Speaking with a Lender – FUTA Tax

Dear M & M:

What are some things I should do before I speak with a lender?

– William

Dear William:

To be successful in a loan proposal one should beprepared and organized. You must know exactly how much money you will need and why you need it. You should include the plan of how you intend to pay back the loan. You must be able to convince the lender that you are a good credit risk. In summary you should be prepared to answer the following questions.

Size of the loan:  Be specific. Be prepared to clearly identify the total amount of funds needed.

Owners’ equity: In some cases the owners will be expected to provide up to 30-50% of the funds needed. The lenders want you to have some skin in the game.

How the funds are to be used: Most loans are used to purchase new equipment, pay off existing debt, expand or start a business. You should provide a detailed outline of the use of the funds.

Why your company is a good credit risk: Explain why your company has been a good credit risk and how you will continue to be and how this loan will help your company.

Personal Credit: Be prepared to discuss the personal credit of everyone who owns part of the company.

Payback Plan: Using cash flow analysis explains clearly how you intend to pay back money borrowed.

Alternative payback plan: Always have a plan B if for some reason your original plan fails have a back-up plan.

–Arizona Commerce Authority



Dear M & M:

What is FUTA tax?


Dear Beverly: 

(FUTA) stands for Federal Unemployment Tax Act; (FUTA) is part of the federal and state program that pays unemployment compensation to workers who lose their jobs. Employers report and pay (FUTA) taxes separately from social security and Medicare taxes and withheld income taxes. You pay (FUTA) taxes from your own funds. Employees do not pay any part of this tax or have any part of it withheld from their pay. Employers report (FUTA) taxes on Form 940, Employers Annual Federal Unemployment Tax return. To find form 940 and instructions, visit the IRS web site at www.irs.gov and look for “Form and Publications.” Most employers who pay Arizona state unemployment tax are also required to pay the Federal Unemployment Tax (FUTA). The annual FUTA tax you pay is used to fund the administrative costs of the Unemployment Insurance program while your Arizona state unemployment tax is used solelyfor the payment of benefits to unemployed workers. The FUTA tax rate was 6.2% until July 1, 2011, when it decreased to 6.0%. FUTA tax is required on the first $7,000 in wages paid to each worker in a calendar year and is paid to the Internal Revenue Service in January of the following year. As always please contact your accountant, CPA or tax advisor if you have any additional questions or concerns. If you want more information visit their website at IRS.gov, or call 1-800-829-4933.


To ask your questions: Call the Small Business Development Center(SBDC) at Cochise College (520)-515-5478 or email schmittm@cochise.edu or contact the Sierra Vista Economic Development Foundation(EDF) at 520-458-6948 or email  hollism@svedf.org



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