Tips for Small Business During a

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					         St. Louis Women’s Journal                                                                                               August / September 2008

          Tips for Small Business During
                 an Economic Downturn
                                            - Beginning in 2008, many small busi-         Depending on the size of your pur-         making now a much better time to
                                          nesses can now instantly depreciate           chases, it could mean many thou-             survey the market landscape for
                                          most or all of the cost of equipment, soft-   sands of dollars in tax savings. Add in      opportunities. If the market is tight,
                                          ware and other new and used assets the        today's attractive interest rates, and       your suppliers and vendors, for exam-
                                          very first year they are placed in service.   your major purchases might suddenly          ple, may reward large order commit-
                                          Most depreciable business assets (other       be a lot more affordable than they           ments with better pricing and terms.
                                          than real estate) qualify for this expand-    would have been a year ago - or a            Don't be afraid to negotiate for what
                                          ed Section 179 deduction.                     year from now.                               you want, and take advantage of sup-
                                                                                                                                     plier discounts for prompt payment.
                                             - Small businesses will also be              Is now the time to get out?
                                          allowed to depreciate 50% of the cost of                                                     Now may also be a good time to
                                          any new asset purchased and put into             During periods of economic insta-         look at suppliers, vendors and com-
                                          use during the 2008 calendar year. This       bility, some owners begin to think of        petitors as potential joint venture part-
 By: Jennifer Longnecker                  First-Year Bonus Depreciation provi-          selling their business. But is a down        ners or acquisition targets.
    Small Business Banking                sion covers investments in new vehi-          market the best time to sell a busi-
                                          cles, equipment and improvements to           ness? Often, it isn't - especially if your     What if cash flow is a problem?
   Manager, Commerce Bank
                                          leased property, among other things.          business volume is down and you
                                          For some major purchases, the placed-         want to get the best price.                     There are proactive steps owners
  If you're like many small business      in-service deadline is extended to                                                         can take to stave off trouble with sup-
owners, you may be experiencing           December 31, 2009.                              Others are in the same boat as you,        pliers, landlords and other creditors.
economic volatility for the first time.
And that can be daunting. Your                                                                                                          For example, the best time to talk to
instincts may be telling you to pull                                                                                                 your creditors about your bills is
back. To reduce inventories and                                                                                                      BEFORE they're due. Your chances
staff. Or even to get out while the                                                                                                  of persuading creditors to extend your
getting is good.                                                                                                                     payments are greater if you speak to
                                                                                                                                     them before they start sending collec-
   But before you do anything drastic,                                                                                               tion memos. Keep in mind, your ven-
there's something you should know:                                                                                                   dors may be experiencing financial
the economy will, eventually, get bet-                                                                                               difficulties of their own. In that case,
ter. In the meantime, there are many                                                                                                 your payment history will either hurt
things small business owners can do                                                                                                  or help you during these negotiations.
to help their companies navigate
choppy economic waters, while posi-                                                                                                     Similarly, you will also need to keep
tioning themselves for growth when                                                                                                   a closer eye on your customers, even
conditions improve.                                                                                                                  long-time ones. Checking in to see
                                                                                                                                     how they're faring during a downturn
  Here are just a few of them:                                                                                                       both helps avoid surprises and can
                                                                                                                                     lead to new opportunities. It's particu-
  To spend or not to spend?                                                                                                          larly critical to follow up with cus-
                                                                                                                                     tomers who are behind on their pay-
  Conventional wisdom tells small                                                                                                    ments, being willing to negotiate
businesses to cut back on spend-                                                                                                     where appropriate. Within months, a
ing during downturns. In some                                                                                                        struggling customer may again
cases, that is sound advice.                                                                                                         become strong - and they'll likely
                                                                                                                                     remember those who were willing to
   But, thanks to some very attrac-                                                                                                  work with them during the downturn.
tive tax benefits offered by the gov-                                                                                                If you can accommodate such situa-
ernment's economic stimulus pack-                                                                                                    tions without damaging your compa-
age, this might be the very best                                                                                                     ny's financial position, everybody
time for some companies to make                                                                                                      wins.
capital investments, substantially
reducing their business' 2008 fed-                                                                                                     Above all else, the important thing is
eral taxable income*.                                                                                                                to keep your eyes and mind open to
                                                                                                                                     the opportunities that come out of
  The federal government is pro-                                                                                                     volatility. Every cloud has a silver lin-
viding additional tax benefits for                                                                                                   ing. Sometimes you just have to
equipment and other items pur-                                                                                                       search for it a little harder than others.
chased this calendar year. More
specifically:                                                                                                                          * Consult your tax advisor.

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