these differ from leasing in that leasing is not necessarily a path to ownership. Rather than receiving funding and purchasing equipment, for instance, a lease agreement purchases the equipment *for* you. At the end of your lease term, you will no longer have a payment to make but the equipment won’t belong to you, either.
In some cases, there may be a buy-out clause, where you can purchase the equipment for a very small price if you still want it at the end of the lease.
## How Long Can You Finance Used Equipment?
Finance terms may vary by lender, borrowed amount, and equipment type. You can typically expect to finance used equipment for somewhere between two and seven years, however.
Some lenders may cut this off at five years, especially for used or lower-cost equipment, while others might give you as many as 10 years to repay the loan.
## What Credit Score Is Needed to Finance Equipment?
As with most financial products, the better your credit, the better the financing options and products offered to you. When it comes to equipment financing for your business, you should plan to have a credit score of at least 650 to 700 if you want to receive the most competitive interest rates and repayment terms.
There are some lenders willing to forgo these limits, though, accepting scores as low as 575 or even considering *all* credit scores. However, a low score or [negative credit history](https://www.investopedia.com/financial-edge/0212/common-things-that-improve-and-lower-credit-scores.aspx) may result in limited financing options and more expensive lending in the end.
## How We Chose the Best Equipment Financing Companies
We looked at and compared the top 10 equipment financing lenders in order to provide this comprehensive guide. In order to choose the top company for each category, we compared factors such as financing options offered and the type of equipment that could be purchased. We also looked at the typical speed for both credit decisions and funding, fees and penalties involved in the loan, and what sort of borrower requirements were in place.
:max_bytes(150000):strip_icc()/Primary-Image-best-equipment-financing-companies-5083500-88f13aed90cb4f00b94aa5bf52fbccc0.jpg)
:max_bytes(150000):strip_icc()/Primary-Image-best-equipment-financing-companies-5083500-88f13aed90cb4f00b94aa5bf52fbccc0.jpg)
Ariel Skelley / Getty Images
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our
[editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy)
1. Techvera. "[How Much Should a Company Spend on IT?](https://techvera.com/how-much-should-a-company-spend-on-it/)"
2. Crest Capital. "[Financing On Your Terms](https://www.crestcapital.com/)."
3. Crest Capital. "[About Us](https://www.crestcapital.com/about-equipment-leasing-company)."
4. Crest Capital. "[Working Capital](https://www.crestcapital.com/working_capital)."
5. Crest Capital. "[Payment Options](https://www.crestcapital.com/portal/)," See footer.
6. National Funding. "[Equipment Leasing](https://www.nationalfunding.com/equipment-leasing/)."
7. Currency. "[Hassle-Free Customer Financing Options to Build Your Business](https://www.gocurrency.com/finance/)."
8. Balboa Capital. "[Equipment Financing](https://www.balboacapital.com/equipment-financing/)."
9. US Business Funding. "[FAQ](https://www.usbfund.com/equipment-financing/faq/)."
10. US Business Funding. "[Equipment Financing](https://www.usbfund.com/equipment-financing/)."
11. US Business Funding. "[Business Loans](https://www.usbfund.com/business-loans/)."
12. CIT. "[About Us](https://www.cit.com/about-us)."
13. CIT. "[Capital Equipment](https://www.cit.com/commercial/solutions/capital-equipment)."
14. CIT. "[Finance Equipment](https://www.cit.com/business/solutions/get-financing/finance-equipment)."
15. CIT Bank. "[Business Equipment Financing](https://www.cit.com/business/solutions/get-financing/finance-equipment)."
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|
There are many times when a business may need to purchase equipment. The right equipment can not only be necessary for day-to-day operations but can also help a business grow, expand, and improve efficiency. But costly equipment may be out of the budget for many small- and medium-sized businesses.
Equipment doesn’t just mean heavy machinery. For instance, small companies up to $50 million a year in revenue spend 6.9% of that revenue on IT costs. This is enough to impact many businesses' bottom line.
Similar to personal loan products, companies can get the equipment they need through loans from equipment financing lenders. These loans provide flexible access to tens (or even hundreds) of thousands of dollars when your business needs them most.
To help you find the best equipment financing for you and your unique business needs, we have provided the following guide. We compared more than 10 of the top industry leaders looking at factors like repayment terms, loan limits, credit score and business history requirements, fees, and even the types of equipment that can be purchased with those funds.
The Best Equipment Financing Companies of 2024
Best Overall:
Crest Capital
Best for Expanding Businesses:
National Funding
Best for Bad Credit:
Currency
Best for Heavy Equipment:
Balboa Capital
Best for Used Equipment:
US Business Funding
Best for Large Loans:
CIT Bank
Best Equipment Financing Companies
Expand
Best Equipment Financing Companies
Our Top Picks
Crest Capital
National Funding
Currency
Balboa Capital
US Business Funding
CIT Bank
See More (3)
What Is Equipment Financing?
What Are the 3 Types of Financing?
Finance Terms for Used Equipment
Required Credit Score for Financing
Methodology
Best Overall
:
Crest Capital
Crest Capital
Apply Now
Our top overall pick for the best equipment financing for small businesses is Crest Capital because it offers equipment loans of up to $500,000 and many of the loans receive a decision in just a few hours.
Pros
Same-day approval for most loans
Will finance 100% of costs
No closing costs
Loans up to $500,000
Only requires 2 years financial history to apply
Cons
Financing not offered to startups
Collateral requirements are vague
Crest Capital was established in 1989 as a small- and medium-sized business funding and leasing lender, growing establishments across the nation. This lender prides itself on saying "yes" when the bank says "no" and makes it easy to get fast approvals on the funds businesses need most.
We chose Crest Capital as our overall top pick for the best equipment financing because it offers such a broad (yet competitive) range of products and services. Through Crest, businesses can get up to $500,000 in equipment funding with loan repayment terms ranging from 24 to 72 months. If you’re borrowing less than $250,000, there are no income statements required, speeding up the process even more.
Both new and used equipment can be financed with Crest, from a variety of different industries. Businesses are able to finance up to 100% of the equipment expenses—including “soft costs” like delivery fees, taxes, or installation—with same-day approval in many cases.
Crest offers financing with no closing costs or business liens. Collateral may be required, though this lender doesn’t publish specifics.
Equipment financing from Crest is offered to both small, mom and pop establishments as well as medium-sized businesses. While you will need to have a good credit score, it’s OK if your credit history is limited. Crest just won’t approve your funding request if your credit includes a past history of missed payments, discharged balances, or irresponsible credit account management (i.e.: a limited history is OK here while a bad history is not).
Crest Capital does not offer larger loans to startups. Generally, your business will need to have been operational for at least two years in order to get approved for a credit equipment.
Best for Expanding Businesses
:
National Funding
National Funding
Apply Now
For expanding businesses, National Funding is the best choice for equipment financing. It only requires you to be in business for only six months and has a low credit score requirement for approval.
Pros
No down payment
Low FICO score requirement
Excellent consumer reviews
Equipment can be new or used
Cons
Equipment financing maxes out at $150,000
No matter the industry or type of equipment necessary, National Funding is there to help businesses with at least six months in business get the funding they need most to expand.
National Funding offers equipment financing of up to $150,000 with credit decisions in as little as 24 hours. There are no equipment limits through this lender, either. Whether you want to buy or lease either new or used equipment, National Funding is willing to provide the funds.
Borrower requirements are fairly straightforward: you’ll need to have been in business for at least 6 months, have a FICO credit score of fair to excellent, and be able to provide an equipment quote from the vendor or seller.
Financing is available to businesses in all 50 states and the District of Columbia. There is no down payment required. In determining the length of the loan, the company is flexible and things are done on a case by case basis. Terms can be short or over a decade.
Best for Bad Credit
:
Currency
Currency
Apply Now
It’s tough to get any business loan with bad credit, but this is especially true when you’re buying equipment that can run into the hundreds of thousands of dollars. With loan options for all credit profiles, Currency is our top lender choice for subprime equipment financing.
Pros
Loans for most credit profiles
Financing up to $500,000
Online approval is usually fast and same-day funding is possible
No down payment required
Cons
Maximum repayment term is 72 months
Loan fees may apply
When it comes to shopping around for the best equipment funding for your business, credit can play a significant role. Not only will your credit score impact the rate you’ll receive, but it can even limit the terms you’re offered or exclude you from certain lenders altogether.
That’s why Currency is our top lender pick for business borrowers with bad credit. The company offers funding to customers with most credit profiles. Just expect subprime credit scores to potentially result in lower funding limits and/or higher interest rates.
Equipment financing through Currency provides borrowers with up to $500,000. No down payment is required, though choosing to put cash down may result in better financing terms.
Five years is the most common term and six is sometimes possible. Loan origination fees may apply.
Best for Heavy Equipment
:
Balboa Capital
Balboa Capital
Apply Now
With reasonable eligibility requirements and same-day funding in many cases, Balboa Capital earns our top nod for heavy equipment financing. They offer up to $500,000 with competitive interest rates to boot.
Pros
Qualify for financing in an hour
Same-day funding is available
Financing up to $500,000
Excellent consumer ratings
Cons
Credit score requirements are contradictory
Limited repayment terms available
$100,000 annual revenue requirement
Doesn't lend to brand new businesses or startups
Heavy equipment is one of the most expensive pieces of machinery that a small business could need or purchase. It’s no wonder, then, that so many businesses turn to equipment financing when shopping around for heavy machinery, versus buying with cash.
Our top choice for heavy machinery financing would be Balboa Capital. This lender offers up to $500,000 in equipment funding with repayment terms from 24 to 60 months. Applying online is simple and doesn’t require a bunch of business financials; you’ll usually have a credit decision within an hour, and same-day funding is available in many cases.
In order to get heavy machinery financing through Balboa, your business will need to be operational for at least a year and have an annual revenue of $100,000 or more. The company says that all credit is considered, but also says they look for at least a score of 620. This is slightly confusing.
Best for Used Equipment
:
US Business Funding
US Business Funding
Apply Now
Whether you’re looking to purchase new or used business equipment—or even purchase directly from a third-party—US Business Funding is willing to finance the transaction, earning it our top spot for used equipment.
Pros
New, used, and third-party sales accepted
Equipment loans from $5,000 to $50 million
Credit decision in 60 seconds
24-hour funding available
Repayment terms up to 72 months
100% soft cost roll-in allowed
95% loan approval
Cons
Only $75,000 available with short-form application (no financials)
Most programs require a two-year business history
All financing is technically a “lease”
Offering financing options in any number of industries, US Business Funding is there for a variety of businesses and equipment needs.
With US Business Funding most equipment loans are between $10,000 and $2 million. However, loans as $50 million are possible. If you plan to borrow $75,000 or less, you can do so with a one-page credit application, and there is no need for lengthy financials. Beyond $75,000, however, you should expect to provide a range of business and financial documentation.
Equipment financing is offered for new or used equipment. Where US Business Funding stands out, though, is that it also allows for purchases of equipment from third parties, which may be helpful depending on your industry and the exact equipment you’re looking to buy.
In order to qualify for most financing programs through US Business Funding, your business will need to have been operational for at least two years. However, there is a program option for businesses that are at least six months old and another for one year old businesses.
Credit approval takes only 60 seconds. Many applicants receive funding in as little as 24 hours, and the lender currently boasts a 95% approval rate. Repayment terms are up to 72 months depending on the program. Interest rates are as low as 3.5% APR right now, though you can expect your rate to vary based on things like the financing terms you request, your business’ history, and credit score.
Lastly, you can roll in 100% of the costs involved with your equipment purchase, including “soft costs” like installation, delivery, training, and more.
It’s important to note that all of this lender’s programs are equipment leases. With that said, there are programs where at the end of the lease, you can purchase the equipment for $1 if you want to keep it ($1 Buy Out).
Best for Large Loans
:
CIT Bank
CIT Bank
Apply Now
Offering up to $500,000 with a quick online application (and up to $1 million with financials), CIT Bank makes it quick and easy to get a large equipment financing loan for your business.
Pros
Up to $500,000 without financials
Online application takes as little as three minutes
Flexible repayment terms
New or used equipment allowed
With capital equipment financing, up to $100 million is possible
Cons
Same-day funding not available
Credit score thresholds may be high
Business history required
Earning our pick for best large equipment financing is CIT Bank, an institution that has been offering financing options to consumers for more than a century. CIT is a division of First Citizens Bank. The bank is a top 20 U.S. financial institution and has over 600 branches across 22 states.
CIT Bank offers equipment loans of up to $1 million to small businesses, with repayment terms ranging from six to 72 months in length. With a simple application-only loan, you can borrow up to $500,000 without needing to submit any additional records. If you’re willing to compile and turn over financials, you can borrow up to $1 million. Need even more money? CIT’s Capital Equipment Financing program offers up to $100 million (and beyond, in some cases), with repayment terms up to 10 years in length.
CIT Bank’s online application takes only three minutes to complete and submit, and funding can take as little as one business day. Financing is offered for both new and used equipment, and rates are currently as low as 5.49% APR.
You will be asked to show business history of some length. In many cases, credit score requirements can be quite high. Also, same-day financing is not available, but approved funds can be in your account as soon as the next day.
Financing options are quite flexible as well. You can choose between monthly, seasonal, and deferred repayment options, depending on what works for you and your business. CIT Bank also offers a $1 Buyout option, either as a lease or as an equipment financing agreement (EFA). With a fair market value lease, you have the option to purchase your equipment at the end of the term or simply return it, and CIT also allows for net 30-, 60-, or 90-day payments.
What Is Equipment Financing?
If you own a small business and need to purchase equipment of any kind, the cost can often be prohibitive. With equipment financing, though, you can either take out a loan or lease that equipment from an equipment financing lender.This allows you to get the machinery or other equipment you may need to operate, expand, or profit, without needing to pay the full cost upfront.
What Are the 3 Types of Financing?
There are three different types of financing that you may encounter: debt financing, equity financing, and combination financing. Each of these differs from leasing.Debt financing is your typical installment loan; you borrow a one-time, fixed amount from a lender and then pay it back over time according to your loan agreement. Equity financing is where you receive funding in exchange for a portion of the equity in your business; you are not obligated to repay the capital you received as part of an equity financing.Combination financing is a blend of the two. In many cases, this means accepting capital in exchange for equity in a business, with the understanding that at least a portion of those funds will be paid back over time.All three of these differ from leasing in that leasing is not necessarily a path to ownership. Rather than receiving funding and purchasing equipment, for instance, a lease agreement purchases the equipment for you. At the end of your lease term, you will no longer have a payment to make but the equipment won’t belong to you, either.In some cases, there may be a buy-out clause, where you can purchase the equipment for a very small price if you still want it at the end of the lease.
How Long Can You Finance Used Equipment?
Finance terms may vary by lender, borrowed amount, and equipment type. You can typically expect to finance used equipment for somewhere between two and seven years, however.Some lenders may cut this off at five years, especially for used or lower-cost equipment, while others might give you as many as 10 years to repay the loan.
What Credit Score Is Needed to Finance Equipment?
As with most financial products, the better your credit, the better the financing options and products offered to you. When it comes to equipment financing for your business, you should plan to have a credit score of at least 650 to 700 if you want to receive the most competitive interest rates and repayment terms.There are some lenders willing to forgo these limits, though, accepting scores as low as 575 or even considering all credit scores. However, a low score or negative credit history may result in limited financing options and more expensive lending in the end.
How We Chose the Best Equipment Financing Companies
We looked at and compared the top 10 equipment financing lenders in order to provide this comprehensive guide. In order to choose the top company for each category, we compared factors such as financing options offered and the type of equipment that could be purchased. We also looked at the typical speed for both credit decisions and funding, fees and penalties involved in the loan, and what sort of borrower requirements were in place.
Ariel Skelley / Getty Images
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our
editorial policy.
Techvera. "How Much Should a Company Spend on IT?"
Crest Capital. "Financing On Your Terms."
Crest Capital. "About Us."
Crest Capital. "Working Capital."
Crest Capital. "Payment Options," See footer.
National Funding. "Equipment Leasing."
Currency. "Hassle-Free Customer Financing Options to Build Your Business."
Balboa Capital. "Equipment Financing."
US Business Funding. "FAQ."
US Business Funding. "Equipment Financing."
US Business Funding. "Business Loans."
CIT. "About Us."
CIT. "Capital Equipment."
CIT. "Finance Equipment."
CIT Bank. "Business Equipment Financing."
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Related Terms
Chattel Mortgage: Definition, Types, and Examples
A chattel mortgage is a loan used to purchase an item of movable personal property, such as a vehicle, which then serves as security for the loan.
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more
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https://www.investopedia.com/how-to-apply-for-a-small-business-grant-7644287 | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Financial grants that can help your small business grow and succeed are available from a variety of sources—the federal government, state and city governments, and a wide range of philanthropic organizations and corporations. Applying for these grants can be time-consuming, but they have several significant advantages over <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-qualify-for-an-sba-loan-7507410">small business loans</a> if you can get one. Most importantly, grants <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-do-business-grants-work-7642849">don't need to be repaid</a>.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Many financial grants for small businesses are available from the federal government, state and local governments, and other sources.</li><li>Most grant programs accept applications online.</li><li>Before you apply, make sure your business meets the eligibility requirements, some of which can be very specific.</li><li>Bear in mind that small business grants can be highly competitive—especially those funded by the federal government—and you may not be successful on your first try.</li></ul></div></div></div>
<span class="heading-toc" id="toc-how-to-find-a-small-business-grant"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> How to Find a Small Business Grant </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> The first step in applying for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/government-grant.asp">government grant</a> or other small business grant is to find one or more for which your business might qualify. In fact, this can be the most time-consuming part of the whole application process. Here are some resources that can help.
</p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-subheading__text"> For Federal Grants </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> You might want to start at Grants.gov, which provides a guide to federal grants and a search tool for finding suitable ones.<span class="ql-inline-citation" data-cite="6"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> One of the most common places to obtain a business grant is the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a>. The SBA provides grants to small businesses based on a variety of qualifications, such as the industry of the business and the background of the owners, such as gender or minority qualifications.<span class="ql-inline-citation" data-cite="15"></span>
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Other federal agencies that a business owner can look to for possible grants include the Department of Agriculture (USDA), the Department of Energy (DOE), the Environmental Protection Agency (EPA), the U.S. Economic Development Administration (EDA), and the National Institutes of Health (NIH).<span class="ql-inline-citation" data-cite="17"></span><span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="18"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> For State, Local, and Other Grants </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Your state or local government may also offer small business grants and loans. You can search for these on the Council for Community and Economic Research's State Business Incentives Database.<span class="ql-inline-citation" data-cite="16"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Finally, Small Business Development Centers (SBDCs) may also be helpful in finding grants. Approximately 1,000 of these centers are across the country, making it possible to find one near you.<span class="ql-inline-citation" data-cite="7"></span>
</p>
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<span class="heading-toc" id="toc-steps-to-applying-for-a-small-business-grant"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Steps to Applying for a Small Business Grant </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The wide range of sponsors and available grants makes it difficult to describe the "typical" process for applying, but in general, it can be broken into three main steps.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> 1. Check Your Eligibility </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Before you spend the time applying, check to see if you are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/business-grants-for-people-convicted-of-felony-8624596">eligible for the business grant</a>. This will save you and the reviewer a significant amount of time. All grants have a goal and to achieve that goal they have to comply with a set of requirements laid out by the organization on who they can accept for the grant.<span class="ql-inline-citation" data-cite="2"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Eligibility requirements may include the size of the business, a minimum amount of revenue a business brings in, the gender of the owners of the business, what type of activities the business is involved in, and more.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="2"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> 2. Collect Any Backup You Need </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> All grant applications will require certain documents, so make sure you have organized all relevant information before applying to streamline the application process.<br/>
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Information that might be required as part of a grant application includes:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0">
<li>Business plan</li>
<li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/employer-identification-number.asp">Employer identification number (EIN)</a></li>
<li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dunsnumber.asp">Data universal numbering system (DUNS) number</a></li>
<li>The business's revenue history </li>
<li>Business organizational chart</li>
<li>Bank statements </li>
<li>Tax returns </li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-subheading__text"> 3. Invest Some Time in the Application </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The complexity of your grant application—and the amount of time you'll need to spend on it—can vary depending on the sponsoring organization and the type and size of the grant. Grants from the federal government, for example, can involve many steps.<span class="ql-inline-citation" data-cite="13"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_38-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_39-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">33.2 Million</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The number of small businesses in the U.S. as of 2019, from the SBA's latest data provided in March 2023.<span class="ql-inline-citation" data-cite="20"></span></p></div></div></div>
<span class="heading-toc" id="toc-tips-for-qualifying-for-a-small-business-grant"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-heading__text"> Tips for Qualifying for a Small Business Grant </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Since business grants are such an attractive source of funding for small businesses, they tend to be very competitive. This is especially true for federal grants. State and local grants can be less competitive, but to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-get-approved-for-small-business-grant-7814312">maximize your chances of success</a>, you should still take the application seriously.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Here are some tips to make your application as competitive as possible:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0">
<li><strong>Read the grant objectives.</strong> Make sure you refer to the grant's objectives in your application. From the sponsor's point of view, the best applications are those that show a clear understanding of those objectives.</li>
<li><strong>Spend time on your business plan.</strong> A well-developed and well-written business plan is arguably the most important part of your application. Take the time to ensure yours is of the highest quality, detailed, polished, and able to answer any foreseeable questions.</li>
<li><strong>Explain how you'll use the grant.</strong> Because most small business grants are meant to be used for a specific purpose, be sure your business plan indicates how you're going to do that. The more detail you can give here, the better.</li>
<li><strong>Check any funding match requirements.</strong> For some grants, you'll be required to match the sponsor's funds with your own. Determine that you could actually come up with the money before you apply. </li>
<li><strong>Apply early. </strong>Most<strong> </strong>grant programs have a finite pool of money and will stop <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/request-for-application.asp">considering applications</a> once it has run out for the year. Keep an eye out for any deadlines and apply as early as you can.</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> While all these considerations can seem like a lot when you first start applying for grants, most businesses find that it gets easier with time. Once you have all your documents and are accustomed to writing in a way that grant officers understand and like, you'll find that applying for grants becomes significantly easier and ultimately more successful.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_49-0"><span class="heading-toc" id="toc-what-is-considered-a-small-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Considered a Small Business?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Definitions vary, but in accordance with SBA regulations, the majority of manufacturing firms employing 500 individuals or fewer, as well as non-manufacturing enterprises with average yearly earnings below $7.5 million, meet the criteria for classification as a small business.<span class="ql-inline-citation" data-cite="14"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_51-0"><span class="heading-toc" id="toc-why-would-a-grant-be-denied"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Would a Grant Be Denied?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>There are many reasons a grant application can be unsuccessful. You may not be eligible for the grant, or you might not have made it clear enough how the grant will support and develop your business. Alternatively, it could be that your application was great, but the donor received so many applications that it was unable to fund you this time.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_53-0"><span class="heading-toc" id="toc-are-small-business-grants-taxable"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Small Business Grants Taxable?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Yes, with very few exceptions, grants to businesses are taxable. Business loan proceeds, on the other hand, are not considered income and are not taxable.<span class="ql-inline-citation" data-cite="19"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> A grant can be a better option than a loan as it is like free money that doesn't need to be paid back and comes with no interest charges like a loan does. Though applying for a grant can be competitive and challenging, it may be worth it for your business.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> You can maximize your odds of success by devoting some serious time to researching appropriate grant opportunities, making sure your application addresses the grant sponsor's objectives, and applying early before the money runs out.
</p></div> | Financial grants that can help your small business grow and succeed are available from a variety of sources—the federal government, state and city governments, and a wide range of philanthropic organizations and corporations. Applying for these grants can be time-consuming, but they have several significant advantages over [small business loans](https://www.investopedia.com/how-to-qualify-for-an-sba-loan-7507410) if you can get one. Most importantly, grants [don't need to be repaid](https://www.investopedia.com/how-do-business-grants-work-7642849).
### Key Takeaways
* Many financial grants for small businesses are available from the federal government, state and local governments, and other sources.
* Most grant programs accept applications online.
* Before you apply, make sure your business meets the eligibility requirements, some of which can be very specific.
* Bear in mind that small business grants can be highly competitive—especially those funded by the federal government—and you may not be successful on your first try.
## How to Find a Small Business Grant
The first step in applying for a [government grant](https://www.investopedia.com/terms/g/government-grant.asp) or other small business grant is to find one or more for which your business might qualify. In fact, this can be the most time-consuming part of the whole application process. Here are some resources that can help.
### For Federal Grants
You might want to start at Grants.gov, which provides a guide to federal grants and a search tool for finding suitable ones.
One of the most common places to obtain a business grant is the U.S. [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp). The SBA provides grants to small businesses based on a variety of qualifications, such as the industry of the business and the background of the owners, such as gender or minority qualifications.
Other federal agencies that a business owner can look to for possible grants include the Department of Agriculture (USDA), the Department of Energy (DOE), the Environmental Protection Agency (EPA), the U.S. Economic Development Administration (EDA), and the National Institutes of Health (NIH).
### For State, Local, and Other Grants
Your state or local government may also offer small business grants and loans. You can search for these on the Council for Community and Economic Research's State Business Incentives Database.
Finally, Small Business Development Centers (SBDCs) may also be helpful in finding grants. Approximately 1,000 of these centers are across the country, making it possible to find one near you.
## Steps to Applying for a Small Business Grant
The wide range of sponsors and available grants makes it difficult to describe the "typical" process for applying, but in general, it can be broken into three main steps.
### 1. Check Your Eligibility
Before you spend the time applying, check to see if you are [eligible for the business grant](https://www.investopedia.com/business-grants-for-people-convicted-of-felony-8624596). This will save you and the reviewer a significant amount of time. All grants have a goal and to achieve that goal they have to comply with a set of requirements laid out by the organization on who they can accept for the grant.
Eligibility requirements may include the size of the business, a minimum amount of revenue a business brings in, the gender of the owners of the business, what type of activities the business is involved in, and more.
### 2. Collect Any Backup You Need
All grant applications will require certain documents, so make sure you have organized all relevant information before applying to streamline the application process.
Information that might be required as part of a grant application includes:
* Business plan
* [Employer identification number (EIN)](https://www.investopedia.com/terms/e/employer-identification-number.asp)
* [Data universal numbering system (DUNS) number](https://www.investopedia.com/terms/d/dunsnumber.asp)
* The business's revenue history
* Business organizational chart
* Bank statements
* Tax returns
### 3. Invest Some Time in the Application
The complexity of your grant application—and the amount of time you'll need to spend on it—can vary depending on the sponsoring organization and the type and size of the grant. Grants from the federal government, for example, can involve many steps.
### 33.2 Million
The number of small businesses in the U.S. as of 2019, from the SBA's latest data provided in March 2023.
## Tips for Qualifying for a Small Business Grant
Since business grants are such an attractive source of funding for small businesses, they tend to be very competitive. This is especially true for federal grants. State and local grants can be less competitive, but to [maximize your chances of success](https://www.investopedia.com/how-get-approved-for-small-business-grant-7814312), you should still take the application seriously.
Here are some tips to make your application as competitive as possible:
* **Read the grant objectives.** Make sure you refer to the grant's objectives in your application. From the sponsor's point of view, the best applications are those that show a clear understanding of those objectives.
* **Spend time on your business plan.** A well-developed and well-written business plan is arguably the most important part of your application. Take the time to ensure yours is of the highest quality, detailed, polished, and able to answer any foreseeable questions.
* **Explain how you'll use the grant.** Because most small business grants are meant to be used for a specific purpose, be sure your business plan indicates how you're going to do that. The more detail you can give here, the better.
* **Check any funding match requirements.** For some grants, you'll be required to match the sponsor's funds with your own. Determine that you could actually come up with the money before you apply.
* **Apply early.** Mostgrant programs have a finite pool of money and will stop [considering applications](https://www.investopedia.com/terms/r/request-for-application.asp) once it has run out for the year. Keep an eye out for any deadlines and apply as early as you can.
While all these considerations can seem like a lot when you first start applying for grants, most businesses find that it gets easier with time. Once you have all your documents and are accustomed to writing in a way that grant officers understand and like, you'll find that applying for grants becomes significantly easier and ultimately more successful.
## What Is Considered a Small Business?
Definitions vary, but in accordance with SBA regulations, the majority of manufacturing firms employing 500 individuals or fewer, as well as non-manufacturing enterprises with average yearly earnings below $7.5 million, meet the criteria for classification as a small business.
## Why Would a Grant Be Denied?
There are many reasons a grant application can be unsuccessful. You may not be eligible for the grant, or you might not have made it clear enough how the grant will support and develop your business. Alternatively, it could be that your application was great, but the donor received so many applications that it was unable to fund you this time.
## Are Small Business Grants Taxable?
Yes, with very few exceptions, grants to businesses are taxable. Business loan proceeds, on the other hand, are not considered income and are not taxable.
## The Bottom Line
A grant can be a better option than a loan as it is like free money that doesn't need to be paid back and comes with no interest charges like a loan does. Though applying for a grant can be competitive and challenging, it may be worth it for your business.
You can maximize your odds of success by devoting some serious time to researching appropriate grant opportunities, making sure your application addresses the grant sponsor's objectives, and applying early before the money runs out.
| Financial grants that can help your small business grow and succeed are available from a variety of sources—the federal government, state and city governments, and a wide range of philanthropic organizations and corporations. Applying for these grants can be time-consuming, but they have several significant advantages over small business loans if you can get one. Most importantly, grants don't need to be repaid.
Key Takeaways
Many financial grants for small businesses are available from the federal government, state and local governments, and other sources.Most grant programs accept applications online.Before you apply, make sure your business meets the eligibility requirements, some of which can be very specific.Bear in mind that small business grants can be highly competitive—especially those funded by the federal government—and you may not be successful on your first try.
How to Find a Small Business Grant
The first step in applying for a government grant or other small business grant is to find one or more for which your business might qualify. In fact, this can be the most time-consuming part of the whole application process. Here are some resources that can help.
For Federal Grants
You might want to start at Grants.gov, which provides a guide to federal grants and a search tool for finding suitable ones.
One of the most common places to obtain a business grant is the U.S. Small Business Administration (SBA). The SBA provides grants to small businesses based on a variety of qualifications, such as the industry of the business and the background of the owners, such as gender or minority qualifications.
Other federal agencies that a business owner can look to for possible grants include the Department of Agriculture (USDA), the Department of Energy (DOE), the Environmental Protection Agency (EPA), the U.S. Economic Development Administration (EDA), and the National Institutes of Health (NIH).
For State, Local, and Other Grants
Your state or local government may also offer small business grants and loans. You can search for these on the Council for Community and Economic Research's State Business Incentives Database.
Finally, Small Business Development Centers (SBDCs) may also be helpful in finding grants. Approximately 1,000 of these centers are across the country, making it possible to find one near you.
Steps to Applying for a Small Business Grant
The wide range of sponsors and available grants makes it difficult to describe the "typical" process for applying, but in general, it can be broken into three main steps.
1. Check Your Eligibility
Before you spend the time applying, check to see if you are eligible for the business grant. This will save you and the reviewer a significant amount of time. All grants have a goal and to achieve that goal they have to comply with a set of requirements laid out by the organization on who they can accept for the grant.
Eligibility requirements may include the size of the business, a minimum amount of revenue a business brings in, the gender of the owners of the business, what type of activities the business is involved in, and more.
2. Collect Any Backup You Need
All grant applications will require certain documents, so make sure you have organized all relevant information before applying to streamline the application process.
Information that might be required as part of a grant application includes:
Business plan
Employer identification number (EIN)
Data universal numbering system (DUNS) number
The business's revenue history
Business organizational chart
Bank statements
Tax returns
3. Invest Some Time in the Application
The complexity of your grant application—and the amount of time you'll need to spend on it—can vary depending on the sponsoring organization and the type and size of the grant. Grants from the federal government, for example, can involve many steps.
33.2 Million
The number of small businesses in the U.S. as of 2019, from the SBA's latest data provided in March 2023.
Tips for Qualifying for a Small Business Grant
Since business grants are such an attractive source of funding for small businesses, they tend to be very competitive. This is especially true for federal grants. State and local grants can be less competitive, but to maximize your chances of success, you should still take the application seriously.
Here are some tips to make your application as competitive as possible:
Read the grant objectives. Make sure you refer to the grant's objectives in your application. From the sponsor's point of view, the best applications are those that show a clear understanding of those objectives.
Spend time on your business plan. A well-developed and well-written business plan is arguably the most important part of your application. Take the time to ensure yours is of the highest quality, detailed, polished, and able to answer any foreseeable questions.
Explain how you'll use the grant. Because most small business grants are meant to be used for a specific purpose, be sure your business plan indicates how you're going to do that. The more detail you can give here, the better.
Check any funding match requirements. For some grants, you'll be required to match the sponsor's funds with your own. Determine that you could actually come up with the money before you apply.
Apply early. Most grant programs have a finite pool of money and will stop considering applications once it has run out for the year. Keep an eye out for any deadlines and apply as early as you can.
While all these considerations can seem like a lot when you first start applying for grants, most businesses find that it gets easier with time. Once you have all your documents and are accustomed to writing in a way that grant officers understand and like, you'll find that applying for grants becomes significantly easier and ultimately more successful.
What Is Considered a Small Business?
Definitions vary, but in accordance with SBA regulations, the majority of manufacturing firms employing 500 individuals or fewer, as well as non-manufacturing enterprises with average yearly earnings below $7.5 million, meet the criteria for classification as a small business.
Why Would a Grant Be Denied?
There are many reasons a grant application can be unsuccessful. You may not be eligible for the grant, or you might not have made it clear enough how the grant will support and develop your business. Alternatively, it could be that your application was great, but the donor received so many applications that it was unable to fund you this time.
Are Small Business Grants Taxable?
Yes, with very few exceptions, grants to businesses are taxable. Business loan proceeds, on the other hand, are not considered income and are not taxable.
The Bottom Line
A grant can be a better option than a loan as it is like free money that doesn't need to be paid back and comes with no interest charges like a loan does. Though applying for a grant can be competitive and challenging, it may be worth it for your business.
You can maximize your odds of success by devoting some serious time to researching appropriate grant opportunities, making sure your application addresses the grant sponsor's objectives, and applying early before the money runs out.
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https://www.investopedia.com/terms/i/inside-sales.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-are-inside-sales"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Are Inside Sales? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Inside sales refers to the sale of products or services by personnel who reach customers through phone, email, or the internet. Other ways to define inside sales are "remote sales" or "virtual sales." It is called "inside" because these sales reps remain indoors, often at a call center or company office. Inside sales may or may not be outsourced to a third-party vendor.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Inside sales can be contrasted with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/outside-sales.asp">outside sales</a>, where people physically go out and meet potential customers.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>An inside sale is the sale of products or services made by personnel who reach customers by phone or online.</li><li>Outside sales would instead rely on in-person meetings and physical interaction.</li><li>Inside and outside sales may be paired for greater efficiency, where they assist each other in tasks, such as lead generation, to increase sales.</li><li>Purchasing goods and services online or by phone is increasingly popular among consumers.</li></ul></div></div></div>
<span class="heading-toc" id="toc-understanding-inside-sales"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding Inside Sales </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Unlike <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/outside-sales.asp" rel="noopener noreferrer">outside sales</a> personnel, inside salespeople traditionally do not travel. Despite this, they are still proactive about contacting potential <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/customer.asp" rel="noopener noreferrer">customers</a> and may engage in <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/coldcalling.asp" rel="noopener noreferrer">cold calling</a>. However, a company may also designate incoming calls from prospective customers as inside sales. In addition, a company may outsource its inside sales duties to a third party instead of conducting sales in-house.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The advent of the telephone and its use as a sales tool gave birth to the distinction between inside and outside sales. The term "inside sales" was created in the 1980s to differentiate <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/telemarketing.asp" rel="noopener noreferrer">telemarketing</a> or telesales from high ticket phone sales common with business-to-business (B2B) and business-to-consumer (B2C) sales practices.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Unlike telemarketers who read from scripts, inside sales reps are highly trained, creative people, who determine a sales strategy for selling products and services to customers. By the late 1990s or early 2000s, the term "inside sales" was being used to mark a difference between inside and outside sales.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Sometimes inside and outside sales personnel and practices work together for greater efficiency. For example, an inside sales individual within a department may handle the legwork of creating and organizing sales appointments for outside sales personnel, otherwise known as lead generation. In some cases, inside sales personnel may be used to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/add-on-sales.asp" rel="noopener noreferrer">upsell</a> incumbent customers by adding ancillary products or services to their order.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_17-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_18-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The inside sales segment is among the fastest-growing segments of sales and lead generation.</p></div></div></div>
<span class="heading-toc" id="toc-advantages-of-inside-sales"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Advantages of Inside Sales </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Purchasing goods and services online or by phone is popular among consumers, looking for ways to simplify their lives. It even has its own industry association, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.aa-isp.org/">American Association of Inside Sales Professionals</a> (AA-ISP).
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Meanwhile, the ways most inside and outside salespeople operate are converging. Increasingly, outside salespeople are making more sales remotely and inside salespeople are occasionally going out in the field. This convergence is aided by the adoption of new sales-facilitating technologies, as well as changing customer buying habits and attitudes about how products and services are sold. This has led to a new moniker for inside sales: "sales in the cloud."
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div>
<span class="heading-toc" id="toc-the-role-of-the-inside-sales-representative"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> The Role of the Inside Sales Representative </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Insider sales reps often earn a modest base salary followed by sales commissions and performance bonuses. Because inside sales will take place online over the phone, representatives may want experience in telemarketing or customer support and develop a pleasant demeanor when calling strangers. One perk of inside sales is that you can often do the job remotely or from home.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> In 2021, according to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.payscale.com/research/US/Job=Inside_Sales_Representative/Salary">PayScale.com</a>, the median base salary for an inside sales representative is about $45,000 with 10% receiving a maximum salary of $66,000. However, salary differences can vary greatly among companies. For example, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.payscale.com/research/US/Job=Inside_Sales_Representative/Salary/f8b7a433/Oracle-Corp.">Oracle Corp. pays its inside sales reps</a> an average salary of $50,565 while <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.payscale.com/research/US/Job=Inside_Sales_Representative/Salary/691d9ea5/State-Farm-Insurance-Company">State Farm Insurance Company offers its sales reps</a> an average salary of $29,661, according to PayScale's data.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_29-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_30-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>It is common for companies to outsource inside sales to third-party specialists like call centers, telemarketers, or online sales specialists.</p></div></div></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_31-0"><span class="heading-toc" id="toc-what-is-inside-sales-vs-outside-sales"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Inside Sales vs. Outside Sales?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Inside sales relies on an indoors salesforce to market and sell the company's products or services online or over the phone.</p><p>Outside sales uses in-person techniques such as meeting clients face-to-face, knocking on doors, or setting up physical booths at conventions or conferences.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_33-0"><span class="heading-toc" id="toc-is-cold-calling-used-with-inside-sales"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is Cold Calling Used With Inside Sales?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/coldcalling.asp">Cold calling</a> is when a salesman or marketers solicits a potential customer who has had no prior interaction with the company or salesperson. Consumers tend to dislike cold calling, finding it impersonal and potentially disruptive. As a result, the success rate for cold calling is very low and federal regulations now exist to limit the extent of cold calls including the National Do-Not-Call Register.</p><p>Nevertheless, cold calling can be one strategy used with inside sales to reach more individuals and stay proactive.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_35-0"><span class="heading-toc" id="toc-is-inside-sales-the-same-as-telemarketing"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is Inside Sales the Same As Telemarketing?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Telemarketing, or telesales, involves selling over the phone or by email, often using cold calls, and is one aspect of inside sales. On whole, inside sales encompasses a broader range of sales & marketing tools and techniques including social media marketing, mobile marketing, search engine optimization (SEO), and customer relationship management (CRM).</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Inside sales relies on professionals selling products and services from behind a desk in an office, call center, or from home. Inside sales uses telephone, email, and other online methods to make contact with prospective clients and close sales. With the growth of e-commerce, inside sales involving social media and driving web-based traffic has become a priority for many companies, including legacy <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brickandmortar.asp">brick-and-mortar</a> retailers.
</p></div> | ## What Are Inside Sales?
Inside sales refers to the sale of products or services by personnel who reach customers through phone, email, or the internet. Other ways to define inside sales are "remote sales" or "virtual sales." It is called "inside" because these sales reps remain indoors, often at a call center or company office. Inside sales may or may not be outsourced to a third-party vendor.
Inside sales can be contrasted with [outside sales](https://www.investopedia.com/terms/o/outside-sales.asp), where people physically go out and meet potential customers.
### Key Takeaways
* An inside sale is the sale of products or services made by personnel who reach customers by phone or online.
* Outside sales would instead rely on in-person meetings and physical interaction.
* Inside and outside sales may be paired for greater efficiency, where they assist each other in tasks, such as lead generation, to increase sales.
* Purchasing goods and services online or by phone is increasingly popular among consumers.
## Understanding Inside Sales
Unlike [outside sales](https://www.investopedia.com/terms/o/outside-sales.asp) personnel, inside salespeople traditionally do not travel. Despite this, they are still proactive about contacting potential [customers](https://www.investopedia.com/terms/c/customer.asp) and may engage in [cold calling](https://www.investopedia.com/terms/c/coldcalling.asp). However, a company may also designate incoming calls from prospective customers as inside sales. In addition, a company may outsource its inside sales duties to a third party instead of conducting sales in-house.
The advent of the telephone and its use as a sales tool gave birth to the distinction between inside and outside sales. The term "inside sales" was created in the 1980s to differentiate [telemarketing](https://www.investopedia.com/terms/t/telemarketing.asp) or telesales from high ticket phone sales common with business-to-business (B2B) and business-to-consumer (B2C) sales practices.
Unlike telemarketers who read from scripts, inside sales reps are highly trained, creative people, who determine a sales strategy for selling products and services to customers. By the late 1990s or early 2000s, the term "inside sales" was being used to mark a difference between inside and outside sales.
Sometimes inside and outside sales personnel and practices work together for greater efficiency. For example, an inside sales individual within a department may handle the legwork of creating and organizing sales appointments for outside sales personnel, otherwise known as lead generation. In some cases, inside sales personnel may be used to [upsell](https://www.investopedia.com/terms/a/add-on-sales.asp) incumbent customers by adding ancillary products or services to their order.
###
The inside sales segment is among the fastest-growing segments of sales and lead generation.
## Advantages of Inside Sales
Purchasing goods and services online or by phone is popular among consumers, looking for ways to simplify their lives. It even has its own industry association, the [American Association of Inside Sales Professionals](https://www.aa-isp.org/) (AA-ISP).
Meanwhile, the ways most inside and outside salespeople operate are converging. Increasingly, outside salespeople are making more sales remotely and inside salespeople are occasionally going out in the field. This convergence is aided by the adoption of new sales-facilitating technologies, as well as changing customer buying habits and attitudes about how products and services are sold. This has led to a new moniker for inside sales: "sales in the cloud."
## The Role of the Inside Sales Representative
Insider sales reps often earn a modest base salary followed by sales commissions and performance bonuses. Because inside sales will take place online over the phone, representatives may want experience in telemarketing or customer support and develop a pleasant demeanor when calling strangers. One perk of inside sales is that you can often do the job remotely or from home.
In 2021, according to [PayScale.com](https://www.payscale.com/research/US/Job=Inside_Sales_Representative/Salary), the median base salary for an inside sales representative is about $45,000 with 10% receiving a maximum salary of $66,000. However, salary differences can vary greatly among companies. For example, [Oracle Corp. pays its inside sales reps](https://www.payscale.com/research/US/Job=Inside_Sales_Representative/Salary/f8b7a433/Oracle-Corp.) an average salary of $50,565 while [State Farm Insurance Company offers its sales reps](https://www.payscale.com/research/US/Job=Inside_Sales_Representative/Salary/691d9ea5/State-Farm-Insurance-Company) an average salary of $29,661, according to PayScale's data.
###
It is common for companies to outsource inside sales to third-party specialists like call centers, telemarketers, or online sales specialists.
## What Is Inside Sales vs. Outside Sales?
Inside sales relies on an indoors salesforce to market and sell the company's products or services online or over the phone.
Outside sales uses in-person techniques such as meeting clients face-to-face, knocking on doors, or setting up physical booths at conventions or conferences.
## Is Cold Calling Used With Inside Sales?
[Cold calling](https://www.investopedia.com/terms/c/coldcalling.asp) is when a salesman or marketers solicits a potential customer who has had no prior interaction with the company or salesperson. Consumers tend to dislike cold calling, finding it impersonal and potentially disruptive. As a result, the success rate for cold calling is very low and federal regulations now exist to limit the extent of cold calls including the National Do-Not-Call Register.
Nevertheless, cold calling can be one strategy used with inside sales to reach more individuals and stay proactive.
## Is Inside Sales the Same As Telemarketing?
Telemarketing, or telesales, involves selling over the phone or by email, often using cold calls, and is one aspect of inside sales. On whole, inside sales encompasses a broader range of sales & marketing tools and techniques including social media marketing, mobile marketing, search engine optimization (SEO), and customer relationship management (CRM).
## The Bottom Line
Inside sales relies on professionals selling products and services from behind a desk in an office, call center, or from home. Inside sales uses telephone, email, and other online methods to make contact with prospective clients and close sales. With the growth of e-commerce, inside sales involving social media and driving web-based traffic has become a priority for many companies, including legacy [brick-and-mortar](https://www.investopedia.com/terms/b/brickandmortar.asp) retailers.
| What Are Inside Sales?
Inside sales refers to the sale of products or services by personnel who reach customers through phone, email, or the internet. Other ways to define inside sales are "remote sales" or "virtual sales." It is called "inside" because these sales reps remain indoors, often at a call center or company office. Inside sales may or may not be outsourced to a third-party vendor.
Inside sales can be contrasted with outside sales, where people physically go out and meet potential customers.
Key Takeaways
An inside sale is the sale of products or services made by personnel who reach customers by phone or online.Outside sales would instead rely on in-person meetings and physical interaction.Inside and outside sales may be paired for greater efficiency, where they assist each other in tasks, such as lead generation, to increase sales.Purchasing goods and services online or by phone is increasingly popular among consumers.
Understanding Inside Sales
Unlike outside sales personnel, inside salespeople traditionally do not travel. Despite this, they are still proactive about contacting potential customers and may engage in cold calling. However, a company may also designate incoming calls from prospective customers as inside sales. In addition, a company may outsource its inside sales duties to a third party instead of conducting sales in-house.
The advent of the telephone and its use as a sales tool gave birth to the distinction between inside and outside sales. The term "inside sales" was created in the 1980s to differentiate telemarketing or telesales from high ticket phone sales common with business-to-business (B2B) and business-to-consumer (B2C) sales practices.
Unlike telemarketers who read from scripts, inside sales reps are highly trained, creative people, who determine a sales strategy for selling products and services to customers. By the late 1990s or early 2000s, the term "inside sales" was being used to mark a difference between inside and outside sales.
Sometimes inside and outside sales personnel and practices work together for greater efficiency. For example, an inside sales individual within a department may handle the legwork of creating and organizing sales appointments for outside sales personnel, otherwise known as lead generation. In some cases, inside sales personnel may be used to upsell incumbent customers by adding ancillary products or services to their order.
The inside sales segment is among the fastest-growing segments of sales and lead generation.
Advantages of Inside Sales
Purchasing goods and services online or by phone is popular among consumers, looking for ways to simplify their lives. It even has its own industry association, the American Association of Inside Sales Professionals (AA-ISP).
Meanwhile, the ways most inside and outside salespeople operate are converging. Increasingly, outside salespeople are making more sales remotely and inside salespeople are occasionally going out in the field. This convergence is aided by the adoption of new sales-facilitating technologies, as well as changing customer buying habits and attitudes about how products and services are sold. This has led to a new moniker for inside sales: "sales in the cloud."
The Role of the Inside Sales Representative
Insider sales reps often earn a modest base salary followed by sales commissions and performance bonuses. Because inside sales will take place online over the phone, representatives may want experience in telemarketing or customer support and develop a pleasant demeanor when calling strangers. One perk of inside sales is that you can often do the job remotely or from home.
In 2021, according to PayScale.com, the median base salary for an inside sales representative is about $45,000 with 10% receiving a maximum salary of $66,000. However, salary differences can vary greatly among companies. For example, Oracle Corp. pays its inside sales reps an average salary of $50,565 while State Farm Insurance Company offers its sales reps an average salary of $29,661, according to PayScale's data.
It is common for companies to outsource inside sales to third-party specialists like call centers, telemarketers, or online sales specialists.
What Is Inside Sales vs. Outside Sales?
Inside sales relies on an indoors salesforce to market and sell the company's products or services online or over the phone.Outside sales uses in-person techniques such as meeting clients face-to-face, knocking on doors, or setting up physical booths at conventions or conferences.
Is Cold Calling Used With Inside Sales?
Cold calling is when a salesman or marketers solicits a potential customer who has had no prior interaction with the company or salesperson. Consumers tend to dislike cold calling, finding it impersonal and potentially disruptive. As a result, the success rate for cold calling is very low and federal regulations now exist to limit the extent of cold calls including the National Do-Not-Call Register.Nevertheless, cold calling can be one strategy used with inside sales to reach more individuals and stay proactive.
Is Inside Sales the Same As Telemarketing?
Telemarketing, or telesales, involves selling over the phone or by email, often using cold calls, and is one aspect of inside sales. On whole, inside sales encompasses a broader range of sales & marketing tools and techniques including social media marketing, mobile marketing, search engine optimization (SEO), and customer relationship management (CRM).
The Bottom Line
Inside sales relies on professionals selling products and services from behind a desk in an office, call center, or from home. Inside sales uses telephone, email, and other online methods to make contact with prospective clients and close sales. With the growth of e-commerce, inside sales involving social media and driving web-based traffic has become a priority for many companies, including legacy brick-and-mortar retailers.
| [
[
"outside sales",
"https://www.investopedia.com/terms/o/outside-sales.asp"
],
[
"outside sales",
"https://www.investopedia.com/terms/o/outside-sales.asp"
],
[
"customers",
"https://www.investopedia.com/terms/c/customer.asp"
],
[
"cold calling",
"https://www.investopedia.com/terms/c/coldcalling.asp"
],
[
"telemarketing",
"https://www.investopedia.com/terms/t/telemarketing.asp"
],
[
"upsell",
"https://www.investopedia.com/terms/a/add-on-sales.asp"
],
[
"American Association of Inside Sales Professionals",
"https://www.aa-isp.org/"
],
[
"PayScale.com",
"https://www.payscale.com/research/US/Job=Inside_Sales_Representative/Salary"
],
[
"Oracle Corp. pays its inside sales reps",
"https://www.payscale.com/research/US/Job=Inside_Sales_Representative/Salary/f8b7a433/Oracle-Corp."
],
[
"State Farm Insurance Company offers its sales reps",
"https://www.payscale.com/research/US/Job=Inside_Sales_Representative/Salary/691d9ea5/State-Farm-Insurance-Company"
],
[
"Cold calling",
"https://www.investopedia.com/terms/c/coldcalling.asp"
],
[
"brick-and-mortar",
"https://www.investopedia.com/terms/b/brickandmortar.asp"
]
] |
https://www.investopedia.com/terms/s/social-media.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-social-media"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Social Media? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Social media refers to a variety of technologies that facilitate the sharing of ideas and information among their users. From Facebook and Instagram to X platform (formerly Twitter) and YouTube, more than 4.7 billion people use social media, equal to roughly 60% of the world's population.<span class="ql-inline-citation" data-cite="13"></span> In early 2023, 94.8% of users accessed chat and messaging apps and websites, followed closely by social platforms, with 94.6% of users.<span class="ql-inline-citation" data-cite="14"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Social media is digital technology that allows the sharing of ideas and information, including text and visuals, through virtual networks and communities.</li><li>Social media typically features user-generated content that lends itself to engagement via likes, shares, comments, and discussion.</li><li>More than 4.7 billion people around the world use social media.</li><li>Social media is credited with helping people build community and faulted for facilitating disinformation and hate speech.</li><li>Social media is also an increasingly important part of many companies' marketing campaigns.</li><li>The largest social media platforms worldwide are Facebook, YouTube, WhatsApp, Instagram, and WeChat.</li></ul></div></div></div>
<span class="heading-toc" id="toc-how-social-media-originated-and-evolved"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How Social Media Originated and Evolved </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Social media started out as a way for people to interact with friends and family but soon expanded to serve many different purposes. In 2004, MySpace was the first network to reach 1 million monthly active users.<span class="ql-inline-citation" data-cite="15"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Social media participation exploded in the years that followed with the entry of Facebook and Twitter (now X platform). Businesses gravitated toward these platforms in order to reach an audience instantly on a global scale.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> According to Global Web Index, 46% of internet users worldwide get their news through social media. That compares to 40% of users who view news on news websites. Gen Z and Millennials were most likely to view news on social sites versus other generations.<span class="ql-inline-citation" data-cite="14"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Social media plays a key role in many businesses' marketing strategies, not surprising given the sheer number of hours people spend each day on social websites and apps. At the same time, social media is an ever-changing field, with relatively recent apps such as TikTok, Signal, and Clubhouse joining the ranks of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/social-networking-companies-6830677">established social networks</a> like Facebook, YouTube, X platform, and Instagram.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div>
<span class="heading-toc" id="toc-what-social-media-is-used-for-today"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> What Social Media Is Used for Today </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Social media platforms are often divided into six categories: social networking, social bookmarking, social news, media sharing, microblogging, and online forums.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> These diverse platforms serve a vast range of purposes and user interests. Some appeal to hobbyists, others to people in their work lives. People use them to find others across the globe who share their political or other views. Entertainers use social media to engage with fans, politicians with voters, charities with donors. Governments often turn to social media to convey vital information during emergencies.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> For businesses, social media has become <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/use-social-media-to-grow-business-8391642">a key marketing tool</a>. Companies use it to find and engage with customers, drive sales through advertising and promotion, identify fast-moving consumer trends, provide customer service or support, and collect data on users, sometimes surreptitiously.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_22-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_23-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">94.6%</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Percentage of internet users age 16 to 64 who visited a social networking site in the past month.<span class="ql-inline-citation" data-cite="13"></span></p></div></div></div>
<span class="heading-toc" id="toc-pros-and-cons-of-social-media"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> Pros and Cons of Social Media </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Social media platforms allow people to access information in real time, to connect with others, and to find niche communities. At its best, it makes the world more interconnected.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> On the other hand, social media is also very good at spreading disinformation, creating polarization, and even causing harmful psychological effects.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Still, according to a 2019 survey by Pew Research Center, people's use of social media is correlated with having more friends and more diverse personal networks, especially within emerging economies.<span class="ql-inline-citation" data-cite="6"></span> Some 80% of teenagers say social media allows them to feel more connected to their peers, according to a 2022 Pew Research Center survey of U.S. teens ages 13 to 17. Overall, one in three said that social media has had a mostly positive effect on them, while 59% said it had neither a positive nor a negative effect.<span class="ql-inline-citation" data-cite="16"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> At the same time, many teens' use, and overuse, of social media has raised questions about its effect on their physical and mental health by "distracting them, disrupting their sleep, and exposing them to bullying, rumor spreading, unrealistic views of other people's lives, and peer pressure," as the Mayo Clinic notes.<span class="ql-inline-citation" data-cite="21"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Businesses, meanwhile, have found social media to be an often effective and relatively inexpensive way to reach consumers and build an image for their brands. According to Facebook, more than 200 million small businesses use its service for various purposes.<span class="ql-inline-citation" data-cite="20"></span> Separately, close to 90% of marketers say they use Facebook for promotion.<span class="ql-inline-citation" data-cite="18"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> In 2022, social media and search advertising spending made up roughly 55% of overall ad spending globally. It is also the fastest-growing category across advertising channels.<span class="ql-inline-citation" data-cite="19"></span><br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div>
<span class="heading-toc" id="toc-the-top-10-social-media-platforms-worldwide"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> The Top 10 Social Media Platforms Worldwide </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> These were the most widely used social media providers as of January 2023, according to DataReportal:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div>
<ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> <li>Facebook (2.96 billion users)</li><li>YouTube (2.51 billion users)</li><li>WhatsApp (2 billion users)</li><li>Instagram (2 billion users)</li><li>WeChat (1.31 billion users)</li><li>TikTok (1.05 billion users)</li><li>Facebook Messenger (931 million users)</li><li>Douyin (715 million users)</li><li>Telegram (700 million users)</li><li>Snapchat (635 million users)</li>
</ol>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Interestingly, two that are especially well-known in the U.S.—X platform and Pinterest—didn't make the top 10 list globally. X platform was 14th, with 556 million users worldwide, while Pinterest was 15th with 445 million.<span class="ql-inline-citation" data-cite="13"></span><br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-what-is-the-most-popular-social-media"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Most Popular Social Media?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Globally, the most popular social media site is Facebook, with close to 3 billion users, according to one recent estimate.<span class="ql-inline-citation" data-cite="13"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_46-0"><span class="heading-toc" id="toc-how-much-time-do-people-spend-on-social-media"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Time Do People Spend on Social Media?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Internet users age 16 to 64 worldwide spent a daily average of 2 hours and 31 minutes on social media as of late 2022, according to DataReportal, which adds that "social media now accounts for its greatest ever share of total online time, with almost four in every 10 minutes spent online now attributable to social media activities."<span class="ql-inline-citation" data-cite="13"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_48-0"><span class="heading-toc" id="toc-what-is-social-media-marketing"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Social Media Marketing?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Social media marketing is the use of social networks as a sales and marketing tool. Companies with products or services to promote can go beyond traditional advertising to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sec-rules-and-regulations-on-social-media-use-5270738">build an online presence</a> and engage directly with their customers.</p><p>In particular, social media marketing has opened up opportunities for local businesses to reach out to potential customers without spending a fortune on ad placement.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> For better or worse, social media has reshaped our lives, capturing more than 4.7 billion users worldwide and counting. From a business perspective, it has also revolutionized commerce and seems likely to continue to do so.
</p></div> | ## What Is Social Media?
Social media refers to a variety of technologies that facilitate the sharing of ideas and information among their users. From Facebook and Instagram to X platform (formerly Twitter) and YouTube, more than 4.7 billion people use social media, equal to roughly 60% of the world's population. In early 2023, 94.8% of users accessed chat and messaging apps and websites, followed closely by social platforms, with 94.6% of users.
### Key Takeaways
* Social media is digital technology that allows the sharing of ideas and information, including text and visuals, through virtual networks and communities.
* Social media typically features user-generated content that lends itself to engagement via likes, shares, comments, and discussion.
* More than 4.7 billion people around the world use social media.
* Social media is credited with helping people build community and faulted for facilitating disinformation and hate speech.
* Social media is also an increasingly important part of many companies' marketing campaigns.
* The largest social media platforms worldwide are Facebook, YouTube, WhatsApp, Instagram, and WeChat.
## How Social Media Originated and Evolved
Social media started out as a way for people to interact with friends and family but soon expanded to serve many different purposes. In 2004, MySpace was the first network to reach 1 million monthly active users.
Social media participation exploded in the years that followed with the entry of Facebook and Twitter (now X platform). Businesses gravitated toward these platforms in order to reach an audience instantly on a global scale.
According to Global Web Index, 46% of internet users worldwide get their news through social media. That compares to 40% of users who view news on news websites. Gen Z and Millennials were most likely to view news on social sites versus other generations.
Social media plays a key role in many businesses' marketing strategies, not surprising given the sheer number of hours people spend each day on social websites and apps. At the same time, social media is an ever-changing field, with relatively recent apps such as TikTok, Signal, and Clubhouse joining the ranks of [established social networks](https://www.investopedia.com/social-networking-companies-6830677) like Facebook, YouTube, X platform, and Instagram.
## What Social Media Is Used for Today
Social media platforms are often divided into six categories: social networking, social bookmarking, social news, media sharing, microblogging, and online forums.
These diverse platforms serve a vast range of purposes and user interests. Some appeal to hobbyists, others to people in their work lives. People use them to find others across the globe who share their political or other views. Entertainers use social media to engage with fans, politicians with voters, charities with donors. Governments often turn to social media to convey vital information during emergencies.
For businesses, social media has become [a key marketing tool](https://www.investopedia.com/use-social-media-to-grow-business-8391642). Companies use it to find and engage with customers, drive sales through advertising and promotion, identify fast-moving consumer trends, provide customer service or support, and collect data on users, sometimes surreptitiously.
### 94.6%
Percentage of internet users age 16 to 64 who visited a social networking site in the past month.
## Pros and Cons of Social Media
Social media platforms allow people to access information in real time, to connect with others, and to find niche communities. At its best, it makes the world more interconnected.
On the other hand, social media is also very good at spreading disinformation, creating polarization, and even causing harmful psychological effects.
Still, according to a 2019 survey by Pew Research Center, people's use of social media is correlated with having more friends and more diverse personal networks, especially within emerging economies. Some 80% of teenagers say social media allows them to feel more connected to their peers, according to a 2022 Pew Research Center survey of U.S. teens ages 13 to 17. Overall, one in three said that social media has had a mostly positive effect on them, while 59% said it had neither a positive nor a negative effect.
At the same time, many teens' use, and overuse, of social media has raised questions about its effect on their physical and mental health by "distracting them, disrupting their sleep, and exposing them to bullying, rumor spreading, unrealistic views of other people's lives, and peer pressure," as the Mayo Clinic notes.
Businesses, meanwhile, have found social media to be an often effective and relatively inexpensive way to reach consumers and build an image for their brands. According to Facebook, more than 200 million small businesses use its service for various purposes. Separately, close to 90% of marketers say they use Facebook for promotion.
In 2022, social media and search advertising spending made up roughly 55% of overall ad spending globally. It is also the fastest-growing category across advertising channels.
## The Top 10 Social Media Platforms Worldwide
These were the most widely used social media providers as of January 2023, according to DataReportal:
1. Facebook (2.96 billion users)
2. YouTube (2.51 billion users)
3. WhatsApp (2 billion users)
4. Instagram (2 billion users)
5. WeChat (1.31 billion users)
6. TikTok (1.05 billion users)
7. Facebook Messenger (931 million users)
8. Douyin (715 million users)
9. Telegram (700 million users)
10. Snapchat (635 million users)
Interestingly, two that are especially well-known in the U.S.—X platform and Pinterest—didn't make the top 10 list globally. X platform was 14th, with 556 million users worldwide, while Pinterest was 15th with 445 million.
## What Is the Most Popular Social Media?
Globally, the most popular social media site is Facebook, with close to 3 billion users, according to one recent estimate.
## How Much Time Do People Spend on Social Media?
Internet users age 16 to 64 worldwide spent a daily average of 2 hours and 31 minutes on social media as of late 2022, according to DataReportal, which adds that "social media now accounts for its greatest ever share of total online time, with almost four in every 10 minutes spent online now attributable to social media activities."
## What Is Social Media Marketing?
Social media marketing is the use of social networks as a sales and marketing tool. Companies with products or services to promote can go beyond traditional advertising to [build an online presence](https://www.investopedia.com/sec-rules-and-regulations-on-social-media-use-5270738) and engage directly with their customers.
In particular, social media marketing has opened up opportunities for local businesses to reach out to potential customers without spending a fortune on ad placement.
## The Bottom Line
For better or worse, social media has reshaped our lives, capturing more than 4.7 billion users worldwide and counting. From a business perspective, it has also revolutionized commerce and seems likely to continue to do so.
| What Is Social Media?
Social media refers to a variety of technologies that facilitate the sharing of ideas and information among their users. From Facebook and Instagram to X platform (formerly Twitter) and YouTube, more than 4.7 billion people use social media, equal to roughly 60% of the world's population. In early 2023, 94.8% of users accessed chat and messaging apps and websites, followed closely by social platforms, with 94.6% of users.
Key Takeaways
Social media is digital technology that allows the sharing of ideas and information, including text and visuals, through virtual networks and communities.Social media typically features user-generated content that lends itself to engagement via likes, shares, comments, and discussion.More than 4.7 billion people around the world use social media.Social media is credited with helping people build community and faulted for facilitating disinformation and hate speech.Social media is also an increasingly important part of many companies' marketing campaigns.The largest social media platforms worldwide are Facebook, YouTube, WhatsApp, Instagram, and WeChat.
How Social Media Originated and Evolved
Social media started out as a way for people to interact with friends and family but soon expanded to serve many different purposes. In 2004, MySpace was the first network to reach 1 million monthly active users.
Social media participation exploded in the years that followed with the entry of Facebook and Twitter (now X platform). Businesses gravitated toward these platforms in order to reach an audience instantly on a global scale.
According to Global Web Index, 46% of internet users worldwide get their news through social media. That compares to 40% of users who view news on news websites. Gen Z and Millennials were most likely to view news on social sites versus other generations.
Social media plays a key role in many businesses' marketing strategies, not surprising given the sheer number of hours people spend each day on social websites and apps. At the same time, social media is an ever-changing field, with relatively recent apps such as TikTok, Signal, and Clubhouse joining the ranks of established social networks like Facebook, YouTube, X platform, and Instagram.
What Social Media Is Used for Today
Social media platforms are often divided into six categories: social networking, social bookmarking, social news, media sharing, microblogging, and online forums.
These diverse platforms serve a vast range of purposes and user interests. Some appeal to hobbyists, others to people in their work lives. People use them to find others across the globe who share their political or other views. Entertainers use social media to engage with fans, politicians with voters, charities with donors. Governments often turn to social media to convey vital information during emergencies.
For businesses, social media has become a key marketing tool. Companies use it to find and engage with customers, drive sales through advertising and promotion, identify fast-moving consumer trends, provide customer service or support, and collect data on users, sometimes surreptitiously.
94.6%
Percentage of internet users age 16 to 64 who visited a social networking site in the past month.
Pros and Cons of Social Media
Social media platforms allow people to access information in real time, to connect with others, and to find niche communities. At its best, it makes the world more interconnected.
On the other hand, social media is also very good at spreading disinformation, creating polarization, and even causing harmful psychological effects.
Still, according to a 2019 survey by Pew Research Center, people's use of social media is correlated with having more friends and more diverse personal networks, especially within emerging economies. Some 80% of teenagers say social media allows them to feel more connected to their peers, according to a 2022 Pew Research Center survey of U.S. teens ages 13 to 17. Overall, one in three said that social media has had a mostly positive effect on them, while 59% said it had neither a positive nor a negative effect.
At the same time, many teens' use, and overuse, of social media has raised questions about its effect on their physical and mental health by "distracting them, disrupting their sleep, and exposing them to bullying, rumor spreading, unrealistic views of other people's lives, and peer pressure," as the Mayo Clinic notes.
Businesses, meanwhile, have found social media to be an often effective and relatively inexpensive way to reach consumers and build an image for their brands. According to Facebook, more than 200 million small businesses use its service for various purposes. Separately, close to 90% of marketers say they use Facebook for promotion.
In 2022, social media and search advertising spending made up roughly 55% of overall ad spending globally. It is also the fastest-growing category across advertising channels.
The Top 10 Social Media Platforms Worldwide
These were the most widely used social media providers as of January 2023, according to DataReportal:
Facebook (2.96 billion users)YouTube (2.51 billion users)WhatsApp (2 billion users)Instagram (2 billion users)WeChat (1.31 billion users)TikTok (1.05 billion users)Facebook Messenger (931 million users)Douyin (715 million users)Telegram (700 million users)Snapchat (635 million users)
Interestingly, two that are especially well-known in the U.S.—X platform and Pinterest—didn't make the top 10 list globally. X platform was 14th, with 556 million users worldwide, while Pinterest was 15th with 445 million.
What Is the Most Popular Social Media?
Globally, the most popular social media site is Facebook, with close to 3 billion users, according to one recent estimate.
How Much Time Do People Spend on Social Media?
Internet users age 16 to 64 worldwide spent a daily average of 2 hours and 31 minutes on social media as of late 2022, according to DataReportal, which adds that "social media now accounts for its greatest ever share of total online time, with almost four in every 10 minutes spent online now attributable to social media activities."
What Is Social Media Marketing?
Social media marketing is the use of social networks as a sales and marketing tool. Companies with products or services to promote can go beyond traditional advertising to build an online presence and engage directly with their customers.In particular, social media marketing has opened up opportunities for local businesses to reach out to potential customers without spending a fortune on ad placement.
The Bottom Line
For better or worse, social media has reshaped our lives, capturing more than 4.7 billion users worldwide and counting. From a business perspective, it has also revolutionized commerce and seems likely to continue to do so.
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[
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],
[
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"https://www.investopedia.com/use-social-media-to-grow-business-8391642"
],
[
"build an online presence",
"https://www.investopedia.com/sec-rules-and-regulations-on-social-media-use-5270738"
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https://www.investopedia.com/terms/i/independent-contractor.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-an-independent-contractor"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is an Independent Contractor? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> An independent contractor is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/self-employed-person.asp">self-employed person</a> or entity contracted to perform work for—or provide services to—another entity as a non-employee. As a result, independent contractors must pay their own <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/oasdi.asp">Social Security</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/070914/medicare-101-do-you-need-all-4-parts.asp">Medicare</a> taxes.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> In addition, an entity that uses the services of an independent contractor is not required to provide them with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/09/deciphering-benefits-at-new-job.asp">employment benefits</a>, such as health insurance and employer-sponsored retirement accounts that the entity may otherwise provide to its employees. The payer must correctly classify each payee as either an independent contractor or an employee. Another term for an independent contractor is “<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/freelancer.asp">freelancer</a>.”
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Independent contractors are not employees, nor are they eligible for employee benefits.</li><li>They do not have taxes withheld from their paychecks but instead must pay estimated income taxes in advance through quarterly payments.</li><li>Freelancers can reduce their gross income through the use of allowed business deductions, thus lowering their tax bills.</li><li>Independent contractors must arrange for their own insurance and retirement.</li><li>The category for independent contractors is very broad. </li></ul></div></div></div>
<span class="heading-toc" id="toc-understanding-the-category-of-an-independent-contractor"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding the Category of an Independent Contractor </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Doctors, dentists, veterinarians, lawyers, and many other professionals who provide independent services are classified as independent contractors by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp">Internal Revenue Service (IRS)</a>.<span class="ql-inline-citation" data-cite="12"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> However, the category also includes contractors, subcontractors, writers, software designers, auctioneers, actors, musicians, and many others who provide independent services to the general public. Independent contractors have become increasingly prevalent in the rise of what has been dubbed the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gig-economy.asp">gig economy</a>.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Independent contractors must keep track of their earnings and include every payment received from clients. Clients are legally obliged to issue <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/form1099-misc.asp">1099-MISC forms</a> to their contractors if the amount they paid warrants that expense. If an independent contractor earns more than $600 from a single-payer, that payer is required to issue the contractor a 1099 form detailing their earnings for the year.<span class="ql-inline-citation" data-cite="8"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Independent contractors must decide how much freedom they need versus how much risk they are willing to assume.</p></div></div></div>
<span class="heading-toc" id="toc-how-to-pay-taxes-as-an-independent-contractor"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> How to Pay Taxes As an Independent Contractor </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> In the United States, independent contractors are considered <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/soleproprietorship.asp">sole proprietors</a> or single-member <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/llc.asp">limited liability companies (LLCs)</a>. They must report all their income and expenses on <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/081314/whos-required-fill-out-schedule-c-irs-form.asp">Schedule C</a> of <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/1/1040.asp">Form 1040</a> or Schedule E if they have profits or losses from rental properties. Further, they must submit <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/estimated-tax.asp">self-employment taxes</a> to the IRS, usually every quarter, using Form 1040-ES.<span class="ql-inline-citation" data-cite="18"></span><span class="ql-inline-citation" data-cite="17"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> However, as sole proprietors, independent contractors do not necessarily pay taxes on their gross earnings. Applicable business expenses <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/tax/09/self-employed-tax-deductions.asp">can reduce</a> their overall tax obligation. The difference between gross earnings and business expenses is the net income, on which taxes are due.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> For the tax year 2024, independent contractors pay 12.4% in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/030216/social-security-selfemployed-how-it-works.asp">Social Security contributions</a> on the first $168,600 of net income and 2.9% in Medicare taxes on all net income.<span class="ql-inline-citation" data-cite="11"></span> Single filers must pay an additional 0.9% Medicare tax on self-employment income that exceeds $200,000 ($250,000 for married couples filing jointly).<span class="ql-inline-citation" data-cite="19"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Some independent contractors may also need to pay state sales taxes for producing products, but it can depend on the type of product being made.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>While they have access to alternative retirement plans, such as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sep.asp">SEP IRA</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/simple-ira.asp">SIMPLE IRA</a>, and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/100314/do-i-need-employer-set-401k-plan.asp">solo 401(k)</a>, they must fund these all by themselves, and they have no access to unemployment insurance or workers’ compensation payments.<span class="ql-inline-citation" data-cite="15"></span><span class="ql-inline-citation" data-cite="14"></span><span class="ql-inline-citation" data-cite="13"></span></p></div></div></div>
<span class="heading-toc" id="toc-advantages-and-disadvantages-of-being-an-independent-contractor"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> Advantages and Disadvantages of Being an Independent Contractor </span> </h2>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-subheading__text"> Advantages </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> The pros of being an independent contractor generally relate to the greater freedom they enjoy. They can set their hours, pursue work they love, and decide what work they will and will not accept. Those who can work from home may save money on transportation and the wardrobe needed to work in an office.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> They may also get the home office tax deduction that allows them to deduct the business portion of their bills for such things as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-independent-contractor-insurance-4845558">insurance</a>, rent, repairs, security systems, and utilities and services.<span class="ql-inline-citation" data-cite="4"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> They have complete control over building their business, from hiring and firing to choosing clients. Unlike employees who have a set annual salary, there's no limit on how much money they can earn. Finally, they can enjoy a sense of pride and accomplishment in building a successful business enterprise that belongs to no one but them.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-subheading__text"> Disadvantages </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> The cons of being an independent contractor are related to the risk of going bankrupt and the opportunity cost of a regular career. They aren't supported by a regular salary when business is terrible, and their income is unpredictable and highly volatile month over and year over year.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> This income fluctuation undermines them vis-a-vis banks and lenders for mortgages, car loans, and other types of loans. They are responsible for all business costs—no reimbursable expense reports for them—and if working alone, they lack the support and camaraderie of coworkers.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Independent contractors are not eligible for employer-provided healthcare plans, so they must completely <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/091114/build-your-own-retirement-plan.asp">fund their healthcare</a>. They must also pay both the employee and the employer parts of Social Security and Medicare taxes. They are not eligible for employer-sponsored 401(k) plans or matching contributions from those who employ them.<br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div>
<div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_43-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_44-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list">
<li><p>Can set their own hours and choose their own work</p></li>
<li><p>Not limited by an annual salary as to how much money they can earn</p></li>
<li><p>Can save money by working from home</p></li>
</ul>
</div>
<div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list">
<li><p>Responsible for all of their business expenses</p></li>
<li><p>Must fund their own healthcare</p></li>
<li><p>Aren’t eligible for unemployment insurance or workers’ compensation</p></li>
</ul>
</div>
</div></div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div>
<span class="heading-toc" id="toc-example-of-an-independent-contractor"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> Example of an Independent Contractor </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> One example of an independent contractor would be an interior designer who works for themselves and has a roster of clients who hire them to decorate their homes. The interior designer might even work on a contract for an architecture firm that employs them to work closely with their clients throughout the building process of a new home.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> The designer, an independent contractor, would work out how many hours, payment, and ideas with the architects (who they are contracted to work with) on the project but might work closely with the client during the decorating process. At the same time, the interior designer might be working for other clients and working on various homes simultaneously, versus being an in-house designer and only working for clients of the architecture firm.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_51-0"><span class="heading-toc" id="toc-how-do-you-become-an-independent-contractor"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Become an Independent Contractor?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>You can become an independent contractor by working for yourself. Many freelancers in a gig-centric economy transition to independent contractors who work on a contractual basis to provide goods or services. Independent contractors may have a registered legal business name, earn any necessary certifications or licenses, and pay their estimated taxes quarterly to the IRS.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_53-0"><span class="heading-toc" id="toc-what-is-the-difference-between-an-independent-contractor-and-self-employed"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between an Independent Contractor and Self-Employed?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>An independent contractor is the same thing as being a self-employed worker. An independent contractor could be a dentist who owns their own business, for example, which would be different than someone who knits hats and occasionally sells them at holiday fairs, which would be more like a freelancer, as they usually provide a good or service on a contractual basis.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_55-0"><span class="heading-toc" id="toc-how-do-you-fill-out-a-w9-as-an-independent-contractor"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Fill out a W9 as an Independent Contractor?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>If you are an independent contractor and hired by a company or person to perform a service, chances are they will ask you to fill out a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/w9form.asp">W-9 form</a>. You must verify information, including name, address, and tax identification number. All the pages of the W-9 are available on the IRS website, which also provides step-by-step directions on how to fill it out.<span class="ql-inline-citation" data-cite="10"></span><br/></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_57-0"><span class="heading-toc" id="toc-how-do-you-fill-out-a-1099-misc-form-for-an-independent-contractor"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Fill out a 1099-MISC Form for an Independent Contractor?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Form 1099-MISC is available on the IRS website for anyone who needs it. There are 18 boxes to fill out on the form, plus you must include the payee's name, address, a tax identification number for both the payee and recipient, plus the recipient's name and address.<span class="ql-inline-citation" data-cite="7"></span> In addition, the IRS provides step-by-step instructions on how to fill it out.<span class="ql-inline-citation" data-cite="16"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_59-0"><span class="heading-toc" id="toc-how-do-you-pay-an-independent-contractor"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Pay an Independent Contractor?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>You pay an independent contractor just like you would pay any freelancer either by the hour, by the project, or by a flat fee. You can pay an independent contractor by check, Venmo, PayPal, or cash.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Working as an independent contractor can be a great way to earn a living for people who desire flexibility, don't mind inconsistent earnings, and who can manage their time while potentially juggling multiple clients.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> In addition, independent contractors must be comfortable with filing their taxes quarterly with the IRS and paying for their own insurance, plus retirement savings. For some, the freedom to choose projects, and the flexibility of working for themselves, make the challenges worth it.
</p></div> | ## What Is an Independent Contractor?
An independent contractor is a [self-employed person](https://www.investopedia.com/terms/s/self-employed-person.asp) or entity contracted to perform work for—or provide services to—another entity as a non-employee. As a result, independent contractors must pay their own [Social Security](https://www.investopedia.com/terms/o/oasdi.asp) and [Medicare](https://www.investopedia.com/articles/personal-finance/070914/medicare-101-do-you-need-all-4-parts.asp) taxes.
In addition, an entity that uses the services of an independent contractor is not required to provide them with [employment benefits](https://www.investopedia.com/articles/pf/09/deciphering-benefits-at-new-job.asp), such as health insurance and employer-sponsored retirement accounts that the entity may otherwise provide to its employees. The payer must correctly classify each payee as either an independent contractor or an employee. Another term for an independent contractor is “[freelancer](https://www.investopedia.com/terms/f/freelancer.asp).”
### Key Takeaways
* Independent contractors are not employees, nor are they eligible for employee benefits.
* They do not have taxes withheld from their paychecks but instead must pay estimated income taxes in advance through quarterly payments.
* Freelancers can reduce their gross income through the use of allowed business deductions, thus lowering their tax bills.
* Independent contractors must arrange for their own insurance and retirement.
* The category for independent contractors is very broad.
## Understanding the Category of an Independent Contractor
Doctors, dentists, veterinarians, lawyers, and many other professionals who provide independent services are classified as independent contractors by the [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp).
However, the category also includes contractors, subcontractors, writers, software designers, auctioneers, actors, musicians, and many others who provide independent services to the general public. Independent contractors have become increasingly prevalent in the rise of what has been dubbed the [gig economy](https://www.investopedia.com/terms/g/gig-economy.asp).
Independent contractors must keep track of their earnings and include every payment received from clients. Clients are legally obliged to issue [1099-MISC forms](https://www.investopedia.com/terms/f/form1099-misc.asp) to their contractors if the amount they paid warrants that expense. If an independent contractor earns more than $600 from a single-payer, that payer is required to issue the contractor a 1099 form detailing their earnings for the year.
###
Independent contractors must decide how much freedom they need versus how much risk they are willing to assume.
## How to Pay Taxes As an Independent Contractor
In the United States, independent contractors are considered [sole proprietors](https://www.investopedia.com/terms/s/soleproprietorship.asp) or single-member [limited liability companies (LLCs)](https://www.investopedia.com/terms/l/llc.asp). They must report all their income and expenses on [Schedule C](https://www.investopedia.com/ask/answers/081314/whos-required-fill-out-schedule-c-irs-form.asp) of [Form 1040](https://www.investopedia.com/terms/1/1040.asp) or Schedule E if they have profits or losses from rental properties. Further, they must submit [self-employment taxes](https://www.investopedia.com/terms/e/estimated-tax.asp) to the IRS, usually every quarter, using Form 1040-ES.
However, as sole proprietors, independent contractors do not necessarily pay taxes on their gross earnings. Applicable business expenses [can reduce](https://www.investopedia.com/articles/tax/09/self-employed-tax-deductions.asp) their overall tax obligation. The difference between gross earnings and business expenses is the net income, on which taxes are due.
For the tax year 2024, independent contractors pay 12.4% in [Social Security contributions](https://www.investopedia.com/articles/personal-finance/030216/social-security-selfemployed-how-it-works.asp) on the first $168,600 of net income and 2.9% in Medicare taxes on all net income. Single filers must pay an additional 0.9% Medicare tax on self-employment income that exceeds $200,000 ($250,000 for married couples filing jointly).
Some independent contractors may also need to pay state sales taxes for producing products, but it can depend on the type of product being made.
###
While they have access to alternative retirement plans, such as a [SEP IRA](https://www.investopedia.com/terms/s/sep.asp), [SIMPLE IRA](https://www.investopedia.com/terms/s/simple-ira.asp), and [solo 401(k)](https://www.investopedia.com/ask/answers/100314/do-i-need-employer-set-401k-plan.asp), they must fund these all by themselves, and they have no access to unemployment insurance or workers’ compensation payments.
## Advantages and Disadvantages of Being an Independent Contractor
### Advantages
The pros of being an independent contractor generally relate to the greater freedom they enjoy. They can set their hours, pursue work they love, and decide what work they will and will not accept. Those who can work from home may save money on transportation and the wardrobe needed to work in an office.
They may also get the home office tax deduction that allows them to deduct the business portion of their bills for such things as [insurance](https://www.investopedia.com/best-independent-contractor-insurance-4845558), rent, repairs, security systems, and utilities and services.
They have complete control over building their business, from hiring and firing to choosing clients. Unlike employees who have a set annual salary, there's no limit on how much money they can earn. Finally, they can enjoy a sense of pride and accomplishment in building a successful business enterprise that belongs to no one but them.
### Disadvantages
The cons of being an independent contractor are related to the risk of going bankrupt and the opportunity cost of a regular career. They aren't supported by a regular salary when business is terrible, and their income is unpredictable and highly volatile month over and year over year.
This income fluctuation undermines them vis-a-vis banks and lenders for mortgages, car loans, and other types of loans. They are responsible for all business costs—no reimbursable expense reports for them—and if working alone, they lack the support and camaraderie of coworkers.
Independent contractors are not eligible for employer-provided healthcare plans, so they must completely [fund their healthcare](https://www.investopedia.com/articles/personal-finance/091114/build-your-own-retirement-plan.asp). They must also pay both the employee and the employer parts of Social Security and Medicare taxes. They are not eligible for employer-sponsored 401(k) plans or matching contributions from those who employ them.
Pros
* Can set their own hours and choose their own work
* Not limited by an annual salary as to how much money they can earn
* Can save money by working from home
Cons
* Responsible for all of their business expenses
* Must fund their own healthcare
* Aren’t eligible for unemployment insurance or workers’ compensation
## Example of an Independent Contractor
One example of an independent contractor would be an interior designer who works for themselves and has a roster of clients who hire them to decorate their homes. The interior designer might even work on a contract for an architecture firm that employs them to work closely with their clients throughout the building process of a new home.
The designer, an independent contractor, would work out how many hours, payment, and ideas with the architects (who they are contracted to work with) on the project but might work closely with the client during the decorating process. At the same time, the interior designer might be working for other clients and working on various homes simultaneously, versus being an in-house designer and only working for clients of the architecture firm.
## How Do You Become an Independent Contractor?
You can become an independent contractor by working for yourself. Many freelancers in a gig-centric economy transition to independent contractors who work on a contractual basis to provide goods or services. Independent contractors may have a registered legal business name, earn any necessary certifications or licenses, and pay their estimated taxes quarterly to the IRS.
## What Is the Difference Between an Independent Contractor and Self-Employed?
An independent contractor is the same thing as being a self-employed worker. An independent contractor could be a dentist who owns their own business, for example, which would be different than someone who knits hats and occasionally sells them at holiday fairs, which would be more like a freelancer, as they usually provide a good or service on a contractual basis.
## How Do You Fill out a W9 as an Independent Contractor?
If you are an independent contractor and hired by a company or person to perform a service, chances are they will ask you to fill out a [W-9 form](https://www.investopedia.com/terms/w/w9form.asp). You must verify information, including name, address, and tax identification number. All the pages of the W-9 are available on the IRS website, which also provides step-by-step directions on how to fill it out.
## How Do You Fill out a 1099-MISC Form for an Independent Contractor?
Form 1099-MISC is available on the IRS website for anyone who needs it. There are 18 boxes to fill out on the form, plus you must include the payee's name, address, a tax identification number for both the payee and recipient, plus the recipient's name and address. In addition, the IRS provides step-by-step instructions on how to fill it out.
## How Do You Pay an Independent Contractor?
You pay an independent contractor just like you would pay any freelancer either by the hour, by the project, or by a flat fee. You can pay an independent contractor by check, Venmo, PayPal, or cash.
## The Bottom Line
Working as an independent contractor can be a great way to earn a living for people who desire flexibility, don't mind inconsistent earnings, and who can manage their time while potentially juggling multiple clients.
In addition, independent contractors must be comfortable with filing their taxes quarterly with the IRS and paying for their own insurance, plus retirement savings. For some, the freedom to choose projects, and the flexibility of working for themselves, make the challenges worth it.
| What Is an Independent Contractor?
An independent contractor is a self-employed person or entity contracted to perform work for—or provide services to—another entity as a non-employee. As a result, independent contractors must pay their own Social Security and Medicare taxes.
In addition, an entity that uses the services of an independent contractor is not required to provide them with employment benefits, such as health insurance and employer-sponsored retirement accounts that the entity may otherwise provide to its employees. The payer must correctly classify each payee as either an independent contractor or an employee. Another term for an independent contractor is “freelancer.”
Key Takeaways
Independent contractors are not employees, nor are they eligible for employee benefits.They do not have taxes withheld from their paychecks but instead must pay estimated income taxes in advance through quarterly payments.Freelancers can reduce their gross income through the use of allowed business deductions, thus lowering their tax bills.Independent contractors must arrange for their own insurance and retirement.The category for independent contractors is very broad.
Understanding the Category of an Independent Contractor
Doctors, dentists, veterinarians, lawyers, and many other professionals who provide independent services are classified as independent contractors by the Internal Revenue Service (IRS).
However, the category also includes contractors, subcontractors, writers, software designers, auctioneers, actors, musicians, and many others who provide independent services to the general public. Independent contractors have become increasingly prevalent in the rise of what has been dubbed the gig economy.
Independent contractors must keep track of their earnings and include every payment received from clients. Clients are legally obliged to issue 1099-MISC forms to their contractors if the amount they paid warrants that expense. If an independent contractor earns more than $600 from a single-payer, that payer is required to issue the contractor a 1099 form detailing their earnings for the year.
Independent contractors must decide how much freedom they need versus how much risk they are willing to assume.
How to Pay Taxes As an Independent Contractor
In the United States, independent contractors are considered sole proprietors or single-member limited liability companies (LLCs). They must report all their income and expenses on Schedule C of Form 1040 or Schedule E if they have profits or losses from rental properties. Further, they must submit self-employment taxes to the IRS, usually every quarter, using Form 1040-ES.
However, as sole proprietors, independent contractors do not necessarily pay taxes on their gross earnings. Applicable business expenses can reduce their overall tax obligation. The difference between gross earnings and business expenses is the net income, on which taxes are due.
For the tax year 2024, independent contractors pay 12.4% in Social Security contributions on the first $168,600 of net income and 2.9% in Medicare taxes on all net income. Single filers must pay an additional 0.9% Medicare tax on self-employment income that exceeds $200,000 ($250,000 for married couples filing jointly).
Some independent contractors may also need to pay state sales taxes for producing products, but it can depend on the type of product being made.
While they have access to alternative retirement plans, such as a SEP IRA, SIMPLE IRA, and solo 401(k), they must fund these all by themselves, and they have no access to unemployment insurance or workers’ compensation payments.
Advantages and Disadvantages of Being an Independent Contractor
Advantages
The pros of being an independent contractor generally relate to the greater freedom they enjoy. They can set their hours, pursue work they love, and decide what work they will and will not accept. Those who can work from home may save money on transportation and the wardrobe needed to work in an office.
They may also get the home office tax deduction that allows them to deduct the business portion of their bills for such things as insurance, rent, repairs, security systems, and utilities and services.
They have complete control over building their business, from hiring and firing to choosing clients. Unlike employees who have a set annual salary, there's no limit on how much money they can earn. Finally, they can enjoy a sense of pride and accomplishment in building a successful business enterprise that belongs to no one but them.
Disadvantages
The cons of being an independent contractor are related to the risk of going bankrupt and the opportunity cost of a regular career. They aren't supported by a regular salary when business is terrible, and their income is unpredictable and highly volatile month over and year over year.
This income fluctuation undermines them vis-a-vis banks and lenders for mortgages, car loans, and other types of loans. They are responsible for all business costs—no reimbursable expense reports for them—and if working alone, they lack the support and camaraderie of coworkers.
Independent contractors are not eligible for employer-provided healthcare plans, so they must completely fund their healthcare. They must also pay both the employee and the employer parts of Social Security and Medicare taxes. They are not eligible for employer-sponsored 401(k) plans or matching contributions from those who employ them.
Pros
Can set their own hours and choose their own work
Not limited by an annual salary as to how much money they can earn
Can save money by working from home
Cons
Responsible for all of their business expenses
Must fund their own healthcare
Aren’t eligible for unemployment insurance or workers’ compensation
Example of an Independent Contractor
One example of an independent contractor would be an interior designer who works for themselves and has a roster of clients who hire them to decorate their homes. The interior designer might even work on a contract for an architecture firm that employs them to work closely with their clients throughout the building process of a new home.
The designer, an independent contractor, would work out how many hours, payment, and ideas with the architects (who they are contracted to work with) on the project but might work closely with the client during the decorating process. At the same time, the interior designer might be working for other clients and working on various homes simultaneously, versus being an in-house designer and only working for clients of the architecture firm.
How Do You Become an Independent Contractor?
You can become an independent contractor by working for yourself. Many freelancers in a gig-centric economy transition to independent contractors who work on a contractual basis to provide goods or services. Independent contractors may have a registered legal business name, earn any necessary certifications or licenses, and pay their estimated taxes quarterly to the IRS.
What Is the Difference Between an Independent Contractor and Self-Employed?
An independent contractor is the same thing as being a self-employed worker. An independent contractor could be a dentist who owns their own business, for example, which would be different than someone who knits hats and occasionally sells them at holiday fairs, which would be more like a freelancer, as they usually provide a good or service on a contractual basis.
How Do You Fill out a W9 as an Independent Contractor?
If you are an independent contractor and hired by a company or person to perform a service, chances are they will ask you to fill out a W-9 form. You must verify information, including name, address, and tax identification number. All the pages of the W-9 are available on the IRS website, which also provides step-by-step directions on how to fill it out.
How Do You Fill out a 1099-MISC Form for an Independent Contractor?
Form 1099-MISC is available on the IRS website for anyone who needs it. There are 18 boxes to fill out on the form, plus you must include the payee's name, address, a tax identification number for both the payee and recipient, plus the recipient's name and address. In addition, the IRS provides step-by-step instructions on how to fill it out.
How Do You Pay an Independent Contractor?
You pay an independent contractor just like you would pay any freelancer either by the hour, by the project, or by a flat fee. You can pay an independent contractor by check, Venmo, PayPal, or cash.
The Bottom Line
Working as an independent contractor can be a great way to earn a living for people who desire flexibility, don't mind inconsistent earnings, and who can manage their time while potentially juggling multiple clients.
In addition, independent contractors must be comfortable with filing their taxes quarterly with the IRS and paying for their own insurance, plus retirement savings. For some, the freedom to choose projects, and the flexibility of working for themselves, make the challenges worth it.
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https://www.investopedia.com/articles/personal-finance/092515/6-drawbacks-working-your-parents.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-are-6-drawbacks-of-working-for-your-parents"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Are 6 Drawbacks of Working for Your Parents? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> From the moment you were born, you were on your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financial-careers/08/most-competitive-financial-careers.asp">career</a> path. Now that you’ve graduated from college and earned your degree, the time has come. Unlike your peers who have a long hard road of online applications and job interviews ahead of them, you already have the perfect position waiting for you. You’ll be joining the family business, of course!
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> If your parents run a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/insights/052416/top-10-wealthiest-families-world.asp">family business</a>, joining the family biz seems like a no-brainer. After all, not only are jobs hard to come by, but there are also countless advantages to working for your folks. However, no job is perfect—particularly when your boss happens to be the same person who changed your diapers when you were a baby.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Many of your colleagues, co-workers, and clients may assume you were hired simply because you’re the boss’s child.</li><li>Working for your parents can lead to significant conflict.</li><li>if you keep the lines of communication open and set some clear boundaries from the get-go, you’ll be more likely to survive and even thrive in the family business.</li></ul></div></div></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> There are quite a few challenges to working for your parents. Not only will outsiders assume you’re not qualified for your job, but one parent will probably embarrass you one day, and another will infuriate you the next.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> However, if you keep the lines of communication open and set some clear boundaries from the get-go, you’ll be more likely to survive and even thrive in the family business. Even so, be sure to weigh all the pros and cons before you accept the job.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div>
<span class="heading-toc" id="toc-understanding-the-drawbacks-of-working-for-your-parents"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Understanding the Drawbacks of Working for Your Parents </span> </h2>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-subheading__text"> Drawback No.1: Lack of Respect </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Even if you’re the most qualified person for the job, many of your colleagues, co-workers, and clients will assume you were hired simply because you’re the boss’ child.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> When folks believe your achievements are solely the result of nepotism, they won’t treat you with respect. This can create a lot of resentment and hostility within the workplace, which can make things uncomfortable for you and everyone else. Not to mention it can be a massive blow to your self-esteem.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-subheading__text"> Drawback No.2: Family Friction </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> You grew up with your parents and lived under the same roof for years. So it should be no biggie to spend every day with them at the office. As many others who have joined their family business will tell you, it’s one thing to live with your parents. It’s an entirely different ball game to work for them.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Working for your parents can lead to significant conflict. Because you know each other so well, you may tend to make work disagreements personal. Plus, when you have emotional ties to your boss, it’s a lot easier to get your feelings hurt at the office. Not only can these disagreements lead to family problems, but it can also harm the entire company.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> Drawback No.3: There’s No Escape </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Once you decide to join the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/insights/052416/top-10-wealthiest-families-world.asp">family business</a>, you may feel trapped. Even if a more promising career opportunity comes along, you may feel obligated to stick with the family business. After all, how could you possibly abandon your parents when they’ve spent so many years teaching you the ins and outs of the family business?
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> If you do decide to accept another job and leave the biz, your family could end up resenting you for it. And do you want to suffer the wrath of your parents' unique brand of guilt for the rest of your days?
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> Drawback No.4: You’re Emotionally Invested </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> When times are tough, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/economics/08/recession-affecting-business.asp">business is slow</a>, you’ll have to watch your parents struggling to make ends meet and keep the company afloat. This can be emotionally draining for you and somewhat embarrassing for them.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> After all, no parent wants their child to see them in such a weak position. When you work for your parents as opposed to a large corporation, you take the ups and downs much more personally.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> Drawback No.5: Your Ideas Are Shot Down </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Your parents may have a hard time seeing you as anything other than their “baby," so they may not value your opinion as much as other employees.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> When you present new ideas at the office, your parents may be more likely to shoot them down or ignore you altogether. After all, you’re their kid. What do you know? This kind of rejection can quickly wear on you and create feelings of resentment.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-subheading__text"> Drawback No.6: Family Time = Business Time </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> When you work for your parents, you may begin to feel like all you ever talk about is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/03/022803.asp">work</a>. Every time you get together—whether it’s for Thanksgiving dinner or your birthday party—the conversation may always turn to business.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> This can put a major strain on your family relationships, and you may feel as if you’re losing the more personal connection you once shared with your parents.
</p></div> | ## What Are 6 Drawbacks of Working for Your Parents?
From the moment you were born, you were on your [career](https://www.investopedia.com/articles/financial-careers/08/most-competitive-financial-careers.asp) path. Now that you’ve graduated from college and earned your degree, the time has come. Unlike your peers who have a long hard road of online applications and job interviews ahead of them, you already have the perfect position waiting for you. You’ll be joining the family business, of course!
If your parents run a [family business](https://www.investopedia.com/articles/insights/052416/top-10-wealthiest-families-world.asp), joining the family biz seems like a no-brainer. After all, not only are jobs hard to come by, but there are also countless advantages to working for your folks. However, no job is perfect—particularly when your boss happens to be the same person who changed your diapers when you were a baby.
### Key Takeaways
* Many of your colleagues, co-workers, and clients may assume you were hired simply because you’re the boss’s child.
* Working for your parents can lead to significant conflict.
* if you keep the lines of communication open and set some clear boundaries from the get-go, you’ll be more likely to survive and even thrive in the family business.
There are quite a few challenges to working for your parents. Not only will outsiders assume you’re not qualified for your job, but one parent will probably embarrass you one day, and another will infuriate you the next.
However, if you keep the lines of communication open and set some clear boundaries from the get-go, you’ll be more likely to survive and even thrive in the family business. Even so, be sure to weigh all the pros and cons before you accept the job.
## Understanding the Drawbacks of Working for Your Parents
### Drawback No.1: Lack of Respect
Even if you’re the most qualified person for the job, many of your colleagues, co-workers, and clients will assume you were hired simply because you’re the boss’ child.
When folks believe your achievements are solely the result of nepotism, they won’t treat you with respect. This can create a lot of resentment and hostility within the workplace, which can make things uncomfortable for you and everyone else. Not to mention it can be a massive blow to your self-esteem.
### Drawback No.2: Family Friction
You grew up with your parents and lived under the same roof for years. So it should be no biggie to spend every day with them at the office. As many others who have joined their family business will tell you, it’s one thing to live with your parents. It’s an entirely different ball game to work for them.
Working for your parents can lead to significant conflict. Because you know each other so well, you may tend to make work disagreements personal. Plus, when you have emotional ties to your boss, it’s a lot easier to get your feelings hurt at the office. Not only can these disagreements lead to family problems, but it can also harm the entire company.
### Drawback No.3: There’s No Escape
Once you decide to join the [family business](https://www.investopedia.com/articles/insights/052416/top-10-wealthiest-families-world.asp), you may feel trapped. Even if a more promising career opportunity comes along, you may feel obligated to stick with the family business. After all, how could you possibly abandon your parents when they’ve spent so many years teaching you the ins and outs of the family business?
If you do decide to accept another job and leave the biz, your family could end up resenting you for it. And do you want to suffer the wrath of your parents' unique brand of guilt for the rest of your days?
### Drawback No.4: You’re Emotionally Invested
When times are tough, and [business is slow](https://www.investopedia.com/articles/economics/08/recession-affecting-business.asp), you’ll have to watch your parents struggling to make ends meet and keep the company afloat. This can be emotionally draining for you and somewhat embarrassing for them.
After all, no parent wants their child to see them in such a weak position. When you work for your parents as opposed to a large corporation, you take the ups and downs much more personally.
### Drawback No.5: Your Ideas Are Shot Down
Your parents may have a hard time seeing you as anything other than their “baby," so they may not value your opinion as much as other employees.
When you present new ideas at the office, your parents may be more likely to shoot them down or ignore you altogether. After all, you’re their kid. What do you know? This kind of rejection can quickly wear on you and create feelings of resentment.
### Drawback No.6: Family Time = Business Time
When you work for your parents, you may begin to feel like all you ever talk about is [work](https://www.investopedia.com/articles/basics/03/022803.asp). Every time you get together—whether it’s for Thanksgiving dinner or your birthday party—the conversation may always turn to business.
This can put a major strain on your family relationships, and you may feel as if you’re losing the more personal connection you once shared with your parents.
| What Are 6 Drawbacks of Working for Your Parents?
From the moment you were born, you were on your career path. Now that you’ve graduated from college and earned your degree, the time has come. Unlike your peers who have a long hard road of online applications and job interviews ahead of them, you already have the perfect position waiting for you. You’ll be joining the family business, of course!
If your parents run a family business, joining the family biz seems like a no-brainer. After all, not only are jobs hard to come by, but there are also countless advantages to working for your folks. However, no job is perfect—particularly when your boss happens to be the same person who changed your diapers when you were a baby.
Key Takeaways
Many of your colleagues, co-workers, and clients may assume you were hired simply because you’re the boss’s child.Working for your parents can lead to significant conflict.if you keep the lines of communication open and set some clear boundaries from the get-go, you’ll be more likely to survive and even thrive in the family business.
There are quite a few challenges to working for your parents. Not only will outsiders assume you’re not qualified for your job, but one parent will probably embarrass you one day, and another will infuriate you the next.
However, if you keep the lines of communication open and set some clear boundaries from the get-go, you’ll be more likely to survive and even thrive in the family business. Even so, be sure to weigh all the pros and cons before you accept the job.
Understanding the Drawbacks of Working for Your Parents
Drawback No.1: Lack of Respect
Even if you’re the most qualified person for the job, many of your colleagues, co-workers, and clients will assume you were hired simply because you’re the boss’ child.
When folks believe your achievements are solely the result of nepotism, they won’t treat you with respect. This can create a lot of resentment and hostility within the workplace, which can make things uncomfortable for you and everyone else. Not to mention it can be a massive blow to your self-esteem.
Drawback No.2: Family Friction
You grew up with your parents and lived under the same roof for years. So it should be no biggie to spend every day with them at the office. As many others who have joined their family business will tell you, it’s one thing to live with your parents. It’s an entirely different ball game to work for them.
Working for your parents can lead to significant conflict. Because you know each other so well, you may tend to make work disagreements personal. Plus, when you have emotional ties to your boss, it’s a lot easier to get your feelings hurt at the office. Not only can these disagreements lead to family problems, but it can also harm the entire company.
Drawback No.3: There’s No Escape
Once you decide to join the family business, you may feel trapped. Even if a more promising career opportunity comes along, you may feel obligated to stick with the family business. After all, how could you possibly abandon your parents when they’ve spent so many years teaching you the ins and outs of the family business?
If you do decide to accept another job and leave the biz, your family could end up resenting you for it. And do you want to suffer the wrath of your parents' unique brand of guilt for the rest of your days?
Drawback No.4: You’re Emotionally Invested
When times are tough, and business is slow, you’ll have to watch your parents struggling to make ends meet and keep the company afloat. This can be emotionally draining for you and somewhat embarrassing for them.
After all, no parent wants their child to see them in such a weak position. When you work for your parents as opposed to a large corporation, you take the ups and downs much more personally.
Drawback No.5: Your Ideas Are Shot Down
Your parents may have a hard time seeing you as anything other than their “baby," so they may not value your opinion as much as other employees.
When you present new ideas at the office, your parents may be more likely to shoot them down or ignore you altogether. After all, you’re their kid. What do you know? This kind of rejection can quickly wear on you and create feelings of resentment.
Drawback No.6: Family Time = Business Time
When you work for your parents, you may begin to feel like all you ever talk about is work. Every time you get together—whether it’s for Thanksgiving dinner or your birthday party—the conversation may always turn to business.
This can put a major strain on your family relationships, and you may feel as if you’re losing the more personal connection you once shared with your parents.
| [
[
"career",
"https://www.investopedia.com/articles/financial-careers/08/most-competitive-financial-careers.asp"
],
[
"family business",
"https://www.investopedia.com/articles/insights/052416/top-10-wealthiest-families-world.asp"
],
[
"family business",
"https://www.investopedia.com/articles/insights/052416/top-10-wealthiest-families-world.asp"
],
[
"business is slow",
"https://www.investopedia.com/articles/economics/08/recession-affecting-business.asp"
],
[
"work",
"https://www.investopedia.com/articles/basics/03/022803.asp"
]
] |
https://www.investopedia.com/ask/answers/040315/what-difference-between-mis-management-information-system-and-information-technology.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-management-information-systemsmis-vs-information-technologyit-an-overview"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> Management Information Systems—MIS vs. Information Technology—IT: An Overview </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Management information system (MIS) refers to a large <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/infrastructure.asp">infrastructure</a> used by a business or corporation, whereas <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/information-management-technology-imt.asp">information technology (IT)</a> is one component of that infrastructure that is used for collecting and transmitting data.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> A management information system <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/decision-support-system.asp">helps a business make decisions</a> and coordinate and analyze information. Information Technology supports and facilitates the employment of that system.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> For example, IT could be a particular interface that helps users input data into a corporate MIS operation. However, that isn't to say that the scope of IT is narrow. In some ways, IT is a broader field than MIS. The particular goals of a particular IT application can fit neatly into a larger MIS framework; however, the reverse is not necessarily true.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div>
<span class="heading-toc" id="toc-management-information-system"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Management Information System </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> In terms of business decision-making, an information system (IS) is a set of data, computing devices, and management methods that support routine company operations. A management information system (MIS) is a specific subset of IS.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> A management information system, as used by a company or institution, might be a computerized system consisting of hardware and software that serves as the backbone of information for the company. Specifically, the computerized database may house all the company's financial information and organize it in such a way that it can be accessed to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/annualreport.asp">generate reports on operations</a> at different levels of the company.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> An analysis of MIS data could reveal how to utilize internal and external information better. It might help a business better implement a new social media strategy or better organize employee benefits. It might instead highlight that a company's use of IT is outdated or poorly applied.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Much like IT professionals, MIS specialists tend to spend a lot of time troubleshooting, adjusting software, or supporting less technologically savvy associates.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div>
<span class="heading-toc" id="toc-information-technology"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Information Technology </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> By definition, information technology (IT) is the technology that involves the development, maintenance and use of computer systems, software, and networks for the processing and distribution of data.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Put more simply, the most encompassing interpretation of information technology would be anything related to computers or computing technology. Computing technology includes hardware, software, networking, and internet interactions.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> A company with an excellent IT framework or one that employs excellent IT technicians finds it easier to build, adjust, and deploy a management information system.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Even though IT can (and must) be directed toward specific ends, its general scope is unfocused outside of computing processes. Conversely, MIS begins with a focused purpose; it addresses the needs of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/02/062602.asp">business management</a>. IT supports and informs the methods of reaching MIS objectives.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A management information system (MIS) is a large structure that exists to support management and assist it in making informed and strategic decisions.</li><li>Information technology (IT) is one component of that infrastructure that is used for collecting and transmitting data. </li><li>IT is typically related to computers or computing technology.</li><li>IT supports and informs the methods of reaching MIS goals and objectives.</li></ul></div></div></div></div> | ## Management Information Systems—MIS vs. Information Technology—IT: An Overview
Management information system (MIS) refers to a large [infrastructure](https://www.investopedia.com/terms/i/infrastructure.asp) used by a business or corporation, whereas [information technology (IT)](https://www.investopedia.com/terms/i/information-management-technology-imt.asp) is one component of that infrastructure that is used for collecting and transmitting data.
A management information system [helps a business make decisions](https://www.investopedia.com/terms/d/decision-support-system.asp) and coordinate and analyze information. Information Technology supports and facilitates the employment of that system.
For example, IT could be a particular interface that helps users input data into a corporate MIS operation. However, that isn't to say that the scope of IT is narrow. In some ways, IT is a broader field than MIS. The particular goals of a particular IT application can fit neatly into a larger MIS framework; however, the reverse is not necessarily true.
## Management Information System
In terms of business decision-making, an information system (IS) is a set of data, computing devices, and management methods that support routine company operations. A management information system (MIS) is a specific subset of IS.
A management information system, as used by a company or institution, might be a computerized system consisting of hardware and software that serves as the backbone of information for the company. Specifically, the computerized database may house all the company's financial information and organize it in such a way that it can be accessed to [generate reports on operations](https://www.investopedia.com/terms/a/annualreport.asp) at different levels of the company.
An analysis of MIS data could reveal how to utilize internal and external information better. It might help a business better implement a new social media strategy or better organize employee benefits. It might instead highlight that a company's use of IT is outdated or poorly applied.
Much like IT professionals, MIS specialists tend to spend a lot of time troubleshooting, adjusting software, or supporting less technologically savvy associates.
## Information Technology
By definition, information technology (IT) is the technology that involves the development, maintenance and use of computer systems, software, and networks for the processing and distribution of data.
Put more simply, the most encompassing interpretation of information technology would be anything related to computers or computing technology. Computing technology includes hardware, software, networking, and internet interactions.
A company with an excellent IT framework or one that employs excellent IT technicians finds it easier to build, adjust, and deploy a management information system.
Even though IT can (and must) be directed toward specific ends, its general scope is unfocused outside of computing processes. Conversely, MIS begins with a focused purpose; it addresses the needs of [business management](https://www.investopedia.com/articles/02/062602.asp). IT supports and informs the methods of reaching MIS objectives.
### Key Takeaways
* A management information system (MIS) is a large structure that exists to support management and assist it in making informed and strategic decisions.
* Information technology (IT) is one component of that infrastructure that is used for collecting and transmitting data.
* IT is typically related to computers or computing technology.
* IT supports and informs the methods of reaching MIS goals and objectives.
| Management Information Systems—MIS vs. Information Technology—IT: An Overview
Management information system (MIS) refers to a large infrastructure used by a business or corporation, whereas information technology (IT) is one component of that infrastructure that is used for collecting and transmitting data.
A management information system helps a business make decisions and coordinate and analyze information. Information Technology supports and facilitates the employment of that system.
For example, IT could be a particular interface that helps users input data into a corporate MIS operation. However, that isn't to say that the scope of IT is narrow. In some ways, IT is a broader field than MIS. The particular goals of a particular IT application can fit neatly into a larger MIS framework; however, the reverse is not necessarily true.
Management Information System
In terms of business decision-making, an information system (IS) is a set of data, computing devices, and management methods that support routine company operations. A management information system (MIS) is a specific subset of IS.
A management information system, as used by a company or institution, might be a computerized system consisting of hardware and software that serves as the backbone of information for the company. Specifically, the computerized database may house all the company's financial information and organize it in such a way that it can be accessed to generate reports on operations at different levels of the company.
An analysis of MIS data could reveal how to utilize internal and external information better. It might help a business better implement a new social media strategy or better organize employee benefits. It might instead highlight that a company's use of IT is outdated or poorly applied.
Much like IT professionals, MIS specialists tend to spend a lot of time troubleshooting, adjusting software, or supporting less technologically savvy associates.
Information Technology
By definition, information technology (IT) is the technology that involves the development, maintenance and use of computer systems, software, and networks for the processing and distribution of data.
Put more simply, the most encompassing interpretation of information technology would be anything related to computers or computing technology. Computing technology includes hardware, software, networking, and internet interactions.
A company with an excellent IT framework or one that employs excellent IT technicians finds it easier to build, adjust, and deploy a management information system.
Even though IT can (and must) be directed toward specific ends, its general scope is unfocused outside of computing processes. Conversely, MIS begins with a focused purpose; it addresses the needs of business management. IT supports and informs the methods of reaching MIS objectives.
Key Takeaways
A management information system (MIS) is a large structure that exists to support management and assist it in making informed and strategic decisions.Information technology (IT) is one component of that infrastructure that is used for collecting and transmitting data. IT is typically related to computers or computing technology.IT supports and informs the methods of reaching MIS goals and objectives. | [
[
"infrastructure",
"https://www.investopedia.com/terms/i/infrastructure.asp"
],
[
"information technology (IT)",
"https://www.investopedia.com/terms/i/information-management-technology-imt.asp"
],
[
"helps a business make decisions",
"https://www.investopedia.com/terms/d/decision-support-system.asp"
],
[
"generate reports on operations",
"https://www.investopedia.com/terms/a/annualreport.asp"
],
[
"business management",
"https://www.investopedia.com/articles/02/062602.asp"
]
] |
https://www.investopedia.com/terms/s/soleproprietorship.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-sole-proprietorship"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Sole Proprietorship? </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A sole proprietorship is an unincorporated business that has just one owner with no separation between the business and the owner. The owner receives all profits but is also liable for all debts and losses.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> The owner of a sole proprietorship pays <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/personalincome.asp">personal income</a> tax on profits earned from the business. Many sole proprietors do business under their own names because creating a separate business or trade name isn’t necessary.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Also referred to as a sole trader or a proprietorship, a sole proprietorship is the easiest type of business to establish or take apart, due to a lack of government regulation. As such, they are very popular among <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-8611031">sole owners of businesses</a>, individual self-contractors, and consultants. Most small businesses start as sole proprietorships and either stay that way or expand and transition to a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/limitedliability.asp">limited liability</a> entity or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/corporation.asp">corporation</a>.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_8-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_9-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A sole proprietorship is an unincorporated business with only one owner who pays personal income tax on profits earned.</li><li>Sole proprietorships are easy to establish and dismantle due to a lack of government involvement, making them popular with small business owners and contractors.</li><li>Most small businesses start as sole proprietorships and end up transitioning to a limited liability entity or corporation as the company grows.</li><li>One of the main disadvantages of sole proprietorships is that they do not have any government protection, as they are not registered. This means that all liabilities extend from the business to the owner.</li><li>Sole proprietors report their income and expenses on their personal tax returns and pay income and self-employment taxes on their profits.</li></ul></div></div></div>
<span class="heading-toc" id="toc-understanding-sole-proprietorships"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Understanding Sole Proprietorships </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> If you want to start a one-owner business, the simplest and fastest way is through a sole proprietorship. A sole proprietorship begins when you begin conducting business. It doesn’t require filing federal or state forms and has few regulatory burdens, making it an ideal way for self-employed people to start out.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> A sole proprietorship is very different from a corporation, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/llc.asp">limited liability company (LLC)</a>, or a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/090214/limited-liability-partnership-llp-basics.asp">limited liability partnership (LLP)</a>, in that no separate legal entity is created. As a result, the business owner of a sole proprietorship is not exempt from liabilities incurred by the entity.<span class="ql-inline-citation" data-cite="3"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> For example, the debts of the sole proprietorship are also the debts of the owner. However, the profits of the sole proprietorship are also the profits of the owner, as all profits flow directly to the business owner.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div>
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<figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Sabrina Jiang © Investopedia 2020</p></span>
</figcaption></figure>
<span class="heading-toc" id="toc-advantages-and-disadvantages-of-a-sole-proprietorship"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Advantages and Disadvantages of a Sole Proprietorship </span> </h2>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-subheading__text"> Advantages </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The main benefits of a sole proprietorship are the pass-through tax advantage, the ease of creation, and the low fees for creation and maintenance.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0">
<li>The tax benefits. Income generated from a pass-through business is only subject to a single layer of income tax and, in some cases, may be eligible for a 20% tax deduction. Along with slashing the corporate tax rate, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/taxes/trumps-tax-reform-plan-explained/">Tax Cuts and Jobs Act (TCJA)</a> of 2017 added a tax break for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/flow-through.asp">pass-through entities</a> that essentially allows them to deduct up to 20% of qualified business income. That deduction can result in huge savings and runs until Jan. 1, 2026—unless extended by Congress.<span class="ql-inline-citation" data-cite="6"></span></li>
<li>With a sole proprietorship, you do not need to fill out a tremendous amount of paperwork, such as registering with your state. You may need to obtain a license or permit, depending on your state and type of business. But less paperwork allows you to get your business off the ground faster.</li>
<li>The tax process is simpler because you do not need to obtain an <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/employer-identification-number.asp">employer identification number (EIN)</a> from the Internal Revenue Service (IRS). You can obtain an EIN if you choose to, but you can also use your own Social Security number (SSN) to pay taxes rather than needing an EIN.<span class="ql-inline-citation" data-cite="4"></span><br/></li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span>
<li>With a sole proprietorship, you also don’t need a business checking account, as other business structures are required to have. You can simply conduct all your finances through your personal account.</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_24-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_25-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">33.3 million</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The number of small businesses in the United States in 2023. Together, these businesses employed 61.6 million people across the country.<span class="ql-inline-citation" data-cite="2"></span></p></div></div></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-subheading__text"> Disadvantages </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> There are some disadvantages of sole proprietorships, which can be impactful to the business owner. When a business is registered, it has some legal protections. A sole proprietorship provides no liability protection to the owner. By contrast, an LLC separates business and personal assets. The owner has protection against creditors seizing their personal assets, such as their home.
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> This <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unlimited-liability.asp">unlimited liability</a> goes beyond the business entity to the owners themselves. It can be difficult to get capital funding, specifically through established channels. Standard funding avenues include the ability to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equityfinancing.asp">issue company equity</a> and obtain bank loans or lines of credit. Banks prefer to work with companies that have a track record and generally view those who are starting out with a small balance sheet as high-risk borrowers. Obtaining funding from large investors can also be difficult.<br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div>
<div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_31-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_32-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span>
<ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list">
<li><p>Less paperwork</p></li>
<li><p>No need to obtain an EIN from the IRS</p></li>
<li><p>Quick and easy setup compared with other business structures</p></li>
<li><p>Low fees and costs</p></li>
<li><p>Pass-through tax advantage</p></li>
<li><p>Easier banking</p></li>
</ul>
</div>
<div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper">
<span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span>
<ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list">
<li><p>Unlimited liability goes from business to owner</p></li>
<li><p>Difficulty in raising capital</p></li>
</ul>
</div>
</div></div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div>
<span class="heading-toc" id="toc-how-to-create-a-sole-proprietorship"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-heading__text"> How to Create a Sole Proprietorship </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> It isn't very difficult to start a sole proprietorship. That's because there aren't the usual legal hurdles that you have to overcome with other types of business <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/120915/which-type-organization-best-your-business.asp">organizations</a>. In most cases, starting the entity is as easy as establishing yourself as the owner and starting up. Depending on where you live, there are certain steps you can take to formally launch your sole proprietorship.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div>
<ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0">
<li>Get your business license and any permits you may need. Some states require that you apply for licenses (business or occupancy) as well as permits. Check with your state or county clerk to see if you need any special paperwork to begin your business.</li>
<li>You may need to register your business under its Doing Business As name if your state requires it. If this isn't the case, you can operate under an assumed name, which can usually just be your own. Keep in mind that there are legal ramifications if you choose to run your sole proprietorship under your name.</li>
<li>Apply for and obtain an EIN. This is an important and necessary step if you're going to have any employees or file tax returns. If this doesn't apply to you, you're able to use your own SSN. Either way, it's always a good idea to check with a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxadvisor.asp">tax advisor</a> so you don't make any mistakes.<br/></li>
</ol>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_39-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_40-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>If you plan to hire employees, you will need an EIN from the IRS. If you are going to sell taxable products, you will need to register for a sales tax license with your state.<span class="ql-inline-citation" data-cite="4"></span></p></div></div></div>
<span class="heading-toc" id="toc-sole-proprietorship-vs-llc-vs-partnership"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> Sole Proprietorship vs. LLC vs. Partnership </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> As noted above, there are certain distinctions between a sole proprietorship, a limited liability company, and a partnership. The chart below highlights some of the key differences between the three.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div>
<figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_44-0"> <div class="mntl-sc-block-table__table-wrapper">
<table class="mntl-sc-block-table__table">
<colgroup span="1" style=""></colgroup>
<colgroup span="1" style=""></colgroup>
<colgroup span="1" style=""></colgroup>
<colgroup span="1" style=""></colgroup>
<tbody data-check="-1">
<tr>
<td></td>
<td><b>Sole Proprietorship</b> </td>
<td><b>LLC</b> </td>
<td><b>Partnership</b> </td>
</tr>
<tr>
<td><b>Establishment</b></td>
<td>Easy to establish, no paperwork unless required by the state</td>
<td>Must file articles of incorporation with the state </td>
<td>May require contracts for each partner </td>
</tr>
<tr>
<td><b>Business Name</b></td>
<td>Can operate under owner's or fictitious name or formally register under Doing Business As </td>
<td>Established and secured </td>
<td>Can operate under owner's or fictitious name or formally register under Doing Business As </td>
</tr>
<tr>
<td><b>Liability</b></td>
<td>No legal protection, owner is fully liable</td>
<td>Protection for owners</td>
<td>No legal protection, owner fully liable</td>
</tr>
<tr>
<td><b>Taxation</b></td>
<td>Filed under owner's personal taxes if there is no EIN</td>
<td>Filed under owner's personal taxes for one owner<br><br>Treated as partnership for two or more owners</br></br></td>
<td>Filed under partnership<br><br/>Partners declare income and losses from partnership on personal returns</br></td>
</tr>
</tbody>
</table>
</div></figure>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div>
<span class="heading-toc" id="toc-transition-from-sole-proprietor-to-llc"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> Transition From Sole Proprietor to LLC </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> When a sole proprietor seeks to incorporate a business, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sole-proprietorship-vs-llc-8627981">owner usually restructures it into an LLC</a>. For this to work, the owner must first determine that the name of the company is available. If the desired name is free, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/articles-of-organization.asp">articles of organization</a> must be filed with the state office where the business will be based.
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> After the paperwork is filed, the business owner must create an LLC operating agreement, which specifies the business structure. Finally, the new company must obtain an EIN—similar to an SSN, but for businesses—from the IRS.<span class="ql-inline-citation" data-cite="1"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_51-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_52-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_4-0">Note</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>A sole proprietorship has no separation between the business entity and its owner, setting it apart from corporations and limited partnerships.</p></div></div></div>
<span class="heading-toc" id="toc-sole-proprietorship-tax-forms"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-heading__text"> Sole Proprietorship Tax Forms </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Sole proprietors report their income and expenses on their personal tax returns and pay income and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/selfemploymenttax.asp">self-employment taxes</a> on their profits. The tax forms you may need to file could include the following:<br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div>
<figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_56-0"> <div class="mntl-sc-block-table__table-wrapper">
<table class="mntl-sc-block-table__table">
<colgroup span="1" style=""></colgroup>
<colgroup span="1" style=""></colgroup>
<thead>
<tr>
<th class="mntl-sc-block-table__title" colspan="2">Tax Forms for Sole Proprietorship</th>
</tr>
</thead>
<tbody data-check="-1">
<tr>
<td><b>If you are liable for:</b></td>
<td><b>Use form:</b></td>
</tr>
<tr>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/incometax.asp">Income tax</a></td>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-form-1040">1040, U.S. Individual Income Tax Return</a> or <a class="null" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-form-1040-sr">1040-SR, U.S. Tax Return for Seniors</a> and <a class="null" data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-schedule-c-form-1040">Schedule C (Form 1040 or 1040-SR), Profit or Loss from Business (Sole Proprietorship)</a></td>
</tr>
<tr>
<td>Self-employment tax</td>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-schedule-se-form-1040">Schedule SE (Form 1040 or 1040-SR), Self-Employment Tax</a></td>
</tr>
<tr>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/estimated-tax.asp">Estimated tax</a></td>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-form-1040-es">1040-ES, Estimated Tax for Individuals</a></td>
</tr>
<tr>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/social-security-tax.asp">Social Security</a> and Medicare taxes and income tax withholding</td>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-form-941">941, Employer’s Quarterly Federal Tax Return</a>; <a class="null" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-form-943">943, Employer’s Annual Federal Tax Return for Agricultural Employees</a>; <a class="null" data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-form-944">944, Employer’s Annual Federal Tax Return</a></td>
</tr>
<tr>
<td>Providing information on Social Security and <a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/medicare-tax-definition-5115380">Medicare taxes</a> and income tax withholding</td>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-form-w-2">W-2, Wage and Tax Statement</a> (to employee) and <a class="null" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-form-w-3">W-3, Transmittal of Wage and Tax Statements</a> (to the Social Security Administration)</td>
</tr>
<tr>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federal-unemployment-tax-act-futa.asp">Federal unemployment (FUTA) tax</a></td>
<td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-form-940">940, Employer’s Annual Federal Unemployment (FUTA) Tax Return</a></td>
</tr>
</tbody>
</table>
<figcaption>Source: Internal Revenue Service</figcaption>
</div></figure>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div>
<span class="heading-toc" id="toc-example-of-a-sole-proprietorship"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-heading__text"> Example of a Sole Proprietorship </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> Most small businesses start as sole proprietorships and evolve into different legal structures as time passes and the company grows.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> For example, Kate Schade started her company, Kate’s Real Food, as a sole proprietor. The company creates and sells energy bars and began as a local vendor in Jackson Hole, Wyoming. The sole proprietorship currently has a production facility in Bedford, Pennsylvania, and can be found in more than 4,000 retailers.<span class="ql-inline-citation" data-cite="7"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Since launching in 2005, Kate’s Real Food has grown to supply accounts across the country. In response, Schade restructured the business from a sole proprietorship to a corporation to take on investments and expand, a natural step for a growing business.<span class="ql-inline-citation" data-cite="8"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_65-0"><span class="heading-toc" id="toc-how-do-you-start-a-sole-proprietorship"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Start a Sole Proprietorship?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>To start a sole proprietorship, you generally have to launch your business. It is useful to choose a company name. Depending on your business and local regulations, you may need to apply for a permit or license with your city, county, or state. If you plan to hire employees, you will need an employee identification number from the IRS. If you are going to sell taxable products, you will need to register with your state for a sales tax license.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_67-0"><span class="heading-toc" id="toc-is-being-a-sole-proprietorship-the-same-as-being-self-employed"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is Being a Sole Proprietorship the Same As Being Self-Employed?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Yes, being a sole proprietor is the same as being self-employed. A sole proprietor does not work for any company or boss, so they are self-employed.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_69-0"><span class="heading-toc" id="toc-how-do-you-file-taxes-as-a-sole-proprietor"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You File Taxes As a Sole Proprietor?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Filing taxes as a sole proprietor requires you to fill out the standard tax Form 1040 for individual taxes and Schedule C, which reports the profits and losses of your business. The amount of taxes you owe will be based on the combined income of both Form 1040 and Schedule C. If you have employees, there will be other forms to fill out.<span class="ql-inline-citation" data-cite="5"></span></p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_71-0"><span class="heading-toc" id="toc-should-i-form-a-limited-liability-company-or-a-sole-proprietorship"></span> <h2 class="mntl-sc-block-questionandanswer__question">Should I Form a Limited Liability Company or a Sole Proprietorship?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>That depends on your business. A sole proprietorship is best suited to small businesses with low risk and low profits. Generally, these businesses don’t have a wide range of customers but rather a small, dedicated group. Sole proprietorships often start as hobbies that grow into a business.</p><p>The reasons to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-start-an-llc-8631304">start a limited liability company</a> (LLC) are the opposite of the reasons above. The business entails some liability <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk.asp">risks</a>, has the potential for large profits and a large customer base, and is positioned to benefit from certain tax structures.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_73-0"><span class="heading-toc" id="toc-how-do-you-convert-a-sole-proprietorship-to-an-llc"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Convert a Sole Proprietorship to an LLC?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Converting a sole proprietorship to an LLC requires you to file articles of organization with your state secretary. Also, you will have to refile your DBA (or Doing Business As) to keep your company name. Lastly, you will need to obtain an EIN from the IRS.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_75-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> A sole proprietorship is a straightforward way for an individual to start a business. It does not require registering with a state authority for most situations and does not require obtaining an EIN from the IRS.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> The benefits of simplicity are accompanied by some drawbacks, including all liabilities being passed through from the business to the individual and funding being harder to come by. Those risks shouldn’t pose much of an issue initially. However, as the business grows, it may make sense to transition into a different legal structure.<br>
</br></p></div> | ## What Is a Sole Proprietorship?
A sole proprietorship is an unincorporated business that has just one owner with no separation between the business and the owner. The owner receives all profits but is also liable for all debts and losses.
The owner of a sole proprietorship pays [personal income](https://www.investopedia.com/terms/p/personalincome.asp) tax on profits earned from the business. Many sole proprietors do business under their own names because creating a separate business or trade name isn’t necessary.
Also referred to as a sole trader or a proprietorship, a sole proprietorship is the easiest type of business to establish or take apart, due to a lack of government regulation. As such, they are very popular among [sole owners of businesses](https://www.investopedia.com/small-business-8611031), individual self-contractors, and consultants. Most small businesses start as sole proprietorships and either stay that way or expand and transition to a [limited liability](https://www.investopedia.com/terms/l/limitedliability.asp) entity or [corporation](https://www.investopedia.com/terms/c/corporation.asp).
### Key Takeaways
* A sole proprietorship is an unincorporated business with only one owner who pays personal income tax on profits earned.
* Sole proprietorships are easy to establish and dismantle due to a lack of government involvement, making them popular with small business owners and contractors.
* Most small businesses start as sole proprietorships and end up transitioning to a limited liability entity or corporation as the company grows.
* One of the main disadvantages of sole proprietorships is that they do not have any government protection, as they are not registered. This means that all liabilities extend from the business to the owner.
* Sole proprietors report their income and expenses on their personal tax returns and pay income and self-employment taxes on their profits.
## Understanding Sole Proprietorships
If you want to start a one-owner business, the simplest and fastest way is through a sole proprietorship. A sole proprietorship begins when you begin conducting business. It doesn’t require filing federal or state forms and has few regulatory burdens, making it an ideal way for self-employed people to start out.
A sole proprietorship is very different from a corporation, a [limited liability company (LLC)](https://www.investopedia.com/terms/l/llc.asp), or a [limited liability partnership (LLP)](https://www.investopedia.com/articles/investing/090214/limited-liability-partnership-llp-basics.asp), in that no separate legal entity is created. As a result, the business owner of a sole proprietorship is not exempt from liabilities incurred by the entity.
For example, the debts of the sole proprietorship are also the debts of the owner. However, the profits of the sole proprietorship are also the profits of the owner, as all profits flow directly to the business owner.
![Image]()
:max_bytes(150000):strip_icc()/dotdash_Final_Sole_Proprietorship_May_2020-01-72456bd5ac0d4c868d8f55a2718dbdd2.jpg)
Sabrina Jiang © Investopedia 2020
## Advantages and Disadvantages of a Sole Proprietorship
### Advantages
The main benefits of a sole proprietorship are the pass-through tax advantage, the ease of creation, and the low fees for creation and maintenance.
* The tax benefits. Income generated from a pass-through business is only subject to a single layer of income tax and, in some cases, may be eligible for a 20% tax deduction. Along with slashing the corporate tax rate, the [Tax Cuts and Jobs Act (TCJA)](https://www.investopedia.com/taxes/trumps-tax-reform-plan-explained/) of 2017 added a tax break for [pass-through entities](https://www.investopedia.com/terms/f/flow-through.asp) that essentially allows them to deduct up to 20% of qualified business income. That deduction can result in huge savings and runs until Jan. 1, 2026—unless extended by Congress.
* With a sole proprietorship, you do not need to fill out a tremendous amount of paperwork, such as registering with your state. You may need to obtain a license or permit, depending on your state and type of business. But less paperwork allows you to get your business off the ground faster.
* The tax process is simpler because you do not need to obtain an [employer identification number (EIN)](https://www.investopedia.com/terms/e/employer-identification-number.asp) from the Internal Revenue Service (IRS). You can obtain an EIN if you choose to, but you can also use your own Social Security number (SSN) to pay taxes rather than needing an EIN.
* With a sole proprietorship, you also don’t need a business checking account, as other business structures are required to have. You can simply conduct all your finances through your personal account.
### 33.3 million
The number of small businesses in the United States in 2023. Together, these businesses employed 61.6 million people across the country.
### Disadvantages
There are some disadvantages of sole proprietorships, which can be impactful to the business owner. When a business is registered, it has some legal protections. A sole proprietorship provides no liability protection to the owner. By contrast, an LLC separates business and personal assets. The owner has protection against creditors seizing their personal assets, such as their home.
This [unlimited liability](https://www.investopedia.com/terms/u/unlimited-liability.asp) goes beyond the business entity to the owners themselves. It can be difficult to get capital funding, specifically through established channels. Standard funding avenues include the ability to [issue company equity](https://www.investopedia.com/terms/e/equityfinancing.asp) and obtain bank loans or lines of credit. Banks prefer to work with companies that have a track record and generally view those who are starting out with a small balance sheet as high-risk borrowers. Obtaining funding from large investors can also be difficult.
Pros
* Less paperwork
* No need to obtain an EIN from the IRS
* Quick and easy setup compared with other business structures
* Low fees and costs
* Pass-through tax advantage
* Easier banking
Cons
* Unlimited liability goes from business to owner
* Difficulty in raising capital
## How to Create a Sole Proprietorship
It isn't very difficult to start a sole proprietorship. That's because there aren't the usual legal hurdles that you have to overcome with other types of business [organizations](https://www.investopedia.com/articles/personal-finance/120915/which-type-organization-best-your-business.asp). In most cases, starting the entity is as easy as establishing yourself as the owner and starting up. Depending on where you live, there are certain steps you can take to formally launch your sole proprietorship.
1. Get your business license and any permits you may need. Some states require that you apply for licenses (business or occupancy) as well as permits. Check with your state or county clerk to see if you need any special paperwork to begin your business.
2. You may need to register your business under its Doing Business As name if your state requires it. If this isn't the case, you can operate under an assumed name, which can usually just be your own. Keep in mind that there are legal ramifications if you choose to run your sole proprietorship under your name.
3. Apply for and obtain an EIN. This is an important and necessary step if you're going to have any employees or file tax returns. If this doesn't apply to you, you're able to use your own SSN. Either way, it's always a good idea to check with a [tax advisor](https://www.investopedia.com/terms/t/taxadvisor.asp) so you don't make any mistakes.
###
If you plan to hire employees, you will need an EIN from the IRS. If you are going to sell taxable products, you will need to register for a sales tax license with your state.
## Sole Proprietorship vs. LLC vs. Partnership
As noted above, there are certain distinctions between a sole proprietorship, a limited liability company, and a partnership. The chart below highlights some of the key differences between the three.
| | **Sole Proprietorship** | **LLC** | **Partnership** |
| --- | --- | --- | --- |
| **Establishment** | Easy to establish, no paperwork unless required by the state | Must file articles of incorporation with the state | May require contracts for each partner |
| **Business Name** | Can operate under owner's or fictitious name or formally register under Doing Business As | Established and secured | Can operate under owner's or fictitious name or formally register under Doing Business As |
| **Liability** | No legal protection, owner is fully liable | Protection for owners | No legal protection, owner fully liable |
| **Taxation** | Filed under owner's personal taxes if there is no EIN | Filed under owner's personal taxes for one ownerTreated as partnership for two or more owners | Filed under partnership |
## Transition From Sole Proprietor to LLC
When a sole proprietor seeks to incorporate a business, the [owner usually restructures it into an LLC](https://www.investopedia.com/sole-proprietorship-vs-llc-8627981). For this to work, the owner must first determine that the name of the company is available. If the desired name is free, [articles of organization](https://www.investopedia.com/terms/a/articles-of-organization.asp) must be filed with the state office where the business will be based.
After the paperwork is filed, the business owner must create an LLC operating agreement, which specifies the business structure. Finally, the new company must obtain an EIN—similar to an SSN, but for businesses—from the IRS.
### Note
A sole proprietorship has no separation between the business entity and its owner, setting it apart from corporations and limited partnerships.
## Sole Proprietorship Tax Forms
Sole proprietors report their income and expenses on their personal tax returns and pay income and [self-employment taxes](https://www.investopedia.com/terms/s/selfemploymenttax.asp) on their profits. The tax forms you may need to file could include the following:
| Tax Forms for Sole Proprietorship | |
| --- | --- |
| **If you are liable for:** | **Use form:** |
| [Income tax](https://www.investopedia.com/terms/i/incometax.asp) | [1040, U.S. Individual Income Tax Return](https://www.irs.gov/forms-pubs/about-form-1040) or [1040-SR, U.S. Tax Return for Seniors](https://www.irs.gov/forms-pubs/about-form-1040-sr) and [Schedule C (Form 1040 or 1040-SR), Profit or Loss from Business (Sole Proprietorship)](https://www.irs.gov/forms-pubs/about-schedule-c-form-1040) |
| Self-employment tax | [Schedule SE (Form 1040 or 1040-SR), Self-Employment Tax](https://www.irs.gov/forms-pubs/about-schedule-se-form-1040) |
| [Estimated tax](https://www.investopedia.com/terms/e/estimated-tax.asp) | [1040-ES, Estimated Tax for Individuals](https://www.irs.gov/forms-pubs/about-form-1040-es) |
| [Social Security](https://www.investopedia.com/terms/s/social-security-tax.asp) and Medicare taxes and income tax withholding | [941, Employer’s Quarterly Federal Tax Return](https://www.irs.gov/forms-pubs/about-form-941); [943, Employer’s Annual Federal Tax Return for Agricultural Employees](https://www.irs.gov/forms-pubs/about-form-943); [944, Employer’s Annual Federal Tax Return](https://www.irs.gov/forms-pubs/about-form-944) |
| Providing information on Social Security and [Medicare taxes](https://www.investopedia.com/medicare-tax-definition-5115380) and income tax withholding | [W-2, Wage and Tax Statement](https://www.irs.gov/forms-pubs/about-form-w-2) (to employee) and [W-3, Transmittal of Wage and Tax Statements](https://www.irs.gov/forms-pubs/about-form-w-3) (to the Social Security Administration) |
| [Federal unemployment (FUTA) tax](https://www.investopedia.com/terms/f/federal-unemployment-tax-act-futa.asp) | [940, Employer’s Annual Federal Unemployment (FUTA) Tax Return](https://www.irs.gov/forms-pubs/about-form-940) |
Source: Internal Revenue Service
## Example of a Sole Proprietorship
Most small businesses start as sole proprietorships and evolve into different legal structures as time passes and the company grows.
For example, Kate Schade started her company, Kate’s Real Food, as a sole proprietor. The company creates and sells energy bars and began as a local vendor in Jackson Hole, Wyoming. The sole proprietorship currently has a production facility in Bedford, Pennsylvania, and can be found in more than 4,000 retailers.
Since launching in 2005, Kate’s Real Food has grown to supply accounts across the country. In response, Schade restructured the business from a sole proprietorship to a corporation to take on investments and expand, a natural step for a growing business.
## How Do You Start a Sole Proprietorship?
To start a sole proprietorship, you generally have to launch your business. It is useful to choose a company name. Depending on your business and local regulations, you may need to apply for a permit or license with your city, county, or state. If you plan to hire employees, you will need an employee identification number from the IRS. If you are going to sell taxable products, you will need to register with your state for a sales tax license.
## Is Being a Sole Proprietorship the Same As Being Self-Employed?
Yes, being a sole proprietor is the same as being self-employed. A sole proprietor does not work for any company or boss, so they are self-employed.
## How Do You File Taxes As a Sole Proprietor?
Filing taxes as a sole proprietor requires you to fill out the standard tax Form 1040 for individual taxes and Schedule C, which reports the profits and losses of your business. The amount of taxes you owe will be based on the combined income of both Form 1040 and Schedule C. If you have employees, there will be other forms to fill out.
## Should I Form a Limited Liability Company or a Sole Proprietorship?
That depends on your business. A sole proprietorship is best suited to small businesses with low risk and low profits. Generally, these businesses don’t have a wide range of customers but rather a small, dedicated group. Sole proprietorships often start as hobbies that grow into a business.
The reasons to [start a limited liability company](https://www.investopedia.com/how-to-start-an-llc-8631304) (LLC) are the opposite of the reasons above. The business entails some liability [risks](https://www.investopedia.com/terms/r/risk.asp), has the potential for large profits and a large customer base, and is positioned to benefit from certain tax structures.
## How Do You Convert a Sole Proprietorship to an LLC?
Converting a sole proprietorship to an LLC requires you to file articles of organization with your state secretary. Also, you will have to refile your DBA (or Doing Business As) to keep your company name. Lastly, you will need to obtain an EIN from the IRS.
## The Bottom Line
A sole proprietorship is a straightforward way for an individual to start a business. It does not require registering with a state authority for most situations and does not require obtaining an EIN from the IRS.
The benefits of simplicity are accompanied by some drawbacks, including all liabilities being passed through from the business to the individual and funding being harder to come by. Those risks shouldn’t pose much of an issue initially. However, as the business grows, it may make sense to transition into a different legal structure.
| What Is a Sole Proprietorship?
A sole proprietorship is an unincorporated business that has just one owner with no separation between the business and the owner. The owner receives all profits but is also liable for all debts and losses.
The owner of a sole proprietorship pays personal income tax on profits earned from the business. Many sole proprietors do business under their own names because creating a separate business or trade name isn’t necessary.
Also referred to as a sole trader or a proprietorship, a sole proprietorship is the easiest type of business to establish or take apart, due to a lack of government regulation. As such, they are very popular among sole owners of businesses, individual self-contractors, and consultants. Most small businesses start as sole proprietorships and either stay that way or expand and transition to a limited liability entity or corporation.
Key Takeaways
A sole proprietorship is an unincorporated business with only one owner who pays personal income tax on profits earned.Sole proprietorships are easy to establish and dismantle due to a lack of government involvement, making them popular with small business owners and contractors.Most small businesses start as sole proprietorships and end up transitioning to a limited liability entity or corporation as the company grows.One of the main disadvantages of sole proprietorships is that they do not have any government protection, as they are not registered. This means that all liabilities extend from the business to the owner.Sole proprietors report their income and expenses on their personal tax returns and pay income and self-employment taxes on their profits.
Understanding Sole Proprietorships
If you want to start a one-owner business, the simplest and fastest way is through a sole proprietorship. A sole proprietorship begins when you begin conducting business. It doesn’t require filing federal or state forms and has few regulatory burdens, making it an ideal way for self-employed people to start out.
A sole proprietorship is very different from a corporation, a limited liability company (LLC), or a limited liability partnership (LLP), in that no separate legal entity is created. As a result, the business owner of a sole proprietorship is not exempt from liabilities incurred by the entity.
For example, the debts of the sole proprietorship are also the debts of the owner. However, the profits of the sole proprietorship are also the profits of the owner, as all profits flow directly to the business owner.
Sabrina Jiang © Investopedia 2020
Advantages and Disadvantages of a Sole Proprietorship
Advantages
The main benefits of a sole proprietorship are the pass-through tax advantage, the ease of creation, and the low fees for creation and maintenance.
The tax benefits. Income generated from a pass-through business is only subject to a single layer of income tax and, in some cases, may be eligible for a 20% tax deduction. Along with slashing the corporate tax rate, the Tax Cuts and Jobs Act (TCJA) of 2017 added a tax break for pass-through entities that essentially allows them to deduct up to 20% of qualified business income. That deduction can result in huge savings and runs until Jan. 1, 2026—unless extended by Congress.
With a sole proprietorship, you do not need to fill out a tremendous amount of paperwork, such as registering with your state. You may need to obtain a license or permit, depending on your state and type of business. But less paperwork allows you to get your business off the ground faster.
The tax process is simpler because you do not need to obtain an employer identification number (EIN) from the Internal Revenue Service (IRS). You can obtain an EIN if you choose to, but you can also use your own Social Security number (SSN) to pay taxes rather than needing an EIN.
With a sole proprietorship, you also don’t need a business checking account, as other business structures are required to have. You can simply conduct all your finances through your personal account.
33.3 million
The number of small businesses in the United States in 2023. Together, these businesses employed 61.6 million people across the country.
Disadvantages
There are some disadvantages of sole proprietorships, which can be impactful to the business owner. When a business is registered, it has some legal protections. A sole proprietorship provides no liability protection to the owner. By contrast, an LLC separates business and personal assets. The owner has protection against creditors seizing their personal assets, such as their home.
This unlimited liability goes beyond the business entity to the owners themselves. It can be difficult to get capital funding, specifically through established channels. Standard funding avenues include the ability to issue company equity and obtain bank loans or lines of credit. Banks prefer to work with companies that have a track record and generally view those who are starting out with a small balance sheet as high-risk borrowers. Obtaining funding from large investors can also be difficult.
Pros
Less paperwork
No need to obtain an EIN from the IRS
Quick and easy setup compared with other business structures
Low fees and costs
Pass-through tax advantage
Easier banking
Cons
Unlimited liability goes from business to owner
Difficulty in raising capital
How to Create a Sole Proprietorship
It isn't very difficult to start a sole proprietorship. That's because there aren't the usual legal hurdles that you have to overcome with other types of business organizations. In most cases, starting the entity is as easy as establishing yourself as the owner and starting up. Depending on where you live, there are certain steps you can take to formally launch your sole proprietorship.
Get your business license and any permits you may need. Some states require that you apply for licenses (business or occupancy) as well as permits. Check with your state or county clerk to see if you need any special paperwork to begin your business.
You may need to register your business under its Doing Business As name if your state requires it. If this isn't the case, you can operate under an assumed name, which can usually just be your own. Keep in mind that there are legal ramifications if you choose to run your sole proprietorship under your name.
Apply for and obtain an EIN. This is an important and necessary step if you're going to have any employees or file tax returns. If this doesn't apply to you, you're able to use your own SSN. Either way, it's always a good idea to check with a tax advisor so you don't make any mistakes.
If you plan to hire employees, you will need an EIN from the IRS. If you are going to sell taxable products, you will need to register for a sales tax license with your state.
Sole Proprietorship vs. LLC vs. Partnership
As noted above, there are certain distinctions between a sole proprietorship, a limited liability company, and a partnership. The chart below highlights some of the key differences between the three.
Sole Proprietorship
LLC
Partnership
Establishment
Easy to establish, no paperwork unless required by the state
Must file articles of incorporation with the state
May require contracts for each partner
Business Name
Can operate under owner's or fictitious name or formally register under Doing Business As
Established and secured
Can operate under owner's or fictitious name or formally register under Doing Business As
Liability
No legal protection, owner is fully liable
Protection for owners
No legal protection, owner fully liable
Taxation
Filed under owner's personal taxes if there is no EIN
Filed under owner's personal taxes for one ownerTreated as partnership for two or more owners
Filed under partnershipPartners declare income and losses from partnership on personal returns
Transition From Sole Proprietor to LLC
When a sole proprietor seeks to incorporate a business, the owner usually restructures it into an LLC. For this to work, the owner must first determine that the name of the company is available. If the desired name is free, articles of organization must be filed with the state office where the business will be based.
After the paperwork is filed, the business owner must create an LLC operating agreement, which specifies the business structure. Finally, the new company must obtain an EIN—similar to an SSN, but for businesses—from the IRS.
Note
A sole proprietorship has no separation between the business entity and its owner, setting it apart from corporations and limited partnerships.
Sole Proprietorship Tax Forms
Sole proprietors report their income and expenses on their personal tax returns and pay income and self-employment taxes on their profits. The tax forms you may need to file could include the following:
Tax Forms for Sole Proprietorship
If you are liable for:
Use form:
Income tax
1040, U.S. Individual Income Tax Return or 1040-SR, U.S. Tax Return for Seniors and Schedule C (Form 1040 or 1040-SR), Profit or Loss from Business (Sole Proprietorship)
Self-employment tax
Schedule SE (Form 1040 or 1040-SR), Self-Employment Tax
Estimated tax
1040-ES, Estimated Tax for Individuals
Social Security and Medicare taxes and income tax withholding
941, Employer’s Quarterly Federal Tax Return; 943, Employer’s Annual Federal Tax Return for Agricultural Employees; 944, Employer’s Annual Federal Tax Return
Providing information on Social Security and Medicare taxes and income tax withholding
W-2, Wage and Tax Statement (to employee) and W-3, Transmittal of Wage and Tax Statements (to the Social Security Administration)
Federal unemployment (FUTA) tax
940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
Source: Internal Revenue Service
Example of a Sole Proprietorship
Most small businesses start as sole proprietorships and evolve into different legal structures as time passes and the company grows.
For example, Kate Schade started her company, Kate’s Real Food, as a sole proprietor. The company creates and sells energy bars and began as a local vendor in Jackson Hole, Wyoming. The sole proprietorship currently has a production facility in Bedford, Pennsylvania, and can be found in more than 4,000 retailers.
Since launching in 2005, Kate’s Real Food has grown to supply accounts across the country. In response, Schade restructured the business from a sole proprietorship to a corporation to take on investments and expand, a natural step for a growing business.
How Do You Start a Sole Proprietorship?
To start a sole proprietorship, you generally have to launch your business. It is useful to choose a company name. Depending on your business and local regulations, you may need to apply for a permit or license with your city, county, or state. If you plan to hire employees, you will need an employee identification number from the IRS. If you are going to sell taxable products, you will need to register with your state for a sales tax license.
Is Being a Sole Proprietorship the Same As Being Self-Employed?
Yes, being a sole proprietor is the same as being self-employed. A sole proprietor does not work for any company or boss, so they are self-employed.
How Do You File Taxes As a Sole Proprietor?
Filing taxes as a sole proprietor requires you to fill out the standard tax Form 1040 for individual taxes and Schedule C, which reports the profits and losses of your business. The amount of taxes you owe will be based on the combined income of both Form 1040 and Schedule C. If you have employees, there will be other forms to fill out.
Should I Form a Limited Liability Company or a Sole Proprietorship?
That depends on your business. A sole proprietorship is best suited to small businesses with low risk and low profits. Generally, these businesses don’t have a wide range of customers but rather a small, dedicated group. Sole proprietorships often start as hobbies that grow into a business.The reasons to start a limited liability company (LLC) are the opposite of the reasons above. The business entails some liability risks, has the potential for large profits and a large customer base, and is positioned to benefit from certain tax structures.
How Do You Convert a Sole Proprietorship to an LLC?
Converting a sole proprietorship to an LLC requires you to file articles of organization with your state secretary. Also, you will have to refile your DBA (or Doing Business As) to keep your company name. Lastly, you will need to obtain an EIN from the IRS.
The Bottom Line
A sole proprietorship is a straightforward way for an individual to start a business. It does not require registering with a state authority for most situations and does not require obtaining an EIN from the IRS.
The benefits of simplicity are accompanied by some drawbacks, including all liabilities being passed through from the business to the individual and funding being harder to come by. Those risks shouldn’t pose much of an issue initially. However, as the business grows, it may make sense to transition into a different legal structure.
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https://www.investopedia.com/articles/financial-theory/11/small-business-marketing-techniques.asp | What Is a Small Business? Definition, Characteristics, and Challenges | <div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> When you don’t have a big budget, marketing can be challenging, but there’s plenty a small business owner can do to attract and maintain a customer base. The rise in digital marketing has made it easier for small business owners to find a way to create a presence and attract buyers.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Advertising your business or product is about more than just having your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/081616/can-i-make-money-advertising-my-car-or-it-scam.asp">company name and number on the side of your work vehicles</a>. When you build a business, the first thing you want to secure is a customer base. Then, with a decent printer, a phone, and an internet-connected device, you can create a reasonably extensive advertising campaign without paying for digital space. Here are seven small business marketing techniques you can use to boost your business.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Small businesses don’t have the advertising budget of larger rivals, but there are inexpensive ways to build a customer base.</li><li>Hitting the pavement with flyers distributed door to door (where allowed) and placing posters strategically can help get the word out.</li><li>Follow up with customers after the first round of ads to reinforce the initial message, and don’t fear cold calls—they can be effective.</li><li>Value additions, such as discounts or freebies for repeat customers, are a big boon once the business is up and running.</li><li>Referrals—both from customer to customer and business to business—are also important.</li><li>Prioritize digital marketing, including traditional websites and social media.</li></ul></div></div></div>
<span class="heading-toc" id="toc-before-you-start-marketing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Before You Start Marketing </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Before your business starts marketing a product, it helps to think about the type of person you want to reach with your promotional materials. Once you have your ideal customer, you’ll have a wide choice of marketing methods. Most of these are low-cost or no-cost tactics (sometimes called <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/guerrilla-marketing.asp">guerrilla marketing</a>). You may use different ones at different stages of your business cycle—or you may utilize them all at once from your business’s inception.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div>
<span class="heading-toc" id="toc-1-flyers"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> 1. Flyers </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> This is the carpet-bombing method of cheap advertising. You find an area where you would like to do business and distribute flyers to all the mailboxes within reach. Your flyer should be brief and to the point, highlighting the services you offer or products you sell and providing contact information. Offering a free appraisal, coupon, or discount can help attract your first customers.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Flyers shouldn't be mistaken for posters. Flyers are more informative, listing services or products provided, contact information, addresses, and specialties.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div>
<span class="heading-toc" id="toc-2-posters"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> 2. Posters </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Most supermarkets, public spaces, and malls offer free bulletin board space for announcements and advertisements. This method is hit-or-miss, but you should try to make your poster visible and have removable tabs that the customers can present for a discount.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Make each location a different color to get an idea from the tabs where the most leads are generated. If one area is producing most of your leads, you can better target your campaign (flyers, ads in local media catering to those areas, etc.)
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Posters should feature appealing images and catchy, memorable phrasing so viewers will recall it when they're wondering where to go for whatever it is they need that you're offering.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_22-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_23-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Traditional marketing methods like radio, print advertising, and billboards shouldn't be overlooked. The more channels you use, the more exposure you have.</p></div></div></div>
<span class="heading-toc" id="toc-3-value-additions"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> 3. Value Additions </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Value additions (or value-ads) are powerful selling points for any product or service. On the surface, value additions are very similar to coupons and free appraisals, but they aim to increase customer satisfaction and widen the gap between you and the competition.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Common value additions typically include:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> <li>Guarantees</li><li>Discounts for repeat customers</li><li>Point cards</li><li>Referral rewards</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> The deciding factor for a customer choosing between two similar shops might be a point card or preferred customer card. You don’t have to promise the moon to add value—instead, point out something that the customer may not realize about your product or service. It's important to highlight the value additions when creating your advertising materials.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div>
<span class="heading-toc" id="toc-4-referral-networks"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> 4. Referral Networks </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Referral networks can be invaluable to a business. Referrals can be encouraged through discounts or other rewards per referral. However, referral networks also include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/btob.asp">business-to-business</a> referrals. If you have ever found yourself saying, “We don’t do/sell that here, but X down the street does,” you might want to introduce yourself to X's owner and talk to them about a referral <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/q/quidproquo.asp">quid pro quo</a>.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> When dealing with white-collar professions, this network is even stronger. For example, a lawyer might refer you to an accountant; in turn, the accountant might refer you to a <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialplanner.asp">financial planner</a>, who could refer you to a broker. In each situation, the person stakes their professional reputation on the referral.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Regardless of your business type, make sure you create a referral <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/networking.asp">network</a> that has the same outlook and commitment to quality that you do.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_40-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_41-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>If you are too busy to take a job, throw it to your competition. You will often find the favor returned, plus it can be bad for your reputation if a customer has to wait too long for a service.</p></div></div></div>
<span class="heading-toc" id="toc-5-follow-ups"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> 5. Follow-ups </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Advertising can help attract customers, but what you do after they come in can often be a much stronger marketing tool. Follow-up questionnaires are one of the best sources of feedback on how your ad campaign is going. Questions you could ask include:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> <li>Why did the customer choose your business?</li><li>Where did they hear about it?</li><li>Which other companies had they considered?</li><li>What produced the most customer satisfaction?</li><li>What was the least satisfying aspect?</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Also, if your job involves going to the customer, make sure to slip a flyer into nearby mailboxes, as people who live in the same area often have similar needs and interests.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div>
<span class="heading-toc" id="toc-6-cold-calls"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> 6. Cold Calls </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Unpleasant? Important? Yes, and yes.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/coldcalling.asp">Cold calling</a>—whether over the phone or door to door—is a baptism by fire for many small businesses. It forces you to sell yourself as well as your business.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Over the phone, you don’t have the benefit of a smile or face-to-face conversation—a phone is a license for some people to be as caustic and abrupt as possible (we are all guilty of this at one time or another). However, cold calling does make you think on your feet and encourages creativity and adaptability when facing potential customers. It also is a quick way to get your name out there and can drum up business.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/warm-calling.asp">Warm calls</a> are an alternative to cold calls. You make calls to people you have already met or introduced yourself to through social events, email campaigns, or other activities.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div>
<span class="heading-toc" id="toc-7-online-marketing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-heading__text"> 7. Online Marketing </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> The importance of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/digital-marketing.asp">internet</a> in building a successful business cannot be overstated. The internet makes it possible to reach a massive audience from anywhere and generate interest in your business, potentially without spending a cent.
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> No company (even a local café) should be without, at the very least, a website with vital details such as location and hours. You need a point of access for everyone who searches the internet first when they want to make a buying decision.
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> You may also need:
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div>
<ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0">
<li><strong>A social media presence</strong>: Facebook, Instagram, TikTok, X platform (formerly Twitter), LinkedIn, Pinterest, etc.</li>
<li><strong>A content management system (CMS)</strong>: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wordpress-cms.asp">WordPress</a>, Hubspot, Joomla, or Drupal</li>
<li><strong>Search engine optimization (SEO) skills</strong>: <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/seo-for-small-businesses-8584627">Optimizing your content for searches</a>, internal and external linking, title tags, alt tags, and headings</li>
</ul>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> All this digital dexterity may feel intimidating at first. However, publishing technology has evolved to the point where an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/open-source.asp">open-source</a> content management system can meet all these needs.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div>
<div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_69-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_70-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0"></h3>
<div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>The social media platforms that offer marketers the highest <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/returnoninvestment.asp">return on investment (ROI)</a> are Facebook and Instagram, according to HubSpot.<span class="ql-inline-citation" data-cite="5"></span></p></div></div></div>
<span class="heading-toc" id="toc-how-to-identify-your-value-proposition-audience-and-goals"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_71-0"> <span class="mntl-sc-block-heading__text"> How to Identify Your Value Proposition, Audience, and Goals </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> Before you begin printing and distributing your materials, it's best to figure out who your audience is and how to make your product or services valuable to them. Then, set realistic and attainable goals for your business and marketing endeavors.
</p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_74-0"> <span class="mntl-sc-block-subheading__text"> Value Proposition </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> A value proposition is a reason a customer should buy a product or service from you instead of the competition. Consider what your target audience needs from you rather than what your product has. These needs are usually called benefits, whereas a product's physical properties or what it does are called features. You can still highlight features, but they should be backed up with a benefit that aligns with your audience's needs.
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_77-0"> Critical to selling your product or services is identifying what you offer that others do not (or that they don't do very well). To establish your value proposition, compare what you're offering to the competition's product or service. Identify their features and benefits and compare them to yours, then make a note of the areas where you excel.
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_79-0"> Your top value proposition should be unique to your offering and make it <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/perceived-value.asp">appealing</a> to your audience. For example, imagine you have a coffee shop and bistro. It's a trendy convenience found in many towns and cities, so you'll have to analyze your competitors and use your imagination to discover the one thing that makes you stand out.
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_81-0"> Say you've perfected bread recipes from around the world, like pão de queijo (a gluten-free Brazilian bread made from tapioca flour<strong> </strong>and cheese) or aish baladi (an Egyptian bread), and import coffee from the countries where those breads are baked and eaten. You may have a competitive advantage and an excellent value proposition—you offer products no other café in town does.
</p>
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<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_83-0"> <span class="mntl-sc-block-subheading__text"> Audience </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> You'll need to identify who your audience is. If you didn't design your product or service for a specific demographic, you’ll need to do some research to determine which type of people to target. Audience is key to marketing. If you're targeting one demographic that doesn't have a large presence in your area, you may not be too successful unless you're an online retailer.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_86-0"> You'll need to identify who you want to sell to the most and ensure your product or service caters to them. For example, if you like the idea of a global café with bread and coffee from around the world, you'll need a customer base to sell it to.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_88-0"> You could start talking to people and listening to their coffee concerns. Find out their ages and average incomes, see what they'd like, and ask what current issues they have in getting the coffee and the experience they want. Learn as much about them as possible—spending habits, needs, income levels, hobbies, or anything else that might provide insights into what might attract them.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_90-0"> Once you define your audience and what they need, you can figure out the message you're going to send.<br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_92-0"> <span class="mntl-sc-block-subheading__text"> Goals </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_93-0"> One of the best ways to accomplish something is to set a goal. However, you don't want to set one goal—you should set an end goal and several small attainable goals that contribute to the final goal.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_94-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_95-0"> Set up a timeline and dates when you'd like to complete the small goals. This way, you have small steps to guide you and a way to measure your progress and success.<br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_96-0"></div>
<span class="heading-toc" id="toc-marketing-channels"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_97-0"> <span class="mntl-sc-block-heading__text"> Marketing Channels </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_98-0"> The internet, and the various technologies and platforms using it, gives businesses enormous marketing opportunities. Here are the top marketing channels used; it's likely you've heard of or been exposed to them.<br/>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_99-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_100-0"> <span class="mntl-sc-block-subheading__text"> Search Engine Optimization </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_101-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/seo-for-small-businesses-8584627">Search engine optimization (SEO)</a> is top dog when it comes to marketing. It involves structuring your website and content so that it ranks as high as possible on Google search engine results pages.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_102-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_103-0"> Google uses a technique called web crawling that finds web pages to add to its index. When creating or adjusting your webpage or site for SEO, there are several factors to consider, such as following Google's best practices and spam policies.<span class="ql-inline-citation" data-cite="3"></span>
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_104-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_105-0"> <span class="mntl-sc-block-subheading__text"> Content Marketing </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_106-0"> Content marketing is a technique used to promote interest in your brand without explicitly promoting a product or service. You'll find examples of this on many companies' websites where a blog or article discusses a topic and how the company relates to it or works to help people do something. Generally, there is a call to action toward the end of the article, like "if you need help with XYZ, contact us today" or something similar.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_107-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_108-0"> Content marketing establishes expertise and gives potential customers a brand to remember.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_109-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_110-0"> <span class="mntl-sc-block-subheading__text"> Email Marketing </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_111-0"> It's been predicted that more than 4.85 billion people will have an email address by 2027.<span class="ql-inline-citation" data-cite="4"></span> To gain access to this ocean of people, you'll need an email marketing application. You can find hundreds of email marketing applications that will allow you to create email marketing campaigns.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_112-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_113-0"> <span class="mntl-sc-block-subheading__text"> Social Media Marketing </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_114-0"> We've all seen advertisements on our social media pages that seem to target us by what we've been shopping for. It's no secret that using social media increases brand exposure and generates interest, so it is in a small business's best interest to, at a minimum, create a social media profile for itself and begin posting content.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_115-0"></div>
<h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_116-0"> <span class="mntl-sc-block-subheading__text"> Influencer Marketing </span> </h3>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_117-0"> Influencers are people with a large viewer and follower base on their platform of choice. For instance, someone who regularly posts content on Instagram could have millions of followers. This person then becomes an influence in the lives of their followers—giving businesses another exposure outlet.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_118-0"></div>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_119-0"> Chances are you've seen someone talking about a product or service on their social media platform; they've been sponsored by a company to talk about that business's services. Influencers can help you generate tons of interest.
</p>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_120-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_121-0"><span class="heading-toc" id="toc-what-is-small-business-marketing"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Small Business Marketing?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Small business marketing is creating a campaign for your small business to generate interest and a consumer base. It involves using traditional and modern marketing techniques to develop a marketing campaign.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_122-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_123-0"><span class="heading-toc" id="toc-which-marketing-is-best-for-small-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">Which Marketing Is Best for Small Business?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>The most effective marketing combines social media, networking, and traditional methods like flyers, posters, and cold calling. However, social media advertising reaches the most people the fastest.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_124-0"></div>
<div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_125-0"><span class="heading-toc" id="toc-how-can-i-promote-my-small-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can I Promote My Small Business?</h2>
<div class="mntl-sc-block-questionandanswer__answer"><p>Social media is the quickest method for promoting your business. For the promotion itself, you can offer discounts for referrals, promotional pricing, participate in events in your community, or anything else you can think of. Technology has created many more channels you can use, but it's up to you to figure out how to exploit them.</p></div>
</div>
<div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_126-0"></div>
<span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_127-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2>
<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_128-0"> More than likely, you will find that the conversion rate on marketing is very low. Even the most <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-advertising-agencies-5093717">successful campaigns</a> measure leads (and converted sales from those leads) in the 10% to 20% range.<span class="ql-inline-citation" data-cite="2"></span> This helps to shatter any illusions about instant success, but it is also an opportunity for improvement. Consider that if you convert 0.5% of 1 million leads to sales, you've got 5,000 sales.
</p>
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<p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_130-0"> The more exposure you have, the more leads you can generate and convert. Ultimately, this turns into sales, profits, and growth.
</p></div> | When you don’t have a big budget, marketing can be challenging, but there’s plenty a small business owner can do to attract and maintain a customer base. The rise in digital marketing has made it easier for small business owners to find a way to create a presence and attract buyers.
Advertising your business or product is about more than just having your [company name and number on the side of your work vehicles](https://www.investopedia.com/ask/answers/081616/can-i-make-money-advertising-my-car-or-it-scam.asp). When you build a business, the first thing you want to secure is a customer base. Then, with a decent printer, a phone, and an internet-connected device, you can create a reasonably extensive advertising campaign without paying for digital space. Here are seven small business marketing techniques you can use to boost your business.
### Key Takeaways
* Small businesses don’t have the advertising budget of larger rivals, but there are inexpensive ways to build a customer base.
* Hitting the pavement with flyers distributed door to door (where allowed) and placing posters strategically can help get the word out.
* Follow up with customers after the first round of ads to reinforce the initial message, and don’t fear cold calls—they can be effective.
* Value additions, such as discounts or freebies for repeat customers, are a big boon once the business is up and running.
* Referrals—both from customer to customer and business to business—are also important.
* Prioritize digital marketing, including traditional websites and social media.
## Before You Start Marketing
Before your business starts marketing a product, it helps to think about the type of person you want to reach with your promotional materials. Once you have your ideal customer, you’ll have a wide choice of marketing methods. Most of these are low-cost or no-cost tactics (sometimes called [guerrilla marketing](https://www.investopedia.com/terms/g/guerrilla-marketing.asp)). You may use different ones at different stages of your business cycle—or you may utilize them all at once from your business’s inception.
## 1. Flyers
This is the carpet-bombing method of cheap advertising. You find an area where you would like to do business and distribute flyers to all the mailboxes within reach. Your flyer should be brief and to the point, highlighting the services you offer or products you sell and providing contact information. Offering a free appraisal, coupon, or discount can help attract your first customers.
Flyers shouldn't be mistaken for posters. Flyers are more informative, listing services or products provided, contact information, addresses, and specialties.
## 2. Posters
Most supermarkets, public spaces, and malls offer free bulletin board space for announcements and advertisements. This method is hit-or-miss, but you should try to make your poster visible and have removable tabs that the customers can present for a discount.
Make each location a different color to get an idea from the tabs where the most leads are generated. If one area is producing most of your leads, you can better target your campaign (flyers, ads in local media catering to those areas, etc.)
Posters should feature appealing images and catchy, memorable phrasing so viewers will recall it when they're wondering where to go for whatever it is they need that you're offering.
###
Traditional marketing methods like radio, print advertising, and billboards shouldn't be overlooked. The more channels you use, the more exposure you have.
## 3. Value Additions
Value additions (or value-ads) are powerful selling points for any product or service. On the surface, value additions are very similar to coupons and free appraisals, but they aim to increase customer satisfaction and widen the gap between you and the competition.
Common value additions typically include:
* Guarantees
* Discounts for repeat customers
* Point cards
* Referral rewards
The deciding factor for a customer choosing between two similar shops might be a point card or preferred customer card. You don’t have to promise the moon to add value—instead, point out something that the customer may not realize about your product or service. It's important to highlight the value additions when creating your advertising materials.
## 4. Referral Networks
Referral networks can be invaluable to a business. Referrals can be encouraged through discounts or other rewards per referral. However, referral networks also include [business-to-business](https://www.investopedia.com/terms/b/btob.asp) referrals. If you have ever found yourself saying, “We don’t do/sell that here, but X down the street does,” you might want to introduce yourself to X's owner and talk to them about a referral [quid pro quo](https://www.investopedia.com/terms/q/quidproquo.asp).
When dealing with white-collar professions, this network is even stronger. For example, a lawyer might refer you to an accountant; in turn, the accountant might refer you to a [financial planner](https://www.investopedia.com/terms/f/financialplanner.asp), who could refer you to a broker. In each situation, the person stakes their professional reputation on the referral.
Regardless of your business type, make sure you create a referral [network](https://www.investopedia.com/terms/n/networking.asp) that has the same outlook and commitment to quality that you do.
###
If you are too busy to take a job, throw it to your competition. You will often find the favor returned, plus it can be bad for your reputation if a customer has to wait too long for a service.
## 5. Follow-ups
Advertising can help attract customers, but what you do after they come in can often be a much stronger marketing tool. Follow-up questionnaires are one of the best sources of feedback on how your ad campaign is going. Questions you could ask include:
* Why did the customer choose your business?
* Where did they hear about it?
* Which other companies had they considered?
* What produced the most customer satisfaction?
* What was the least satisfying aspect?
Also, if your job involves going to the customer, make sure to slip a flyer into nearby mailboxes, as people who live in the same area often have similar needs and interests.
## 6. Cold Calls
Unpleasant? Important? Yes, and yes.
[Cold calling](https://www.investopedia.com/terms/c/coldcalling.asp)—whether over the phone or door to door—is a baptism by fire for many small businesses. It forces you to sell yourself as well as your business.
Over the phone, you don’t have the benefit of a smile or face-to-face conversation—a phone is a license for some people to be as caustic and abrupt as possible (we are all guilty of this at one time or another). However, cold calling does make you think on your feet and encourages creativity and adaptability when facing potential customers. It also is a quick way to get your name out there and can drum up business.
[Warm calls](https://www.investopedia.com/terms/w/warm-calling.asp) are an alternative to cold calls. You make calls to people you have already met or introduced yourself to through social events, email campaigns, or other activities.
## 7. Online Marketing
The importance of the [internet](https://www.investopedia.com/terms/d/digital-marketing.asp) in building a successful business cannot be overstated. The internet makes it possible to reach a massive audience from anywhere and generate interest in your business, potentially without spending a cent.
No company (even a local café) should be without, at the very least, a website with vital details such as location and hours. You need a point of access for everyone who searches the internet first when they want to make a buying decision.
You may also need:
* **A social media presence**: Facebook, Instagram, TikTok, X platform (formerly Twitter), LinkedIn, Pinterest, etc.
* **A content management system (CMS)**: [WordPress](https://www.investopedia.com/terms/w/wordpress-cms.asp), Hubspot, Joomla, or Drupal
* **Search engine optimization (SEO) skills**: [Optimizing your content for searches](https://www.investopedia.com/seo-for-small-businesses-8584627), internal and external linking, title tags, alt tags, and headings
All this digital dexterity may feel intimidating at first. However, publishing technology has evolved to the point where an [open-source](https://www.investopedia.com/terms/o/open-source.asp) content management system can meet all these needs.
###
The social media platforms that offer marketers the highest [return on investment (ROI)](https://www.investopedia.com/terms/r/returnoninvestment.asp) are Facebook and Instagram, according to HubSpot.
## How to Identify Your Value Proposition, Audience, and Goals
Before you begin printing and distributing your materials, it's best to figure out who your audience is and how to make your product or services valuable to them. Then, set realistic and attainable goals for your business and marketing endeavors.
### Value Proposition
A value proposition is a reason a customer should buy a product or service from you instead of the competition. Consider what your target audience needs from you rather than what your product has. These needs are usually called benefits, whereas a product's physical properties or what it does are called features. You can still highlight features, but they should be backed up with a benefit that aligns with your audience's needs.
Critical to selling your product or services is identifying what you offer that others do not (or that they don't do very well). To establish your value proposition, compare what you're offering to the competition's product or service. Identify their features and benefits and compare them to yours, then make a note of the areas where you excel.
Your top value proposition should be unique to your offering and make it [appealing](https://www.investopedia.com/terms/p/perceived-value.asp) to your audience. For example, imagine you have a coffee shop and bistro. It's a trendy convenience found in many towns and cities, so you'll have to analyze your competitors and use your imagination to discover the one thing that makes you stand out.
Say you've perfected bread recipes from around the world, like pão de queijo (a gluten-free Brazilian bread made from tapioca flourand cheese) or aish baladi (an Egyptian bread), and import coffee from the countries where those breads are baked and eaten. You may have a competitive advantage and an excellent value proposition—you offer products no other café in town does.
### Audience
You'll need to identify who your audience is. If you didn't design your product or service for a specific demographic, you’ll need to do some research to determine which type of people to target. Audience is key to marketing. If you're targeting one demographic that doesn't have a large presence in your area, you may not be too successful unless you're an online retailer.
You'll need to identify who you want to sell to the most and ensure your product or service caters to them. For example, if you like the idea of a global café with bread and coffee from around the world, you'll need a customer base to sell it to.
You could start talking to people and listening to their coffee concerns. Find out their ages and average incomes, see what they'd like, and ask what current issues they have in getting the coffee and the experience they want. Learn as much about them as possible—spending habits, needs, income levels, hobbies, or anything else that might provide insights into what might attract them.
Once you define your audience and what they need, you can figure out the message you're going to send.
### Goals
One of the best ways to accomplish something is to set a goal. However, you don't want to set one goal—you should set an end goal and several small attainable goals that contribute to the final goal.
Set up a timeline and dates when you'd like to complete the small goals. This way, you have small steps to guide you and a way to measure your progress and success.
## Marketing Channels
The internet, and the various technologies and platforms using it, gives businesses enormous marketing opportunities. Here are the top marketing channels used; it's likely you've heard of or been exposed to them.
### Search Engine Optimization
[Search engine optimization (SEO)](https://www.investopedia.com/seo-for-small-businesses-8584627) is top dog when it comes to marketing. It involves structuring your website and content so that it ranks as high as possible on Google search engine results pages.
Google uses a technique called web crawling that finds web pages to add to its index. When creating or adjusting your webpage or site for SEO, there are several factors to consider, such as following Google's best practices and spam policies.
### Content Marketing
Content marketing is a technique used to promote interest in your brand without explicitly promoting a product or service. You'll find examples of this on many companies' websites where a blog or article discusses a topic and how the company relates to it or works to help people do something. Generally, there is a call to action toward the end of the article, like "if you need help with XYZ, contact us today" or something similar.
Content marketing establishes expertise and gives potential customers a brand to remember.
### Email Marketing
It's been predicted that more than 4.85 billion people will have an email address by 2027. To gain access to this ocean of people, you'll need an email marketing application. You can find hundreds of email marketing applications that will allow you to create email marketing campaigns.
### Social Media Marketing
We've all seen advertisements on our social media pages that seem to target us by what we've been shopping for. It's no secret that using social media increases brand exposure and generates interest, so it is in a small business's best interest to, at a minimum, create a social media profile for itself and begin posting content.
### Influencer Marketing
Influencers are people with a large viewer and follower base on their platform of choice. For instance, someone who regularly posts content on Instagram could have millions of followers. This person then becomes an influence in the lives of their followers—giving businesses another exposure outlet.
Chances are you've seen someone talking about a product or service on their social media platform; they've been sponsored by a company to talk about that business's services. Influencers can help you generate tons of interest.
## What Is Small Business Marketing?
Small business marketing is creating a campaign for your small business to generate interest and a consumer base. It involves using traditional and modern marketing techniques to develop a marketing campaign.
## Which Marketing Is Best for Small Business?
The most effective marketing combines social media, networking, and traditional methods like flyers, posters, and cold calling. However, social media advertising reaches the most people the fastest.
## How Can I Promote My Small Business?
Social media is the quickest method for promoting your business. For the promotion itself, you can offer discounts for referrals, promotional pricing, participate in events in your community, or anything else you can think of. Technology has created many more channels you can use, but it's up to you to figure out how to exploit them.
## The Bottom Line
More than likely, you will find that the conversion rate on marketing is very low. Even the most [successful campaigns](https://www.investopedia.com/best-advertising-agencies-5093717) measure leads (and converted sales from those leads) in the 10% to 20% range. This helps to shatter any illusions about instant success, but it is also an opportunity for improvement. Consider that if you convert 0.5% of 1 million leads to sales, you've got 5,000 sales.
The more exposure you have, the more leads you can generate and convert. Ultimately, this turns into sales, profits, and growth.
| When you don’t have a big budget, marketing can be challenging, but there’s plenty a small business owner can do to attract and maintain a customer base. The rise in digital marketing has made it easier for small business owners to find a way to create a presence and attract buyers.
Advertising your business or product is about more than just having your company name and number on the side of your work vehicles. When you build a business, the first thing you want to secure is a customer base. Then, with a decent printer, a phone, and an internet-connected device, you can create a reasonably extensive advertising campaign without paying for digital space. Here are seven small business marketing techniques you can use to boost your business.
Key Takeaways
Small businesses don’t have the advertising budget of larger rivals, but there are inexpensive ways to build a customer base.Hitting the pavement with flyers distributed door to door (where allowed) and placing posters strategically can help get the word out.Follow up with customers after the first round of ads to reinforce the initial message, and don’t fear cold calls—they can be effective.Value additions, such as discounts or freebies for repeat customers, are a big boon once the business is up and running.Referrals—both from customer to customer and business to business—are also important.Prioritize digital marketing, including traditional websites and social media.
Before You Start Marketing
Before your business starts marketing a product, it helps to think about the type of person you want to reach with your promotional materials. Once you have your ideal customer, you’ll have a wide choice of marketing methods. Most of these are low-cost or no-cost tactics (sometimes called guerrilla marketing). You may use different ones at different stages of your business cycle—or you may utilize them all at once from your business’s inception.
1. Flyers
This is the carpet-bombing method of cheap advertising. You find an area where you would like to do business and distribute flyers to all the mailboxes within reach. Your flyer should be brief and to the point, highlighting the services you offer or products you sell and providing contact information. Offering a free appraisal, coupon, or discount can help attract your first customers.
Flyers shouldn't be mistaken for posters. Flyers are more informative, listing services or products provided, contact information, addresses, and specialties.
2. Posters
Most supermarkets, public spaces, and malls offer free bulletin board space for announcements and advertisements. This method is hit-or-miss, but you should try to make your poster visible and have removable tabs that the customers can present for a discount.
Make each location a different color to get an idea from the tabs where the most leads are generated. If one area is producing most of your leads, you can better target your campaign (flyers, ads in local media catering to those areas, etc.)
Posters should feature appealing images and catchy, memorable phrasing so viewers will recall it when they're wondering where to go for whatever it is they need that you're offering.
Traditional marketing methods like radio, print advertising, and billboards shouldn't be overlooked. The more channels you use, the more exposure you have.
3. Value Additions
Value additions (or value-ads) are powerful selling points for any product or service. On the surface, value additions are very similar to coupons and free appraisals, but they aim to increase customer satisfaction and widen the gap between you and the competition.
Common value additions typically include:
GuaranteesDiscounts for repeat customersPoint cardsReferral rewards
The deciding factor for a customer choosing between two similar shops might be a point card or preferred customer card. You don’t have to promise the moon to add value—instead, point out something that the customer may not realize about your product or service. It's important to highlight the value additions when creating your advertising materials.
4. Referral Networks
Referral networks can be invaluable to a business. Referrals can be encouraged through discounts or other rewards per referral. However, referral networks also include business-to-business referrals. If you have ever found yourself saying, “We don’t do/sell that here, but X down the street does,” you might want to introduce yourself to X's owner and talk to them about a referral quid pro quo.
When dealing with white-collar professions, this network is even stronger. For example, a lawyer might refer you to an accountant; in turn, the accountant might refer you to a financial planner, who could refer you to a broker. In each situation, the person stakes their professional reputation on the referral.
Regardless of your business type, make sure you create a referral network that has the same outlook and commitment to quality that you do.
If you are too busy to take a job, throw it to your competition. You will often find the favor returned, plus it can be bad for your reputation if a customer has to wait too long for a service.
5. Follow-ups
Advertising can help attract customers, but what you do after they come in can often be a much stronger marketing tool. Follow-up questionnaires are one of the best sources of feedback on how your ad campaign is going. Questions you could ask include:
Why did the customer choose your business?Where did they hear about it?Which other companies had they considered?What produced the most customer satisfaction?What was the least satisfying aspect?
Also, if your job involves going to the customer, make sure to slip a flyer into nearby mailboxes, as people who live in the same area often have similar needs and interests.
6. Cold Calls
Unpleasant? Important? Yes, and yes.
Cold calling—whether over the phone or door to door—is a baptism by fire for many small businesses. It forces you to sell yourself as well as your business.
Over the phone, you don’t have the benefit of a smile or face-to-face conversation—a phone is a license for some people to be as caustic and abrupt as possible (we are all guilty of this at one time or another). However, cold calling does make you think on your feet and encourages creativity and adaptability when facing potential customers. It also is a quick way to get your name out there and can drum up business.
Warm calls are an alternative to cold calls. You make calls to people you have already met or introduced yourself to through social events, email campaigns, or other activities.
7. Online Marketing
The importance of the internet in building a successful business cannot be overstated. The internet makes it possible to reach a massive audience from anywhere and generate interest in your business, potentially without spending a cent.
No company (even a local café) should be without, at the very least, a website with vital details such as location and hours. You need a point of access for everyone who searches the internet first when they want to make a buying decision.
You may also need:
A social media presence: Facebook, Instagram, TikTok, X platform (formerly Twitter), LinkedIn, Pinterest, etc.
A content management system (CMS): WordPress, Hubspot, Joomla, or Drupal
Search engine optimization (SEO) skills: Optimizing your content for searches, internal and external linking, title tags, alt tags, and headings
All this digital dexterity may feel intimidating at first. However, publishing technology has evolved to the point where an open-source content management system can meet all these needs.
The social media platforms that offer marketers the highest return on investment (ROI) are Facebook and Instagram, according to HubSpot.
How to Identify Your Value Proposition, Audience, and Goals
Before you begin printing and distributing your materials, it's best to figure out who your audience is and how to make your product or services valuable to them. Then, set realistic and attainable goals for your business and marketing endeavors.
Value Proposition
A value proposition is a reason a customer should buy a product or service from you instead of the competition. Consider what your target audience needs from you rather than what your product has. These needs are usually called benefits, whereas a product's physical properties or what it does are called features. You can still highlight features, but they should be backed up with a benefit that aligns with your audience's needs.
Critical to selling your product or services is identifying what you offer that others do not (or that they don't do very well). To establish your value proposition, compare what you're offering to the competition's product or service. Identify their features and benefits and compare them to yours, then make a note of the areas where you excel.
Your top value proposition should be unique to your offering and make it appealing to your audience. For example, imagine you have a coffee shop and bistro. It's a trendy convenience found in many towns and cities, so you'll have to analyze your competitors and use your imagination to discover the one thing that makes you stand out.
Say you've perfected bread recipes from around the world, like pão de queijo (a gluten-free Brazilian bread made from tapioca flour and cheese) or aish baladi (an Egyptian bread), and import coffee from the countries where those breads are baked and eaten. You may have a competitive advantage and an excellent value proposition—you offer products no other café in town does.
Audience
You'll need to identify who your audience is. If you didn't design your product or service for a specific demographic, you’ll need to do some research to determine which type of people to target. Audience is key to marketing. If you're targeting one demographic that doesn't have a large presence in your area, you may not be too successful unless you're an online retailer.
You'll need to identify who you want to sell to the most and ensure your product or service caters to them. For example, if you like the idea of a global café with bread and coffee from around the world, you'll need a customer base to sell it to.
You could start talking to people and listening to their coffee concerns. Find out their ages and average incomes, see what they'd like, and ask what current issues they have in getting the coffee and the experience they want. Learn as much about them as possible—spending habits, needs, income levels, hobbies, or anything else that might provide insights into what might attract them.
Once you define your audience and what they need, you can figure out the message you're going to send.
Goals
One of the best ways to accomplish something is to set a goal. However, you don't want to set one goal—you should set an end goal and several small attainable goals that contribute to the final goal.
Set up a timeline and dates when you'd like to complete the small goals. This way, you have small steps to guide you and a way to measure your progress and success.
Marketing Channels
The internet, and the various technologies and platforms using it, gives businesses enormous marketing opportunities. Here are the top marketing channels used; it's likely you've heard of or been exposed to them.
Search Engine Optimization
Search engine optimization (SEO) is top dog when it comes to marketing. It involves structuring your website and content so that it ranks as high as possible on Google search engine results pages.
Google uses a technique called web crawling that finds web pages to add to its index. When creating or adjusting your webpage or site for SEO, there are several factors to consider, such as following Google's best practices and spam policies.
Content Marketing
Content marketing is a technique used to promote interest in your brand without explicitly promoting a product or service. You'll find examples of this on many companies' websites where a blog or article discusses a topic and how the company relates to it or works to help people do something. Generally, there is a call to action toward the end of the article, like "if you need help with XYZ, contact us today" or something similar.
Content marketing establishes expertise and gives potential customers a brand to remember.
Email Marketing
It's been predicted that more than 4.85 billion people will have an email address by 2027. To gain access to this ocean of people, you'll need an email marketing application. You can find hundreds of email marketing applications that will allow you to create email marketing campaigns.
Social Media Marketing
We've all seen advertisements on our social media pages that seem to target us by what we've been shopping for. It's no secret that using social media increases brand exposure and generates interest, so it is in a small business's best interest to, at a minimum, create a social media profile for itself and begin posting content.
Influencer Marketing
Influencers are people with a large viewer and follower base on their platform of choice. For instance, someone who regularly posts content on Instagram could have millions of followers. This person then becomes an influence in the lives of their followers—giving businesses another exposure outlet.
Chances are you've seen someone talking about a product or service on their social media platform; they've been sponsored by a company to talk about that business's services. Influencers can help you generate tons of interest.
What Is Small Business Marketing?
Small business marketing is creating a campaign for your small business to generate interest and a consumer base. It involves using traditional and modern marketing techniques to develop a marketing campaign.
Which Marketing Is Best for Small Business?
The most effective marketing combines social media, networking, and traditional methods like flyers, posters, and cold calling. However, social media advertising reaches the most people the fastest.
How Can I Promote My Small Business?
Social media is the quickest method for promoting your business. For the promotion itself, you can offer discounts for referrals, promotional pricing, participate in events in your community, or anything else you can think of. Technology has created many more channels you can use, but it's up to you to figure out how to exploit them.
The Bottom Line
More than likely, you will find that the conversion rate on marketing is very low. Even the most successful campaigns measure leads (and converted sales from those leads) in the 10% to 20% range. This helps to shatter any illusions about instant success, but it is also an opportunity for improvement. Consider that if you convert 0.5% of 1 million leads to sales, you've got 5,000 sales.
The more exposure you have, the more leads you can generate and convert. Ultimately, this turns into sales, profits, and growth.
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