James Salvato is the principal at J.R. Salvato & Associates. The business handles payroll and payroll taxes, and bookkeeping and income taxes for small business owners, entrepreneurs and the self-employed. It also offers management consulting for the same group of people.

Salvato holds an undergraduate in business administration with a concentration in small business management and entrepreneurship. He has a Master of Business Administration in accounting and is currently studying for the CPA exam.


jamessalvato3 Accounting Principal Offers Tips For One Of The Biggest Business Challenges: Accessing Capital

James Salvato
(Photo courtesy of James Salvato)


What has been the biggest challenge you have had in your business?
The dirty little secret to small business equity is access to capital. For a small business owner, capital could either be money or time. In the beginning, I had plenty of time on my hands, but I didn’t have a lot of money. Coming out of the Great Recession, banks won’t even look at you unless you have about a million dollars’ worth of hard assets locked up somewhere. Today it is a little better, but banks still look at personal credit for small business lending purposes. Existing creditors also want random income checks by looking at your last year’s tax return just to maintain credit with that particular lender. On top of that, Illinois is one of the most expensive states in the country to start up and maintain an LLC. The cost runs about $650 and is $200 a year after that.

What have you implemented to overcome that challenge?
There wasn’t much I can control in regards to how lenders viewed me as a small business owner. The best I could do was to separate myself from the business as much as possible in a cost effective manner. I started by getting an EIN number and started using that when identifying myself to the IRS, the Illinois Department of Revenue and when I issued W-9’s to clients. The next thing I did was to get a free D-U-N-S number and registered my company with Duns and Bradstreet, the business equivalent to any of the three personal credit reporting agencies. I am still weighing the option to form an LLC in the state of IL or if I should just go the S-Corp route. The cost for starting up an S-Corp in IL is $281 initially and $100 a year afterwards, give or take. However, I would need to maintain payroll on myself, or I can get into serious trouble with the IRS.

What are the results after you implemented your solution?
The results are too early to say. There is current legislation in the state of IL to reduce the filing fee of an LLC down from $650 to $39, which is more in line with other neighboring states. Lenders are still hesitant to part with their money to small business owners, which prohibits them from expanding or capitalizing on available opportunities. We will just have to see how things go after the 2015 tax season ends in April of this year.

This article was written by Michelle Guilbeau for Small Business Pulse


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