By Stephen Sheinbaum
Small businesses have finite, and often small, budgets for their operations. As a result, they have to do a much better job of anticipating where spending will be needed in any given year so they can properly reserve and allocate funds. Lucky for them, two of the three biggest trends in small business spending in 2016 won’t be budget-busters, and the other one could make the difference between a year in the black and a year in the red.
Starting with the latter; in the closing days of 2015, Congress passed a spending bill that makes the Section 179 deduction permanent. This part of the federal tax code was written to allow small businesses to deduct the equipment they buy for their businesses from their taxes. It was a great idea, because it encourages small businesses to reinvest in their operations and it can significantly lower a business’ taxable profit. The problem is Section 179 has been the perennial political football. The overall deduction was as much as $500,000 at the beginning of this decade–and as little as $25,000. Section 179 got something of a public relations black eye in 2004 when it was labeled the “SUV Loophole” or “Hummer Deduction” because small business owners were allowed to use it on large personal vehicles as well as commercial trucks.
Now, small businesses will be able to write off up to $500,000 in qualifying equipment every year, permanently. It is still possible to use it to buy a vehicle for your business, but the IRS has not yet issued guidance on how big a vehicle deduction you’ll be able to claim. Regardless, you can make some concrete plans for acquiring a wide range of goods, and match that spending to the ebb and flow of your income this year. Small business owners should also know there are now more ways for them to finance equipment, whether the items they need are new or used, and whether the deal is a lease or an outright purchase.
The second trend will be more spending on mobile-friendly websites. It has been frustrating to many observers how small business owners have been so slow to create websites for their businesses. The U.S. Small Business Administration (SBA) estimated last year 50 % of all small businesses still didn’t have websites. In trying to operate without a website, these businesses are not taking the basic steps they need to take to reach new prospects. This year, however, small businesses can forget about optimizing websites for a desktop or laptop computer and vault right into a mobile-optimized site, designed specifically for smartphones. It is critical to be mobile-friendly: Last April, Google made changes to its search engine algorithm to favor sites which work well on mobile, and the majority of customers in many sectors search and shop from their smartphones and tablets. There are hundreds of free and low-cost designs out there for mobile-friendly websites which are also easy to create, so small business owners can get up and running online without delay.
Finally, I expect there will be an expanded use of technology in business financing in 2016. Yes, I’ve been in the business of using technology to expand the funding of small businesses since 2005, so I am familiar with the landscape. With their heavy use of sophisticated technology, alternative finance companies like mine have made it faster and easier for small businesses to get the capital they need. But 2016 will be a breakout year for this type of funding because there will be more partnerships between FinTech companies and traditional banks. Banks will get the technology they need to make lending to small businesses cost-effective without building their own platforms from scratch or trying to patch new technology into their legacy systems. White-label solutions from FinTech companies mean traditional small business partners, like accountants and trade groups, can now become gateways to funding as well. And not just one kind of funding: Small business owners can explore solutions from lines of credit to SBA-backed loans, and pick the one which truly meets their needs.
That may sound like a lot for one small business owner to handle. But every year is as full of opportunities as it is of tasks and 2016 will be no different. Get the items on your “to-do” list done and there will be ample possibilities for growth.
Stephen Sheinbaum is the founder of Bizfi, the premier FinTech company combining aggregation, funding and a participation marketplace on a single platform for small businesses. Founded in 2005, Bizfi and its family of companies have provided in excess of $1.4 billion in financing to more than 27,000 small businesses in a wide variety of industries across the United States. @.