Guidant Financial Group Blog

So, the time has come to tell what Americans have done with their extra cash sent with love from our government. Unfortunately, while the checks were sent with good intentions – to stimulate spending in a slow economy – Americans are using the money to … well, uh, we don’t know.

The New York Times reported today that consumer spending hardly increased in April, which tends to show that American’s aren’t spending the money (see Consumer Spending and Personal Income Slow).

As reported in our 4.28.08 post, some people planned on putting their newfound funds into a retirement account – and perhaps that is what everyone is doing! Or, maybe they’re hiding it under their mattresses to shield the dollars from turmoil in the stock market, or to save it for when gasoline prices hit $14 a gallon.

Either way, it is becoming apparent that the economic stimulus checks aren’t “stimulating” anything, aside from our curiosity as to where all the money is going.

If you haven’t decided what to do with your funds yet, consider taking that cash out from under your bedding and putting it into a self-directed IRA. Because of all the options a truly self-directed IRA can give, you can rest assured that the money will be going toward an investment you choose and you manage!

As many of our clients and prospective clients are starting new businesses and are trying to secure traditional financing in addition to the funding available through Guidant’s 401(k) small business financing plan (yes, you can do that!), we often hear about the difficulties of developing a business plan.

Whether you are planning to apply for additional financing or not, having a business plan is never a bad idea – it helps you to understand your market and to have a clear outline of where you want your business to go. It’s something you can refer back to regularly to make sure you are staying on track once you get caught up in the daily processes of owning a business.

To put together a stellar business plan, you must know the key things that financiers are looking for, and the key information you will need to develop your business from the get-go.

Forbes.com came out with an article earlier this month listing the Ten Things Every Business Plan Should Have. Although this article is meant to be a very basic guideline, it provides some particularly helpful information.

Some of the things Forbes recommends you include in your plan are:
• Effective Summary
• Market Opportunity
• Industry Analysis
• Your Team

The article covers additional points (well, 10 in all) that are definitely worth keeping in mind as you pull your business plan together and as you enter the sometimes labyrinthine world of business ownership!

Sorry. It was a mean joke.

We’re talking about only housing prices, of course.

Home prices have fallen 14.1% in the first quarter compared to prices in the same quarter a year ago (see Home Prices Tumble 14.1% in First Quarter). This is the lowest level Standard & Poor's/Case-Shiller’s national home price index has been since the index was started in 1988.

Of the 20 metropolitan cities surveyed, only one showed an actual increase: Charlotte, N.C., with a 1% increase over last year.

Although many industry experts predict that home prices have yet to hit bottom, now may be the time to buy for self-directed IRA holders that are looking for long-term investments for their IRAs. Even though prices may continue to decline for a year or more, if you have the ability to hold onto the investment long enough for prices to begin climbing again, this may be a viable option for you.

Because most employers do not allow their employees to rollover their 401(k) Plan before terminating employment, many of our 401(k) small business financing clients have already terminated employment well before they started their own business. However, for the few that do decide to keep working for at least awhile after their business starts up, quitting their 9-5 job is the final step between being an employee and being the business owner they have always wanted to be.

An article on Entrepreneur.com last week chronicled three entrepreneurs’ transition from employee to employer and the difficulties that accompanied it (see Leaving the Rat Race).

The common thread among the three stories is apparent: Although it can be a scary prospect to leave a steady paycheck, all three entrepreneurs were glad they made the switch.

We love hearing from our clients about their transition to entrepreneurship. Even though this can be an overwhelming time, you’d be hard pressed to find a Guidant client who wouldn’t do it over again in a heartbeat!

Like the song that doesn’t end, the housing crisis seems to be plugging along … and along … and along. And, in all honesty, it is getting to be just as annoying as that song.

According to the Wall Street Journal, new statistics show that existing home sales have decreased for the second month in a row, while inventories continue to increase and prices continue to drop (see Home Resales, Prices Decline, While Inventories Increase).

The outlook for the economy right now isn’t good, but self-directed IRA holders may see this as a moment of opportunity. Median home prices have dropped 8% since April 2007 and, with tougher lending standards, having ready cash in a self-directed IRA can give many investors a decided advantage.

So, just like the song, there may be something good about dropping home sales. Just as those Lamb Chop puppets are annoyingly cute, the housing market – though often annoying -- can be still be an attractive investment option.

Although high gas prices are keeping many consumers at home and away from shopping centers and other stores, online sales appear to continue growing, despite economic uncertainties (see Small Firms Upbeat about Online Sales).

This is great news, we’re sure, for all of our prospective and existing 401(k) small business financing clients. Starting a new business is stressful enough without having to worry about the changing shopping and spending habits of consumers.

Fortunately, almost any business can start soliciting or providing commerce online. Setting up a website has never been easier and, with readily available online payment methods like PayPal, new business owners may find Web sales both more profitable and easier going than traditional store-front transactions.

A Senate Judiciary Committee got together today to grill big oil executives on their big profits, rising gas prices, and a possible correlation between the two (see Don’t Blame Us for Oil Prices – Oil Execs).

It seems pretty obvious that something is going on – just what, though, we aren’t sure. Oil execs say that circumstances outside their control are what are driving oil prices to all-time highs. However, when industry giants like Exxon and Shell are making record profits, it isn’t surprising that many people and government officials are skeptical.

Unfortunately, all this turmoil (get it? turm-oil? Okay, not funny) is not only causing gas prices to skyrocket, it is sending the stock market into a frenzy – up, down and all around again.

It’s times like these that many a self-directed IRA holder is glad they aren’t a slave to the market anymore!

The Senate has reached an agreement on legislation for a plan to keep homeowners in their homes (see Senate Leaders Agree on Housing Aid). The new bill would create an affordable housing fund that, in its first year, would provide about $500 million to aid the foreclosure relief effort.

It appears that this money would be used mostly to help those who need to refinance their homes to lower-rate mortgages.

There has been a lot of controversy surrounding whether or not the government should step in to aid those who have gotten into loans they shouldn’t have in the first place. It is apparent, however, that record numbers of people are losing their homes to foreclosure and that any help from the government or private institutions is greatly needed.

We always love hearing about our clients’ successes, and we’re even more excited when the success is local so we can witness it firsthand. Guidant client Kevin York appeared on Seattle’s King 5 news today and talked about his new Pizza Fusion franchise (see Eco Friendly Pizza Chain Coming to Seattle).

York used Guidant’s 401(k) small business financing solution to help purchase the new green pizza franchise. We are very excited for Kevin and even more excited that we got to witness his TV appearance in person (we had several employees crowded around the TV in the break room when the story ran).

Congrats, Kevin, and we look forward to trying some of your pizza when you open to the public in July!

P.S. We love to hear our clients’ stories – feel free to share with us how your business or investments are coming along! Email us at pr@guidantfinancial.com.

They say a man’s (or woman’s) home is his castle – but his Monet? Or how about his Van Gogh?

A new article out in The New York Times today examines the burgeoning trend of selling real estate at art auctions (see Can Houses Be Sold as Art?).

This week a modernist home in Palm Springs sold for $15 million at a Christie’s auction. This is a record for a home sold at an art-house auction. Apparently, investors and architecture enthusiasts have been long curious as to whether architecturally significant homes could be sold at auction and yield a competitive price. Apparently they can.

But for self-directed IRA investors, this opens up another discussion altogether. Considering the IRS’s limitation on investments in collectibles, if homes are being sold like pieces of art – do some then qualify as a prohibited transaction?

Although we have had several clients roll more than $1 million in retirement funds into a self-directed IRA, we are pretty sure that purchasing mega-million-dollar homes is not something our clients are considering on a regular basis (yet).

Should this trend of selling homes as art continue, we may see a more solid opinion from the IRS handed down soon.

Although social networking sites like myspace.com and facebook.com tend to conjure images of teenyboppers and beer-guzzling frat boys, the face of social networking may be changing – to yours.

A new article in National Real Estate Investor (see Real Estate Deal-Makers Bank on Networking Sites), indicates that real estate investors, agents and professionals of all kinds are turning to social networking sites to “market themselves, cultivate industry contacts and, in some instances, carry out deals.”

The hook-up between real estate pros and social networking sites is not all that surprising, considering real estate and networking have always been intrinsically linked. And with the digital age now here (and here to stay), it was only a matter of time before the pros discovered the benefits of networking online.

Don’t worry, though. You don’t necessarily have to sign up for a MySpace account to do business online. Several more adult- and business-focused sites have popped up, helping to cut through the clutter of sophomoric antics caught on tape and the latest hip-hop hit from who knows who.

LinkedIn is one site that has had some longstanding success in connecting professionals, but some sites get even more specific. Mydealbook.com is dedicated to the real estate sector, whereas RoundOne.com is a social network for entrepreneurs.

One new site, www.nuwireinvestor.com, even has an opportunities listing where you can browse for alternative investment opportunities online.

Believe it or not, housing starts actually increased in April. Not only did they increase, but they increased by 8.2% (see Housing Starts Post Surprise Rise). This is the largest increase since January 2004. Yay!

Financial gurus are suggesting that we not get too excited about this, though, because the jump is largely due to increased multi-family starts. According to Ian Shepherdson of High Frequency Economics, these are purportedly “hugely volatile, and essentially trendless.” Additionally, this increase still leaves the year-over-year trend 30.6% below what it was in April last year.

So what does this mean for the real estate market as a whole? Have we bottomed out and we can now expect things to start recovering?

According to most analysts, no. But who knows? They’ve been wrong before!

Might the Microsoft-Yahoo deal just be on pause? New reports from Yahoo! Finance (see Icahn’s Yahoo Fight Puts Microsoft Back in the Driver’s Seat) and other media outlets seem to show that pressure from shareholders and activist investors may have the search engine rethinking their dismissal of Microsoft’s offer.

Again, this could mean another bumpy ride in the stock market due to speculation – we’ll just have to wait and see what happens!

An article came out last week on BusinessWeek.com about a unique financing option for established business owners: Let your customers do the financing!

Aside from the fact that they are financing your expansion whether directly or not, this option does have several attractions.

First and foremost, as the article points out, having your customers become investors in your venture only helps to solidify their loyalty. Secondly, one can only imagine the word-of-mouth advertising that you can generate for free: if your favorite customer has invested $5,000 in your new biz, you can guarantee that he/she is going to have every family member, friend and acquaintance doing business with you.

The one major hurdle however, is: How do you get them to finance your venture in the first place? Obviously, if you don’t have loyal customers to start, you can’t just ask any Joe Schmoe who comes into your facility for a few grand.

Additionally, you will want to make sure that all your investors fully understand what they are getting themselves into. Just because a woman is a proponent for your one-of-a-kind home-made cheeses doesn’t mean she’s extraordinarily adept at financial matters.

All things considered, if you have the loyal customer base needed to make this kind of financing viable, it’s a very interesting alternative to consider.

We just released a news report on the backgrounds and business preferences of new business owners. In a survey of clients using Guidant’s 401(k) small business financing solution, we discovered that 60 percent of new business owners who financed their purchase with retirement funds come from management or executive backgrounds. The same survey also indicated that the most popular businesses being launched are within the business services and consulting industry (13%). This was followed by retail (12.7%) and home services (11.7%).

These statistics shouldn’t be too surprising, since it’s usually those with the most drive and ambition who reach management-level positions. Anyone who has ever gone into business for themselves realizes that those are the very skills necessary behind launching a successful enterprise. And perhaps it’s these same personality traits that are behind managers and executives being more willing to embrace alternative financing means – such as using IRA or 401(k) funds to purchase a business.

The fact that these folks selected “business services and consulting industry” as the most preferred new-business category is a natural, too. Managers and executives are much more likely to understand how to operate a business. And we suspect they are also more likely to see their years of experience as a “product” they could market as a self-employed consultant.

Read the full relelase.

How do you go about taking your money in a 401(k) or SEP IRA out of the stock market and investing it in real estate? Can you help direct me in this matter?

-- Peggy (Tualatin, Ore.)

It is really quite easy: open an account with us! As a part of our services, we will help to facilitate the rollover of your existing accounts to your new self-directed IRA. In fact, we are the only company that has a rollover specialist in-house to help you through this process.

Typically, this process will include issuing an order to liquidate all your holdings (i.e., stocks) and then a direct transfer of the funds from their existing account into your new self-directed IRA account.

One thing to note, though, is that if your 401(k) or any other employer-sponsored plan is with your current employer, you most likely will not be able to move it out of its existing plan until you terminate employment.

Do you have an Ask the Expert question? Submit your questions to asktheexpert@guidantfinancial.com.

So, apparently consumer prices rose only slightly in April … when you take out food and gas. According to an AP article in The New York Times (see Price Data Suggests Slowdown is Cooling Inflation), the consumer price index rose a modest 0.2% last month.

Food prices, however, have experienced the largest increase in 18 years. The 0.2% increase is slightly lower than the 0.3% increase in March; however, we expect consumers haven’t noticed much of a change.

As the article points out, wages have not kept up with the increase in prices. Average weekly earnings for non-supervisory positions actually dropped 1 percent in April, compared to the same month last year.

We don’t know about you, but with gas prices tickling $4/gallon for regular, and food prices gaining almost a full percent since last month, we are starting to feel the crunch!

The SBA released data today showing that their flagship 7(a) loans have dropped 18% since this same time last year (see SBA Loans Plummet). Grreeeat. (And I don’t mean that like Tony the Tiger means it.)

The most interesting part of this whole scenario is the tug-of-war surrounding where to place the blame for this plummet in offerings. The small business administration seems to point the finger at the slowing economy, while others seem to think that banking institutions are leaving the loan program altogether.

Whatever the reason, the bottom line is the SBA isn’t lending money like it used to.

Could it really be that demand has lowered and less people are looking to open businesses right now? Or, has the mortgage crisis and subsequent credit crunch left bankers terrified of getting in over their heads?

What do you think?

During these uncertain times, we are definitely sensing some reluctance on the part of many of our clients to move forward with their new business venture. For first-time entrepreneurs, starting a small business has always been a somewhat frightening experience – but add in a possible recession and rising costs, and the whole venture can seem downright terrifying!

We are right there with you. We know that these times are tough and that, regardless of the current economy, deciding to start your new business is one of the most important decisions you will ever make.

Fortunately, there may be some ways to lessen the uncertainty associated with starting a business during a possible recession.

Brad Sugars, founder of ActionCOACH -- a business consulting franchise that has referred several prospective franchisees our way -- has a new article out today in Entrepreneur (see 6 Strategies to Recession Proof Your Startup) that outlines several tactics for recession proofing your new business.

Sugars points out that small businesses are more flexible and can quickly adapt to a changing economy by cutting costs or changing strategies.

Some of these strategies include:

• Take advantage of layoffs by hiring experienced workers who would not normally be available
• Use Gorilla Marketing
• Focus on selling necessity-based products and services
• Minimize your full-time staff
• Run a tight ship

See the article for even more tips!

In our area, most 5th grade classrooms take part in hatching baby chicks. For whatever reason, real mother hens are not used to keep the eggs warm, so electric incubators are brought in to heat the calcium-encased bundles of joy until they emerge.

Who would have known that, much in the same way these baby chicks can be artificially hatched, so can your new business!

Many cities and states have non-profit “small business incubators” that serve as commercial space for new businesses and offer on-site mentoring and shared resources, such as a receptionist, copy machine and phone system.

The Tennessean announced today that Gellatin, Tenn., will be building a business incubator as a part of a development project on the city’s east-side (see Gallatin Business Incubator Would Support Entrepreneurs).

As the article points out, incubators provide resources to help small businesses grow as well as cut costs. On-site mentors and business-development programs help to ease entrepreneurs into their new venture.

Most incubators have a set timeframe in which a new business can lease the space and take advantage of its offerings. Once a business is ready to strike out on its own, a new business is selected via application and/or interview to take its place.

We’ve found that the best way to find a business incubator in your area is to perform a Google search, or to contact your local chapter of the National Business Incubator Association (www.nbia.org).

Yahoo! Finance posted an article today from U.S. News that listed five retirement mistakes to avoid. Mistake number four recommends that you don’t cash out your 401(k) Plan when you switch jobs, but, instead, you transfer the funds to a self-directed IRA. If you simply cash out your 401(k), you are losing all the tax-deferred or tax-exempt (in the case of a Roth) benefits, in addition to paying any applicable penalties. Additionally, the article points out that rolling your funds over to a self-directed IRA will give you more investment options than other accounts.

Other mistakes to avoid?

• Using your IRA as a bank account
• Not making contributions
• Moving money/stocks in a down market
• Not having a post-retirement plan

Not since the “miner forty-niner” has there been so much hooplah about gold. MarketWatch reported today that gold have risen yet again (see Gold Futures Rise, Underpinned by Soft Dollar). Although the rates today are much lower than the highs we saw not too long ago, the comments on the article show that gold traders expect the mineral to trade in the $1000s again.

Time will tell. . . .

If gold sounds like your kind of investment, rest assured that our self-directed IRA does allow investments in futures, and some kinds of bullion and gold coins. Have at it!

According to a report in today’s BusinessWeek (see Commercial Bankruptcies Rising), more businesses filed for bankruptcy last month (April) than have been filed monthly since 2005, when new bankruptcy laws were put into effect.

Yikes!

These bankruptcies are, of course, stemming from the crisis in the mortgage industry. One thing that the article does note, however, is that these bankruptcies are disproportionately attributed to businesses in the ailing housing industry.

The worst news, however, could be for prospective new business owners. The article cites a Federal Reserve survey that concluded that more than half of U.S. banks have raised standards for small business loans.

Just as a misbehaving older sibling can ruin Saturday night privileges for younger brothers and sisters, it would seem that one rogue group of lenders can ruin future entrepreneurs’ chances at a good loan.

Fortunately, there are types of small business financing (notably Guidant’s 401(k) small business financing solution) that are not subject to tightening lending standards. With Guidant’s 401(k) small business financing solution there is even NO qualification process – if you have the money in your retirement account, you can use it!

Can you please tell me how long it would take to use my 401(k) to purchase a business? I am not working right now, so I am not currently contributing to this 401(k).

-- Ramesh (Dearborn, Mich.)

It takes an average of 18 days for Guidant to structure the necessary elements for your business (i.e., the C Corporation, 401(k) Plan and necessary documents). Once this process is complete, you will be able to go into a bank of your choice and open up your business and 401(k) checking accounts. Depending on how long you take to do this, you could have your corporation funded and ready to purchase your business within a month.

That being said, some 401(k) administrators (the company that currently holds your 401(k)) have strict regulations regarding what days you can and cannot roll out your retirement money. For example, some administrators only allow rollovers to happen the first day of each month. To expedite the process, we recommend that you contact your plan administrator as soon as possible to find out when and how they transfer funds.

We, of course, have a rollover specialist in-house to facilitate this transaction; however, it never hurts to have all the information ahead of time!

Do you have an Ask the Expert question? Submit your questions to asktheexpert@guidantfinancial.com.

Queue the bugle … commence taps. Microsoft has let Yahoo go. As we are headquartered in Seattle, you can only imagine the amount of buzz that has surrounded this potential takeover. (If you can believe it, we are probably hearing more about it than you!)

It would have been interesting to see how the face of the Internet would have changed had the deal gone through. But it looks like we’ll never know.

After our moment of silence for the death of the deal, we now have to hold onto our hats for the wild ride that’s coming … in the stock market that is (see Yahoo Shares Tumble after Weekend Drama). This kind of speculative market is what drives many an investor to consider a self-directed IRA.

Will the deal go through? Won’t it? Should I invest? Should I not?

You are always going to encounter those questions no matter what you invest in. But when you have options outside the securities market available to you, you can breathe a bit easier knowing that you have at least some of your money in investments that are decidedly less volatile.

It seems like every day oil prices are hitting an all-time high. These skyrocketing prices are now taking their toll on related markets (see Airline Stocks Get Hit by Rising Oil Prices). Hybrid car sales are up, and airline stocks are down.

One thing that these high prices are indicating, though, is the imminent arrival of inflation. High gas prices mean high food prices. After that, everything else may follow.

Inflation in the U.S. may mean more investment abroad. But as my post on April 29 indicated, the U.S. is not the only country that can look forward to inflated prices.

Fortunately, self-directed IRA holders have a lot of investment options, so they can jump into more potentially secure and lucrative areas as the markets fluctuate. It’s hard to know what investing trends will follow in the wake of inflation. Perhaps we will see more investments in green energy or local organic farms. Or maybe support services for an aging population.

So what investment trends do you expect to see in the future?

If you search the Internet for information on self-directed IRAs and small business financing, you’ll see Guidant Financial Group just about everywhere. We’re making every effort to take full advantage of the Internet, search engine optimization, advanced website capabilities and other progressive technologies.

I am extremely proud of how technologically advanced our company is … especially given we are in an industry where traditionally little technology is used. Now Guidant can say that we are officially on the information s-u-p-e-r-highway. Around 2 a.m. PDT on May 3, our network transitioned to a fiber optic connection (or “fiber optic network infrastructure” as our IT team puts it).

This new connection not only increased our bandwidth and overall speed, but it has simplified our network topology. We have created a more seamless, streamlined path to all the information sources that our staff, clients and partners access during the course of the day. In summary, we can do the same things we could before, but we will be doing them much faster.

In other words, even faster information for, and communications with, our clients and affiliates. We are extremely excited about what opportunities this upgrade will provide for Guidant and all those who interact with our systems.

Can the entrepreneurial spirit be taught? Well, maybe not, but the skills needed to start and run a successful business might!

The New York Times today featured several colleges that are now offering courses and programs for entrepreneurs (see A Classroom Path to Entrepreneurship).

According to the article, more than 2,000 colleges and universities offer classes or courses of study for entrepreneurship. The Times quotes Tom Tremblay, president and chief executive of the Guardair Corporation, a small manufacturer in Chicopee, Mass., who says, “What you have today are people who have to think about their careers in a way you didn’t before. So it’s essential that people learn how to manage and run and participate in small companies. Small business can be taught, and it needs to be taught.”

What do you think? Can entrepreneurship be taught?

If you didn’t know already, starting a business is hard. With many entrepreneurs making the transition from employee to business owner, the shift can be even more difficult. According to the Associated Press, many entrepreneurs are unprepared for the trials that they will face as a business owner (see Transition to Business Owner can be Hard).

First of all, many are unprepared for determining their own hours. Michigan resident Georg Stahl, who started a construction and contracting business after losing his job, told the AP, "A lot of people think that if you own your own business, you can set your own hours. I think that's the biggest falsehood you run into."

Additionally, the stress of waiting for the business to get off the ground can be more than some are able to handle. Furthermore, when the business does take off, if the success is unexpected and inadequately planned for, it can actually be a detriment.

The most common challenge, however, is cash flow. Waiting to get paid on jobs can be frustrating and, sometimes, damaging.

Fortunately, for those who use the 401(k) small business financing solution, cash flow may be less of a problem. Business owners may still have to wait to get paid for services rendered; however, by minimizing or eliminating business-purchasing debt, the time between payments may be less detrimental because there are little or no loan payments to be made.

Could Brazil be the next investment hot spot? According to the Los Angeles Times, the S&P just gave Brazil a credit rating boost (see S&P Gives Brazil Credit Rating Boost). Brazil’s economy is growing faster than it has in almost five years, and exports from the country have tripled since 2003.

At Guidant we have received a lot of calls lately about Costa Rican real estate and investment opportunities; perhaps Brazil is the next Costa Rica!

I understand that the best way to invest in tax liens with a self-directed IRA is with a self-directed IRA/LLC, so I will be able to write checks immediately at auction. The question I have is related to the tax filing for the LLC: What tax form will I need to file each year with the IRS?

-- Robert (Lexington, Ky.)

This is an excellent question; one that we receive quite often.

As a part of our service, we will be making the necessary filing to classify your LLC as a “disregarded entity.” This means that the IRS recognizes your LLC as an entity that does not generate taxable income.

How is this so? As an LLC is a “pass-through entity,” it is taxed based on its members’ (a.k.a. shareholders) tax bracket. As the only member of the LLC is your IRA, which is tax-deferred or tax-exempt, the LLC does not normally generate any taxable income. Therefore, it does not need to make a filing.

That being said, there are some rare instances where your IRA/LLC can generate taxable income – namely Unrelated Business Taxable Income (UBTI) or Unrelated Debt-Financed Income (UDFI). In these instances, you will need to work with a competent CPA to make the appropriate filings.

For more information on these potential taxes, visit the FAQs in our Educational Resources section.

Do you have an Ask the Expert question? Submit your questions to asktheexpert@guidantfinancial.com.