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Calculate and Improve Your DSCR

  • Updated on April 21, 2026
  • Category: Business Loans
  • Author: Dane Colvin

Key Takeaways

  • The Debt Service Coverage Ratio (DSCR) shows how easily a business can pay its debt obligations from its operating cash flow.
  • The SBA requires a minimum of a 1.1 DSCR for SBA 7(a) loans under $350k
  • To calculate DSCR, you need financial statements to find operating cash flow (typically EBITDA), total all annual loan principal and interest payments, then divide cash flow by that total.
Your business’s Debt Service Coverage Ratio (DSCR) is a number that helps gauge your ability to cover your debt payments and reflects how much free cash flow you have left after covering all necessary expenses.

DSCR tells lenders whether your business generates enough cash flow to comfortably make its debt payments, and recent SBA rule changes make it even more central to how SBA 7(a) loans are approved.

What Is DSCR

DSCR measures how many dollars of operating cash flow you have for every dollar of annual loan payments (principal + interest).
  • Formula: DSCR = Operating Cash Flow ÷ Annual Debt Service.
  • If DSCR = 1.00, you have just enough cash to make your payments, with no cushion.
  • If DSCR = 1.25, you have 25% more cash flow than needed for debt payments (a healthy buffer).
  • If DSCR < 1.00, your business does not generate enough cash to cover all required loan payments.
The higher your DSCR, the better your cash flow.

New SBA SOPs

Recent updates to SBA’s rules and regulations tightened how lenders must underwrite SBA 7(a) under $350k and DSCR is now explicitly front and center.

For SBA 7(a) loans up to $350,000, the SBA now requires that the borrower’s DSCR be at least 1.10 based on historical cash flow.

These SOP changes signal that lenders must put cash flow—not just credit scores or collateral—at the center of their decision.

The SBA explicitly requires lenders to document “repayment ability” using DSCR and detailed cash flow analysis, rather than leaning on scoring models.

How to Calculate Your DSCR

You can calculate your own DSCR using information from your tax returns, financial statements, and loan documents.

1. Pick The Time Period

Most lenders look at the most recent full fiscal year, using year-end total values.

2. Find Your Operating Cash Flow

Lenders often use EBITDA— earnings before interest, taxes, depreciation, and amortization.
  • Start with net income from your income statement.
  • Add back interest expense (because it’s part of debt service), income taxes, depreciation, and amortization.

3. Compute Your Total Annual Debt Service

For the same 12‑month period, total up:
  • All required principal payments on business loans and term debt.
  • All interest payments on those loans.
  • When underwriting a new loan, lenders will also add the proposed SBA loan’s projected principal and interest payments.

4. Apply For Formula

DSCR = Operating Cash Flow ÷ Total Annual Debt Service.

5. Compare the Result to the SBA's Requirements

At or above 1.10 is now the minimum for 7(a) Small Loans as a formal requirement.

Around 1.25 or above is widely viewed as “strong” for many SBA 7(a) deals.

Example: Calculating DSCR for a Small Boutique

Imagine a retail boutique that wants a new SBA 7(a) loan to remodel its space.

Step 1: Gather The Numbers For One Year

From the boutique’s income statement (last fiscal year):
  • Interest expense: $10,000
  • Income taxes: $0 (assume pass-through, all on owner’s return)
  • Depreciation and amortization: $15,000
From the boutique’s existing loans:
  • Existing term loan annual principal payments: $20,000
  • Existing term loan annual interest: $10,000 (this matches the interest above)
New SBA loan being requested:
  • Projected annual principal payments: $18,000
  • Projected annual interest: $7,000

Step 2: Calculate Operating Cash Flow

Start with net income and add back non-cash and certain financing items:
  • Net income: $40,000
  • Add back interest expense: +$10,000
  • Add back depreciation and amortization: +$15,000
Operating cash flow (EBITDA-style) = $40,000 + $10,000 + $15,000 = $65,000

Step 3: Calculate Total Annual Debt Service

Include all principal and interest for existing and proposed loans:
  • Existing loan principal: $20,000
  • Existing loan interest: $10,000
  • Proposed SBA loan principal: $18,000
  • Proposed SBA loan interest: $7,000
Total annual debt service = $20,000 + $10,000 + $18,000 + $7,000 = $55,000

Step 4: Compute the DSCR

DSCR = Operating Cash Flow ÷ Total Annual Debt Service

DSCR = $65,000 ÷ $55,000 ≈ 1.18

So this boutique has a DSCR of about 1.18.

Where to Find the Numbers for DSCR

You can usually pull what you need from:
  • Business tax returns (Schedule C, Form 1120, 1120‑S, 1065) for net income and interest.
  • Internal financial statements (profit & loss and balance sheet) for the most recent year and interim periods.
  • Depreciation and amortization schedules or the statement of cash flows for those non-cash expenses.
  • Your existing loan documents and amortization schedules for principal and interest amounts due over the year.

Practical Ways to Improve Your DSCR

Improving DSCR comes down to either increasing your operating cash flow, reducing your debt service, or both.

1. Strengthen Operating Cash Flow

  • Raise gross margins: adjust pricing, renegotiate supplier costs, or prune low-margin products or services.
  • Reduce operating expenses: trim discretionary spending, optimize labor scheduling, and control overhead like subscriptions and utilities.
  • Normalize owner compensation: right-sizing owner salary and documenting excess or discretionary perks can increase “adjusted” cash flow for underwriting purposes.

2. Reshape Your Debt Profile

  • Refinance short-term or high-rate debt into longer-term structures to lower annual payments, even if total interest paid overtime is higher.
  • Consolidate multiple small loans or merchant cash advances into a single term loan with a smoother amortization schedule, which can improve DSCR immediately.
  • Avoid stacking new obligations like equipment leases or MCA advances right before you apply for an SBA loan, since those all count against your annual debt service.

3. Manage Growth and Capital Spending

  • Pace major capital expenditures so they align with healthy cash flow periods, rather than taking on large payments when margins are already thin.
  • For expansion, model projected DSCR under different scenarios (sales 10–20% below plan, slightly higher interest rates) to be sure the numbers still work.
  • Build and maintain a basic 12‑month cash flow forecast so you can spot DSCR pressure before it shows up in your year-end numbers.

Actions That Move DSCR

Area
Example Action
Effect on DSCR
Revenue/Margins
Raise prices 5% on top sellers
Increases cash flow
Operating costs
Cancel underused software, trim overtime
Increases cash flow
Debt structure
Refinance MCA into 10-year term loan
Lowers annual debt service
New borrowing
Reduce requested loan amount slightly
Lowers annual debt service
Owner expenses
Separate personal perks, document add-backs
Raises “adjusted” cash flow

Find Out How Much You Qualify For

If you’re interested in growth capital but unsure if your cash flow levels are stable, you can apply through NEWITY today and find out how much you could qualify for in an SBA 7(a) loan in just 10 minutes.

Our application is no-commitment, and we perform a “soft credit pull” with no effect to your credit score.

Sign up to stay notified!

NEWITY LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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How NEWITY Supports Its Members

How NEWITY Supports Its Members

Key Takeaways
  • Whether you’re applying, uploading documents, or waiting on underwriting, our Member Services team is your go-to team for help, updates, and escalation.
  • Our team is always implementing new tech and strategies to be as accessible to our members as possible
At NEWITY, we walk our members through the entire loan process and beyond, helping them secure the resources they need for their small business to flourish.

We know that navigating small business financing can feel overwhelming. That’s why our Member Services team is built to be more than just a help desk. They’re your bridge to answers, your advocates, and your guides through every step of the funding journey.
How can Member Services support you and your business?
Our Member Services team strives to be as accessible as possible, answering your questions and solving problems with efficiency and effectiveness.

This means offering support for:
Login & Account Access
  • Trouble signing in
  • Resetting passwords
  • Navigating your account
Application Support
  • Help completing your SBA 7(a) loan application
  • Clarifying document requirements
  • Troubleshooting upload errors
Status Updates
  • Checking where your application stands
  • Following up if you haven’t heard from your underwriter
  • Escalating issues when needed
Helping Members Move Forward “We’ve had members who had a previous SBA loan that still showed as active or in default, even though it wasn’t accurate. This can…
How To File For Tariff Refunds

How To File For Tariff Refunds

Key Takeaways
  • The Supreme Court has ruled Trump’s IEEPA tariffs unlawful
  • This ruling opens the door for many businesses to get refunded for IEEPA tariffs they paid directly on imports
  • In order to be eligible for your money back, your business must have been the Importer of Record
  • The CBP is developing a dedicated administrative refund process in its Automated Commercial Environment (ACE) system under the supervision of the U.S. Court of International Trade (CIT). 
  • Read our breakdown on how small business owners can collect the necessary information and documentation to officially request their refund
It is estimated that the direct annual tariff cost to U.S. small businesses was between $85 billion and $99.6 billion.

From April to September of 2025, roughly 236,000 small business importers in the U.S. paid an average of $151,000 more in tariffs compared to the same period in 2024.
Supreme Court Tariff Ruling
On Friday February 20, the Supreme Court released a decision condemning the Trump administration’s sweeping tariffs imposed under the International Emergency Economic Powers Act (IEEPA).

This 1977 Act gives the president authority to broadly manage U.S. economic transactions with other countries after declaring a national emergency.

President Trump evoked the IEEPA to set tariffs on virtually every country the U.S. trades with, citing a U.S. trade deficit and the flow of fentanyl and undocumented immigrants across the southern border as the “national emergencies” justifying his tariffs.

This was the first time in history that a U.S. president attempts to use the IEEPA to enact tariffs.

The Supreme Court majority held that the IEEPA is not an act that gives unchecked authority to the president to unilaterally impose tariffs.
What Changes With This Ruling?
The Supreme Court striking down Trump’s IEEPA tariffs means the termination of:
  • The 10% baseline “reciprocal” tariff on nearly every country in the world
  • The higher country-specific reciprocal tariffs targeting countries like China, Vietnam, and EU members
  • The fentanyl and drug-trafficking emergency tariffs on Mexico, Canada, and China
  • Critically, the ruling extends to all IEEPA tariffs categorically — not just specific rates or countries. The Court found the fundamental legal defect was that IEEPA is simply not a tariff statute at all
The Court’s decision did not strike down:
  • Section 301 tariffs on China (authorized under a different trade law)
  • Section 232 tariffs on steel and aluminum (authorized under a different national security law)
  • Any tariffs properly authorized by Congress through explicit legislation
Notably, only tariffs under the IEEPA were struck down, not all Trump-era tariffs.
What Does This Mean For Small Business Owners?
First and foremost, small business owners will no longer need to pay higher prices for imported goods, whether they are the direct importer or purchase imported goods from a wholesaler.

For small business owners who do import goods directly, the Supreme Court’s decision opens the door for those businesses to collect refunds from any tariffs they paid that have now been deemed illegal.
How To Know If You Qualify For Tariff Refunds?
Not all tariffs paid are eligible to be refunded, and not all businesses who distribute imported goods qualify for tariff refunds on those goods. Here is how you can determine your tariff refund eligibility:
  1. Confirm that your business was the Importer or Record (IOR) on any imported goods purchased
    • Collect the Customs & Border Protection (CBP) Form 7501s, also known as “Entry Summaries,” for each imported shipment from the last year.
    • This form can be easily accessed through the Automated Commercial Environment (ACE) Portal.
    • If your business is the IOR of that shipment, your business name will be listed near the top of the form.
    • If you are not the IOR, you will not be able to claim a refund.
  2. Call your customs broker if you used one
    • Call your customs broker and tell them you are collecting a list of all the entries on which you are listed as the IOR from February 2025 through present day that included IEEPA tariffs.
    • If you did not use a customs broker and did not purchase your imported goods through a wholesaler, you are most likely the IOR on the shipments.
  3. Once you’ve collected confirmation of all your imported shipments from the last year, confirm that the tariffs you paid were tariffs under the IEEPA specifically, as these are the only tariffs that have been ruled unlawful
    • On CBP Form 7501, look at the column labeled “HTS Number.”
    • IEEPA tariffs will be identified in this column with a code beginning in 9903.01 or 9903.02.
    • Note that codes 9903.88 (China 301 tariffs) and 9903.80/9903.85 (steel/aluminum tariffs) are not IEEPA tariffs and are therefore not eligible to be refunded.
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How To Choose a Small Business Loan

How To Choose a Small Business Loan

Key Takeaways
  • Small business loans through traditional banks have become less accessible and affordable
  • Some financial institutions are introducing AI into their lending processes, making small business lending more efficient and less expensive
  • Small business owners should apply for funding proactively rather than waiting until their need for capital is dire
  • When searching for a loan, entrepreneurs should research interest rates, repayment term lengths, down payment requirements, collateral requirements, and how the actual loan processing will be conducted in order to make the best decision for their business

Searching for funding that works for your business is no small feat, and not all funding is created equal.

A market saturated with a variety of loan types and providers means discerning the best option for your business requires time and careful consideration.

If you’re strategic about your business funding then managing your repayment and balancing your books should not be overly taxing on your cash flow.

Small Business Loans Through a Traditional Bank
Over the last decade, banks have begun moving away from providing small business funding. Due to the high failure rate of small businesses, banks are less partial to assuming the risk of funding small businesses.

Additionally, small businesses are often seeking less than $500k in funding. These loans are considered “small balance” and the cost of processing them often does not outweigh their profit for banks.

Many banks are still using traditional, manual processes to approve, underwrite, and fund loans.

If a small business is approved for funding through a bank, getting the funding takes time and qualification requirements will be stricter due to the high-risk status of small business lending.
What Are Some Alternatives To Traditional Bank Loans?
Third-party companies are continuously working to simplify the small business funding process, making capital more accessible and affordable to a wider range of small businesses.

The introduction of AI into small business lending is one way these companies are increasing the efficiency with which they can process loans, therefore saving time and money for the borrower.

But how do you choose a loan that’s right for you?
Finding The Loan That's Right For You
For many small businesses, anticipating what your finances will look like 6 months from now is merely a guessing game.

Factoring in economic fluctuations, a fickle and ever-changing consumer market, and turbulent government policy changes, slow seasons are increasingly more difficult to predict and prepare for.

Many small businesses will wait to apply for funding until they need it.

We don’t recommend this strategy.

Our team has worked with many small business owners who have fallen into the trap of predatory small business loans that offer “fast funding”, but come with hidden fees, astronomical interest rates, and extremely short repayment plans.
When it comes to securing capital, small business owners should consider:
  • Competitiveness of interest rates
    • Consider whether a fixed or variable rate is better for you. Additionally, understand the base rate being used by providers and what that means for your repayment.
  • Length of repayment term
    • Understand the tradeoff— longer terms reduce monthly payments and ease cash flow, but increase total interest paid overtime.Ask about payment frequency (monthly vs. weekly/daily). More frequent payments can strain cash flow even if the rate looks acceptable.
  • Down payments
    • Down payments for loans can vary greatly— ensure you’re aware of the cash you’ll be expected to pay up-front upon funding.
  • Collateral
    • Find out if you’ll be expected to provide a list of collateral to back your loan or if your provider may file a lien on your assets.
  • Ease of process
    • Be aware of how the application and underwriting process will be conducted, whether the process is online or your physical presence will be required for any part of the process.
While you should not sacrifice the above criteria for speed, finding a provider that can offer you favorable terms while keeping the process efficient is most ideal.
…
AI In Lending— Is AI Deciding Who Gets Loans?

AI In Lending— Is AI Deciding Who Gets...

Key Takeaways
  • Small businesses on average receive funding at less than half the rate of larger enterprises
  • Traditional banks cannot justify the cost of funding small-balance (<$500k) loans 
  • The integration of AI into small business lending makes the loan process quicker and less expensive
  • AI does not make loan approval decisions, nor does it set loan terms
  • Real humans are still just as important to the lending process as they were before AI
The Small Business Lending Problem
Small businesses on average receive funding at less than half the rate of larger enterprises. Nearly half of all businesses do not receive the funding they’re seeking.

This disparity underscores a critical challenge in the small business lending landscape.

The Boston Consulting Group estimates that the funding gap between small businesses and larger enterprises ranges from $350 billion to $750 billion.

But why?

Small businesses often need small balance loans, with common requests of capital totaling under $500k.

Given the amount of time and energy that goes into the assessment and underwriting of any business loan, the fees collected from a loan that size often do not cover the cost it would require to underwrite it.

If these loans are approved by a traditional bank, the excessive amount of time needed to underwrite them is not time that small business owners can afford.

Further, offsetting these underwriting costs most likely looks like heightened interest rates and shorter repayment terms for small businesses.

Securing small business capital through traditional banks is only growing more expensive and less accessible.
How Can AI Solve This
The integration of AI into small business lending is an opportunity to bring the capital to small businesses that traditional bank processes cannot— and much more rapidly at that.

But what exactly is the AI doing in this process?

The most crucial point to note is that AI is not making decisions about loan approval. A small business owner’s loan approval and interest rate is determined by real humans. However, AI plays a pivotal role in streamlining the behind-the-scenes work.

AI systems are adept at aggregating data from various documents, distilling key information, and organizing insights. This automation frees underwriters to focus their energy on making smart, data-backed assessments about borrowers’ financial health.
How Does AI Help Small Business Owners Access Capital
The integration of artificial intelligence (AI) into the lending process represents a significant leap forward for small business owners seeking to access capital.

This technological advancement offers a multifaceted approach to overcoming traditional barriers, ensuring that small businesses receive the financial support they need to thrive.
1. Enhanced Efficiency
AI systems can process and analyze vast amounts of data far more quickly than human underwriters. This means that the time required to assess loan applications is drastically reduced.
2. Cost Reduction
One of the most significant advantages of AI in lending is the reduction in costs. By automating otherwise time-intensive processes, AI systems minimize the need for extensive manual intervention, thereby reducing operational costs. Additionally, the quicker turnaround times mean that lenders can process more loans within the same timeframe, increasing their overall efficiency and profitability. These cost savings are passed on to borrowers in the form of lower fees and more competitive interest rates.
3. Improved Accessibility
  • A QBI allows eligible businesses to deduct up to 20% of their business’s qualified income from their taxes, allowing them to secure a refund from quarterly payments
  • Certain business types and industries are excluded from QBI deduction eligibility
  • Individuals filing jointly must have a taxable income below $394,600 for 2025
  • Individuals filing separately must have a taxable income below $197,300 for 2025
  • Business owners can strategically position themselves to qualify for a QBI deduction next tax season
What Is A QBI Deduction?
A Qualified Business Income (QBI) deduction allows certain eligible businesses to deduct up to 20% of their business’s net qualified income from their taxes.

This qualified income is determined by key factors pertaining to your business’s functions, industry, and total income.
Who Can Claim QBI Deductions
QBI deductions are available to the following business types:
  • Sole Proprietorship
  • Partnership
  • LLC that files as an S-Corp, Partnership, or Sole Proprietorship
  • S-Corporation
Businesses considered Specialized Service Trade Businesses (SSTB) have specific QBI requirements. Businesses in the following industries are considered SSTBs:
  • Health
  • Law
  • Accounting
  • Consulting
  • Athletics
  • Finance
Read further for more details on what this designation means for your potential QBI deduction.
Overall Taxable Income
In order to confirm your eligibility for QBI deductions, you’ll need to calculate your overall taxable income for the year.

Your taxable income reflects your business’s annual income, subtracting any expenses that are eligible as a tax deduction.

For example, any sum of money you contribute to a retirement plan is subtracted from your taxable income. You can also decrease your overall taxable income by paying employees a fair wage and accounting for the depreciation of any assets you hold.
2025 QBI Deduction Thresholds For SSTBs
For 2025 taxes, these are the overall taxable income thresholds where allowable QBI deductions begin to decrease for Specialized Service Trade Businesses:
  • Married Filing Jointly: $394,600 to $494,600
  • Married Filing Separately: $197,300 to $247,300
  • Single/Head of Household: $197,300 to $247,300
If your taxable income was less than the lowest threshold based on your filing status, you are eligible for a full 20% deduction.

If your taxable income was between the lowest and highest threshold for your respective filing status, you’re in the Phase-Out range and your QBI deduction percentage will be adjusted accordingly.

If your income lies above the upper threshold for your filing status, you are not eligible for a QBI deduction.
2025 QBI Deductions For Non-SSTBs
Non-SSTBs are eligible for a full 20% deduction up to the following taxable income thresholds:
  • Married Filing Jointly: $494,600
  • Married Filing Separately: $247,300
  • Single/Head of Household: $247,300
Non-SSTBs whose taxable income exceeds these thresholds may still be eligible for QBI deductions based on their W-2 wages paid and the UBIA of their qualified property.

UBIA, or Unadjusted Basis Immediately After Acquisition, refers to the amount a business owner initially paid for any property and equipment prior to its depreciation. For assets to be considered “qualified property” in this context, the assets must satisfy all of the following:

  1. Property is both owned by and available to the filing business at the close of the tax year
  2. Property is used by the filing business at any point during the tax year in order to produce the business’s income
  3. Property’s depreciable time frame for UBIA purposes has not ended before the close of the tax year
When SSTBs exceed the income threshold, their deduction eligibility becomes limited to:
  • 50% of W-2 wages paid
  • 25% of W-2 wages paid + 2.5% of UBIA qualified property
Example
  • Your business paid $200,000 in W‑2 wages to employees
  • You own $1,000,000 worth of UBIA of qualified property
1. Find 50% of W-2 wages paid:

$200,000 x 50%=$100,000

2. Find 25% of W-2 wages + 2.5% of UBIA qualified property and combine:

$200,000 x 25%= $50,000
$1,000,000 x 2.5%= $25,000
$50,000 + $25,000 = $75,000

3. The largest of those 2 calculations is your business’s QBI deduction limit, meaning you cannot deduct more than that amount from your taxable income.

$100,000 > $75,000

In this case, your business’s QBI deduction limit would be $100,000.
How Can…
2026 Small Business Taxes— Deadlines, Forms, and Extensions

2026 Small Business Taxes— Deadlines, Forms, and Extensions

Key Takeaways
  • Ensure you know your EIN number and your business’s entity type in order to identify your payment and filing requirements
  • This article lists the dates returns are due based on your business’s use of the calendar or fiscal year
  • Regardless of filing dates, most small businesses should be making quarterly tax payments
  • You can choose to apply for a filing extension based on your business structure’s respective extension request due date
  • Ensure you review our list of possible tax deductions for your small business
  • Small businesses with employees have additionally filing and payment requirements
Most people commonly associate “tax season” with the springtime.

However, tax organization is an ongoing process requiring year-round maintenance and organization.

From making quarterly payments, to keeping your filing information organized, to knowing how your specific business is expected to file and when, it’s crucial that all small business owners are acutely aware of how they should be paying and filing their small business’s taxes.

Here is everything you as a small business owner should know about filing taxes for your business.
How To File
First, ensure that you’ve confirmed the basics of tax filing.
Find Your Employer Identification Number (EIN)
Your EIN number helps to identify your business for tax purposes at both the state and federal level. Similar to your own Social Security Number, this number is essential for operating your business.

If you’re a new business, you can apply for free and receive an EIN through the IRS.
Confirm Your Business's Entity Type
Before identifying your tax filing due dates, you need to confirm your business’s entity structure. This structure determines how and when you file your taxes.

Here are the potential structures:
  • Sole Proprietorship- Business has one owner that takes all profits and assumes all debts.
  • Partnership- Business owned by two or more individuals who share profits and debts of the business.
  • Limited Liability Company (LLC)- Business is owned by any number of people, none of whom assume personal responsibility for the business’s debts.
  • S Corporation- Business has shareholders (limited to 100) to whom income, deductions, and credits are passed. This entity type allows for liability protection to shareholders and avoids the federal corporate taxation of C corporations.
  • C Corporation- Business has unlimited shareholders who pay taxes on their earnings in addition to the business taxes paid by the business.
Tax Filing Due Dates
While each entity structure has its own respective annual deadlines, these deadlines may be different for businesses that follow the fiscal year.

Federal returns are generally due by the fourth month of a business’s fiscal year, on the 15th day of that month. The one exception to this rule is for businesses following a fiscal year that ends June 30, as that deadline lands on September 15.

For businesses that do not follow a fiscal year, here are the tax filing deadlines and necessary documents organized by entity type:
Sole Proprietorship
File federal income tax returns by April 15, 2026.

Documents to submit:
  • Schedule C (reporting profit and loss)
  • Form 1040 from your individual tax return
  • If you want to request an extension, file Form 4868 before April 15. This will move your deadline to October 15, 2026
Partnership
Partnerships should file federal tax returns by March 16, 2026.

Documents to submit:
  • IRS Form 1065
  • If you want to request an extension, file Form 7004 before March 16. This will move your deadline to September 16, 2026
LLC
Tax deadlines for LLCs depend on the tax classification of the business.

Generally, an LLCs classification is decided by the number of owners the business has. An LLC with only one owner is, by default, taxed as a sole proprietorship, and LLCs with multiple owners are taxed as partnerships. These LLCs should follow those respective tax deadlines.

It is important to note that both a sole proprietorship and a partnership tax structure are considered “pass through entities,” meaning owners report the business’s profit and loss on their personal tax forms.

That said, an LLC can change tax classifications. An LLC can file Form 8832 to become a C corporation, or file Form 2553 to become an S Corporation. An LLC can only change its tax classification once every 60 months.
…
The Grove Tavern— Hometown Friends Turned Business Partners

The Grove Tavern— Hometown Friends Turned Business Partners

Erected in the center of DeKalb, IL from nothing but a concrete slab stands The Grove Tavern.

Owned by born-and-raised DeKalb natives, at the heart of this small business is a hometown legacy.
“The rewarding part is, a lot of people saw us grow up here,” said Sam Patterson, co-owner of The Grove. “These people babysat us, were our teachers, saw us graduate from DeKalb High School; especially for the class clowns always goofing off in school the whole time, they’re probably thinking ‘Ok, they really did something here.’”

In the late 1800s, DeKalb was known as “Huntley’s Grove.” Now, this former town name is The Grove Tavern’s namesake.

A “grove” in nature is a group of trees that can often function as a safe haven for a diverse array of animals, providing protection, sustenance, and respite.

This is effectively what Patterson and his team created in their tavern.

The open, commodious dining area is juxtaposed by warm, dim lighting and dark wood accents to bring a touch of tranquility and comfort to the vast space.

Patterson cites the customer experience as the ultimate driving force of The Grove’s growth path.

“The customers are obviously everything,” he said. “They’ve helped us navigate what the community wants, and we try to make sure we have a little bit of something for everybody while not sacrificing our true mantra: Good food, all scratch made.”

That’s the small business balancing act, pursuit of an authentic vision whilst doing justice to the community you’re serving.

Prior to starting The Grove, Patterson lived in Chicago for ten years working in corporate real estate. 

“That was always my main focus, but I always knew there was something more out there,” he said. “And when you’re good at what you do, it kind of sucks to be making the money for someone else.”
In 2020, Patterson looked at purchasing an already-existing restaurant. When that didn’t come to fruition, he and his team turned their attention to building a small business from the ground up.

“We took this blank space and we did the whole build out ourselves,” Patterson said. “It was a cement floor, that was all we had. No walls, nothing.”

As the dream of The Grove became reality, the team of owners began looking for growth capital to propel them forward.

“Every restaurant is going to need a little extra money,” Patterson said. “Between the build out, payroll, a little debt refinancing, there are a lot of things working against you up front.”

First, the team considered a “traditional” financing route.

“You’d think you’d go right down the street, go to your local bank and they’d be open arms, but it really was not that,” Patterson said. “They wanted us to put a bunch up for collateral, and rates were high, and it just didn’t make sense.”

That’s when The Grove team found NEWITY.
“Good rates, good terms, good amount of money,” Patterson said. “And I was almost shocked at how easy it was. We were organized, so you guys were matching us on the speed at which things could get done.”
Patterson said he doesn’t think that will be the last time he applies for growth capital through NEWITY.

“I think now that we have the chef we’ve always wanted and he’s here for the ride, hopefully we can expand and maybe go East,” Patterson said. “Maybe try a different type of restaurant.”

But despite all their previous success and impending growth, Patterson and the rest of the team at The Grove continue to stay true to the foundation they were built on.

“My family, we didn’t come from money,” Patterson said. “You put in the time, learn as much as you can from other people, and then translate that into doing your own thing.”

When Patterson was asked what his advice to other entrepreneurs would be, he spoke of embracing humility as a foundation for ultimate learning, growth, and achievement.
“Work at a restaurant. Work the back of the house, front of the house, everywhere you can. Get yourself exposed to it,” Patterson said. “Build a base knowledge of the industry you’re looking to get into and have the support around you.”
The Grove’s core team is a hodge-podge mix of finance minds, business-savvy entrepreneurs, and restauranteurs with hands-on industry experience.

This amalgamation of diverse experiences, working in tandem with their commitment to listening to their community, allowed these owners to come together to build something true and lasting.

Find out how much you could qualify for today!

Apply Today
NEWITY Wrapped: 2025 in Review

NEWITY Wrapped: 2025 in Review

NEWITY’s 2025 Year Wrapped: A Year of Record-Breaking Growth and Impact
As 2025 comes to a close, NEWITY is proud to reflect on a year defined by innovation, expansion, and unwavering commitment to small businesses across the nation.

From industry recognition to member milestones, we’re proud of what we’ve built this year.
Our Community Grew Stronger
This year, 322,103 new members joined the NEWITY network, expanding our vibrant community of entrepreneurs and small business owners.

Every new member represents a story of ambition and resilience, and we’re honored to be part of their journey.
Fueling Growth
In 2025, NEWITY facilitated $326.56 million in small business funding from Northeast Bank, helping thousands of businesses access the capital they need to grow, hire, and innovate.

As the #1 SBA 7(a) loan facilitator for loans up to $350,000, we remain committed to making funding accessible and streamlined.
Unmatched Member Support
Our dedication to service is reflected in the 19,035 member support calls answered this year.

Every conversation is an opportunity to provide guidance, solve challenges, and celebrate wins alongside our members.
Industry Accolades
NEWITY’s growth and impact have earned national recognition on some of the most prestigious lists in business and technology: These honors underscore our mission to empower small businesses with the resources and funding they need to thrive.
Looking Ahead
2025 was a landmark year, but we’re just getting started.

In 2026, NEWITY will continue to innovate, expand our offerings, and champion small businesses nationwide. Thank you to our members, partners, and team for making this year unforgettable.

Here’s to another year of growth, impact, and success together.

Find out how much you could qualify for today!

Apply Today
Managing Your Small Business Debt

Managing Your Small Business Debt

Key Takeaways
  • Start by organizing all your accounts, clearly indicating how much you owe, to whom, and by when.
  • Consider various strategies to reduce your debt, such as avalanche pay-off and refinancing 
  • If you are going to refinance with an SBA 7(a) loan, ensure you’re aware of what types of debt can and cannot be refinanced with an SBA loan
Why Debt Management Matters
Entrepreneurs go into debt for lots of reasons— taking out loans to fuel a new project, using credit to bridge slow seasons, or even taking out start-up capital to kickstart a new business.

Because of this, debt isn’t inherently “bad.” As long as you’re strategic about when you take on new debt and what kind of debt you take on, borrowing money helps propel your business to new heights and bring your vision to life.

That said, ensure you are properly assessing your borrowing options as well as considering your repayment plan prior to applying for additional debt. This will ensure you have a plan in place that works for your business’s growth.

Debt organization helps you not only keep up with your repayment plan, but also helps you maintain and improve your SBSS score, avoid late payment fees, and take advantage of refinancing and consolidation opportunities.

Additionally, having an awareness of your debt holdings and potential options for decreasing your payments can help you assess options for more funding in the future, as your existing debt does affect how you qualify for additional loans.
Understanding Your Business Debt
Managing debt effectively starts with knowing exactly what you owe and to whom. It may seem trivial, but this preliminary basic organization can go a long way in keeping you up to date and aware of your debt holdings throughout the life of each repayment plan.
Know Exactly What You Have
Begin by listing all your outstanding debts in one place. This includes loans, credit lines, vendor credit, and any other financial obligations tied to your business.

For each debt, record the lender’s name, the original loan amount, current balance, interest rate, payment schedule, and any associated fees. Having this information organized will help you prioritize payments and identify opportunities to reduce costs.
Types of Debt
Small businesses typically carry different forms of debt:
  • Term Loans: Fixed repayment schedules over a set period.
  • Lines of Credit: Flexible borrowing for short-term needs, usually with variable interest rates. This includes credit card debt.
  • Vendor Credit: Agreements with suppliers allowing delayed payment for goods or services.
Understanding the nature of each debt type is crucial because repayment strategies and interest implications vary.
Calculating Total Debt and Interest Obligations
Once you’ve listed all debts, calculate your total outstanding balance and the cumulative interest you’ll pay over time.

This step gives you a realistic view of your financial commitments and helps you plan repayment strategies. Use simple tools like spreadsheets or accounting software to track these figures, or incorporate it into your preferred bookkeeping methods.

Knowing your total debt load and interest obligations can guide decisions such as refinancing, consolidating, or accelerating payments.
Strategies to Manage and Reduce Debt
  • Get festive with your online presence, sharing holiday-themed posts and drawing attention to your holiday season deals
  • Consider expanding your hours to cater to shoppers on a tight schedule
  • Ensure all the information about your business is up to date on every website and platform
  • Offer gift cards for indecisive shoppers to not only draw immediate revenue, but also expand your customer base
  • Be sure to support your employees throughout the season and show your appreciation

The holiday season is huge for small businesses. According to the National Retail Federation, holiday sales in November and December regularly account for 20% or more of annual retail revenue, with U.S. consumers spending over $950 billion in 2023 alone.


For many small businesses, this period can make or break the year. But success doesn’t happen by chance. It requires strategic planning and smart execution.


If you’re a small business owner, now is the time to position your brand to capture holiday shoppers’ attention, maximize sales, and build lasting customer relationships.


Here are five actionable strategies to help you prepare and take full advantage of the season.

1. Leverage Social Media to Spark Holiday Engagement
Social media is your holiday megaphone. Platforms like Instagram, Facebook, TikTok, and LinkedIn are where customers discover gift ideas, seasonal promotions, and local businesses.

Here’s how to make the most of it:
  • Create Holiday-Themed Content: Showcase your products in festive settings, share behind-the-scenes videos of your team preparing for the holidays, and post gift guides tailored to different budgets or interests.
  • Run Interactive Campaigns: Polls, contests, and giveaways can boost engagement and attract new followers. For example, a “12 Days of Giveaways” campaign can keep your audience coming back daily.
  • Use Paid Ads Strategically: Even a modest ad spend can amplify your reach. Target local audiences or people searching for holiday gifts in your niche.
  • Schedule Posts in Advance: Use social media organization tools to plan content so you can focus on in-store or operational needs during the busiest weeks.
Social media isn’t just about establishing credibility; it’s about creating a sense of excitement and urgency that drives customers to act.
2. Expand Your Hours
Convenience is king during the holidays. Many shoppers are juggling work, family, and festivities, so extended hours can make your business the go-to option.
  • Analyze Peak Times: Review last year’s sales data or use your point-of-sale analytics to identify when customers shop most. Consider opening earlier or staying open later during those windows.
  • Communicate Clearly: Update your hours on your website, Google Business Profile, and social media. Nothing frustrates customers more than showing up to a closed door.
  • Offer Special Shopping Events: Host “Late-Night Shopping” or “Early Bird Specials” to create buzz and incentivize visits during extended hours.
By making your business more accessible, you’re increasing opportunities for sales and keeping up with the competition.
3. Update Your Information Everywhere
Holiday shoppers rely heavily on online searches to find businesses, check hours, and confirm product availability. Inaccurate information can cost you sales.
  • Audit Your Digital Presence: Check your website, Google Business Profile, Yelp, and social media for correct hours, address, and contact details.
  • Highlight Holiday Specials: Add banners or pop-ups on your site promoting seasonal deals, shipping deadlines, and gift card options.
  • Optimize for Mobile: Many customers shop on their phones. Ensure your site loads quickly, is easy to navigate, and has a frictionless checkout process.
Think of your online presence as your virtual storefront. Make sure it’s inviting, accurate, and easily navigable so customers can find what they need.
4. Promote Gift Cards
Gift cards are a holiday lifesaver for indecisive shoppers and a revenue booster for businesses.
  • Feature Gift Cards Prominently: Display them at checkout, on your homepage, and in social media posts. Use festive designs to make them feel like a thoughtful gift.
  • Offer Incentives: Consider promotions like “Buy a $50 gift card, get a $10 bonus card.” These deals encourage higher spending and repeat visits.
  • Make Digital Options Available: E-gift cards are essential for last-minute customers and those shopping for out-of-town recipients.
Gift cards drive immediate revenue, but also bring customers back after the holidays, extending your sales season.
5. Support Your Team
Your employees are the backbone of your holiday success. A motivated, well-supported team ensures customers have a positive experience.
  • Plan Staffing Early: Anticipate peak days and schedule accordingly. Consider hiring seasonal help if needed.
  • Provide Training: Make sure staff are familiar with holiday promotions, gift card processes, and customer service best practices.
  • Show Appreciation: Small gestures like catered lunches, flexible scheduling, or holiday bonuses can boost morale and reduce burnout.
Building a community of support starts with investing in those you’re relying on to help your business thrive.
Make This…
Increase Your Small Business Loan Size

Increase Your Small Business Loan Size

Key Takeaways
  • Factors like your revenue, credit, debt, and business age all impact the funding you qualify for 
  • Paying down existing debt, opening credit building accounts, and getting strategic about your financial tracking can help you increase your approved loan amount
  • Consider the timing of when you apply— slow seasons, unpaid client invoices, and the age of your business at the time of application can impact your loan size 
  • Choose to apply for a loan through a group dedicated to making the process efficient, affordable, and accessible 
Your SBA 7(a) loan application was preapproved, but not for the amount you had hoped to receive. If you still have your sights set on that higher loan amount, there are steps you can take towards improving your eligibility.

When it comes to increasing your loan size, it’s important to understand what factors play a role in your qualification. Taking strides to make changes to your application can positively impact the amount you’re qualified to receive.
What Factors Determine an SBA 7(a) Loan Amount? Revenue
Proving you have sufficient cash flow to take on loan payments is extremely important.

Consider this calculation:
  • Calculate your business’s average annual revenue for the last 3 years, if applicable
  • Subtract any existing debt you currently hold
  • Find 25%-50% of that number; that is your ideal loan request range
Using the 25%-50% range you just calculated is a good start for deciding how much you want to request in an SBA 7(a) Loan Application. You should not be applying for a loan that is over half of your average annual revenue. This target not only helps you to manage your debt wisely, but lenders and facilitators like NEWITY will be performing similar calculations to determine whether you’ll receive approval for your requested loan amount.
Credit
While traditional FICO scores are not the ultimate determination when it comes to qualifying for an SBA 7(a) loan, creditworthiness is still a key part of the evaluation process.

Instead of relying solely on personal credit scores for SBA loan eligibility, NEWITY uses the SBA’s SBSS scoring model. Unlike individual credit scores, SBSS scores incorporate business and personal credit criteria to evaluate creditworthiness of SBA 7(a) loan applicants.

Indicators of a sufficient SBSS score include having at least two years in business, annual revenue of $100,000 or more, and maintaining a healthy cash balance— ideally enough to cover several months of loan payments. These factors help demonstrate your business’s ability to repay the loan and manage its finances responsibly.
Debt
Your Debt Service Coverage Ratio (DSCR) reflects your business’s ability to cover the debt it already holds based on your operating income. This metric also plays a large role in how much you qualify to receive in an SBA 7(a) loan.

Regardless of how high your revenue is, if you cannot afford to take on more debt in addition to the debt you already owe, you may not qualify for as much in an SBA 7(a) loan as you’d hoped.

Here’s how you can calculate your DSCR:

Net Operating Income (NOI)/Total Debt Service

*NOI= Income after expenses, before interest and taxes
*Total Debt Service= All required principal and interest payments on debt for a given period

DSCR > 1: The business generates enough income to cover its debt payments (healthy).
DSCR = 1: Income equals debt obligations (break-even).
DSCR < 1: Income is insufficient to cover debt (risk of default).

Factor potential monthly payments on an SBA 7(a) loan into this calculation to determine if your business can afford to take on more debt, and if so, how much.

If your desired loan amount does not yield a DSCR of greater than 1 at your current Net Operating Income, consider ways to boost your revenue to qualify for your desired funding.
Age
Lenders and the SBA use your business’s operating history as a way to assess stability and risk. A business that has been operating for two or more years has likely weathered some ups and downs, built a customer base, and developed predictable revenue patterns. That kind of track record gives lenders more confidence in your ability to repay a loan.

Your best chance at qualifying for an SBA 7(a) loan is if you’ve been in business for 2 years or more.

If your business is younger than 2 years old, we encourage you to apply so we can connect you with a financing option to help you grow and position you to qualify for an SBA loan in the future.

To verify your time in business, you’ll typically need to provide:
  • Two years of filed business tax returns
  • Business formation documents (e.g., Articles of Incorporation or LLC registration)
  • Proof of consistent operations, such as bank statements or financial reports
How Can You Increase Your Loan Amount?
Through NEWITY’s application, you can receive preapproval in just 10 minutes. After receiving a preapproved loan amount, you have the option to re-apply after 90 days. This is an opportunity to take some time to reevaluate your finances and how you anticipate allocating the funds from an SBA 7(a) loan.
Pay Down Your Debt
Reducing your existing debt is one of the most effective ways to improve your loan eligibility. When you pay down credit cards, lines of credit, or other loans, you lower your monthly obligations, improving your DSCR.

Even small reductions in debt can make a big difference. For example, paying off a high-interest credit card or consolidating short-term loans can free up cash flow and reduce your overall liabilities.

Start by targeting debts with the highest interest rates or those that significantly detract from your monthly operating income.

You can also consider refinancing existing small business debt with an SBA 7(a) loan. An SBA 7(a) loan may offer lower monthly payments, lower interest rates, and longer repayment periods.

Additionally, SBA 7(a) loans through NEWITY do not require a down payment, making them particularly good candidates for debt refinancing.
Open…
4 Metrics To Track Your Business's Financials

4 Metrics To Track Your Business's Financials

Key Takeaways
  • Gross Margin shows how efficiently your business is producing and selling its products or services. 
  • Customer Concentration is a way to assess how dependent your business is on a small number of clients.
  • Aging of Accounts Receivable shows how quickly customers are paying you.
  • Cash Needs reflects the amount of cash your business needs to run on a monthly basis.

Running a small business requires juggling a variety of responsibilities, so sometimes detailed financial tracking gets pushed to the wayside.

When serving customers and running daily operations demands most of your time, taking a step back to look at the bigger picture of your small business’s performance and growth is not a simple task.

Where do you start? What should you be looking for?

Let’s break down the 4 most important key performance indicators (KPIs) for you to keep an eye on.

Carving out just a few minutes each month to track these 4 metrics can make a significant difference in how you steer your business forward.

These KPIs offer a snapshot of your business’s financial health and can help you make smarter, faster decisions.

Why Metrics Matter
Half the battle is identifying objective metrics by which you track your business’s performance. Once you know exactly what to look for, you’ll have insights that:
  • Identify strengths and weaknesses in your business model
  • Spot trends before they become problems
  • Make informed decisions about pricing, staffing, and inventory
  • Communicate more effectively with lenders, investors, and partners
While every business is unique, the following four metrics are foundational for most industries, especially for B2B companies and service-based businesses.
Gross Margin
Gross margin represents the percentage of revenue that exceeds the cost of goods sold (COGS). It shows how efficiently your business is producing and selling its products or services.

How To Calculate It

Gross Margin (%) = (revenue-cost of goods sold)/revenue × 100

Example

If you sell a product for $100 and it costs $40 to produce, your gross margin is:

($100−$40)/$100×100= 60%

This means you retain 60 cents for every dollar of sales, before accounting for overhead and other expenses.

Pro Tip

Track gross margin by product line or service category. This allows you to double down on high-margin offerings and reevaluate or reprice low-margin ones.
Customer Concentration
Customer concentration measures how much of your revenue comes from your largest customers. It’s a way to assess how dependent your business is on a small number of clients.

Why It’s Important

High customer concentration can be risky. If one major client stops doing business with you, it could significantly impact your revenue and cash flow. Monitoring this metric helps you:
  • Diversify your customer base
  • Reduce dependency on any single client
  • Strengthen your long-term financial stability
How To Calculate It

Customer Concentration (%) = amount of revenue from top customers / total revenue × 100

Example

If your top customer brought in $90,000 and your total revenue was $200,000, your customer concentration is:

($90,000/$200,000)×100= 45%

This means 45% of your revenue is coming from just one client, indicating you may want to expand your customer base.

Pro Tip

Aim to keep any single customer below 20–30% of your total revenue. If that’s not possible, consider strategies to expand your customer base or offer new services to existing clients to reduce risk.
Aging of Accounts Receivable
This metric tracks how long your invoices have been outstanding. It’s typically broken down into aging buckets (e.g., 0–30 days, 31–60 days, etc.) to show how quickly customers are paying.

Why It’s Important

Slow-paying customers can create cash flow issues, even if your business is profitable on paper. Monitoring accounts receivable aging helps you:
  • Identify late-paying clients
  • Improve your collections process
  • Forecast cash flow more accurately
How To Calculate It

Accounts Receivable Aging (Days) = Aging of accounts receivable = average accounts receivable x 360 days / credit sales

Example

If your average accounts receivable is $450,000 and your credit sales are $900,000:

($450,000×360)/$900,000= 180 days

This means it’s taking, on average, 180 days for your customers to pay you the money they owe.

Pro Tip

Use accounting software to generate aging reports automatically. Follow up on overdue invoices promptly and consider offering early payment discounts or charging late fees.
Cash Needs
Cash needs refer to the amount of money your business requires to cover its monthly operating expenses, including payroll, rent, utilities, taxes, and other overhead.

Why It’s Important

Cash is the lifeblood of your business. Even profitable companies can fail if they run out of cash. Understanding your cash needs helps you:
  • Avoid liquidity crises
  • Plan for seasonal fluctuations
  • Prepare for emergencies or economic downturns
How To Calculate It

  1. Compare your average monthly expenses to your current cash reserves.
  2. Add up your total expenses over a period (e.g., 6 months)
  3. Divide by the number of months to get your average monthly expense
  4. Compare that to your current cash balance
Example

If your average monthly expenses are $4,000 and you have $10,000 in the bank, you have:

$10,000-$4,000=2.5 months of runway

This means, without any further income, you have 2.5 months worth of extra cash to operate from before running out.

Pro Tip

Aim to maintain at least 3–6 months of cash reserves. If that’s not feasible, consider setting up a business line of credit or applying for a working capital loan to bridge gaps.
What Do You Do With These Insights?
Tracking these four metrics monthly is a great start, but the real value comes from analyzing trends over time.

Are your gross margins shrinking?

Is customer concentration increasing?

Are receivables taking longer to collect?

Use these insights to:
  • Adjust pricing or reduce costs
  • Diversify your customer base
  • Improve collections processes
  • Secure financing before you need it
By staying proactive and data-driven, you’ll be better equipped to navigate challenges and seize opportunities as they arise.

Find out how much you could qualify for today!

Apply…
Small Business Bookkeeping

Small Business Bookkeeping

Key Takeaways
  • Bookkeeping includes functions like transaction recording, account management, payroll processing, reporting, and more
  • There are 5 account categories for sorting transactions: assets, liabilities, equity, revenue & income, and expenses
  • There are different approaches your can take to bookkeeping: cash-based vs. accrual-bases and single-entry vs. double-entry
  • The three financial statements most commonly used in bookkeeping includes an income statement, balance sheet, and chart of accounts
  • Doing your own bookkeeping includes 4 main functions: sorting transactions, recording journal entries, posting to a ledger account, and adjusting entries as needed
Why Is Bookkeeping Important?

Bookkeeping is the process of recording, organizing, and tracking your business’s finances. This is the foundation of your small business’s growth and prosperity.

Having an acute awareness of the cash that’s flowing in and out of your business and what services and expenditures are driving that flow helps you not only maintain good financial standing, but also helps you take advantage of growth opportunities and proactively combat financial struggle.

Bookkeeping helps you stay financially organized, but it also aids in staying tax compliant. The IRS requires you to keep records of information pertaining to your small business’s receipts, purchases, expenses, assets, travel, employment, and more.

Additionally, when you apply for small business funding, you’ll need to submit relevant financial documentation. Having an awareness of your small business’s cash flow can also help you to determine the loan size you could qualify to receive and gauge the amount of debt you’re willing to take on.

What Is Bookkeeping?
Bookkeeping involves a variety of different functions, depending on your business’s operations.

Financial Transaction Recording
  • Sales and Revenue Tracking: Recording income from products or services
  • Expense Tracking: Logging purchases, bills, and operational costs
  • Cash Flow Monitoring: Keeping tabs on money coming in and going out
Account Management
  • Accounts Receivable: Tracking customer invoices and payments
  • Accounts Payable: Managing bills and payments to vendors or suppliers
  • Bank Reconciliation: Matching internal records with bank statements to ensure accuracy
Payroll Processing
  • Calculating employee wages
  • Withholding taxes and benefits
  • Issuing payments and maintaining payroll records
Financial Reporting
  • Profit and Loss Statement (P&L): Showing income vs. expenses over time
  • Balance Sheet: Displaying assets, liabilities, and equity
  • Cash Flow Statement: Highlighting how cash moves through the business
Tax Preparation and Compliance
  • Organizing records for tax filing
  • Tracking deductible expenses
  • Ensuring compliance with federal, state, and local tax laws
Budgeting and Forecasting
  • Creating financial plans based on historical data
  • Projecting future income and expenses
  • Supporting strategic decision-making
Inventory and Asset Management
  • Tracking inventory purchases and usage
  • Recording asset depreciation
Types of Accounts
Keeping track of different types of transactions is what helps you determine where cash is flowing to and from. It’s important to note that “accounts” in bookkeeping refers to transaction categories rather than actual bank accounts.

1. Assets: These are things your business owns.
  • Cash
  • Inventory
  • Equipment
  • Accounts receivable (money customers owe you)
2. Liabilities: These are things your business owes.
  • Loans
  • Credit card balances
  • Unpaid bills
3. Equity: This is what you, the business owner, own after liabilities are paid off.
  • Owner’s investment
  • Retained earnings (profits you keep in the business)
4. Revenue & Income This is the money your business earns from selling products or services.
  • Sales
  • Service fees
  • Interest income
5. Expenses: This is the money your business spends to operate.
  • Rent
  • Supplies
  • Salaries
  • Utilities
Bookkeeping Methods

There are different approaches to bookkeeping you can take based on your small business’s finances and what works best for you. These methods will help you determine when you should record transactions and how you should record them.

Cash-Based vs. Accrual-Based

Cash-based accounting method records transactions once the money has been exchanged. An invoice is added to the books once it’s been paid, and bills are recorded once you’ve sent the money. This provides you with a precise picture of the cash in your possession at any given time.

Accrual-based accounting records invoices and bills once they are created rather than waiting for them to be fully paid. This method allows you to plan ahead, knowing what cash will be flowing in and out of your business.

You can also modify the accrual-based method by recording expenses when incurred but only recording invoices once cash has been received. This is a good way to safeguard your finances against potential miscalculations in the event that a customer or client does not pay their invoice.

Single-Entry vs. Double-Entry

Single-entry is a simple method where each transaction is recorded only once, either as income or expense. This method tracks cash flow but does not keep track of assets or liabilities. This is most suitable for very small businesses and sole proprietorships.

Example: You sell $500 worth of lemonade, so you record an additional $500 cash.

In double-entry bookkeeping, every transaction is recorded based on how it affects at least two of the 5 main accounts listed above. This method tracks income and expenses while also providing insight into the business’s assets, liabilities, and equity. This provides a more holistic view of your business’s financials while also helping detect errors to keep your records accurate.

Example: You buy $500 worth of lemons for lemonade. Your cash account has lost $500, and your business’s assets have increased by $500 in value.

Then, you sell $500 worth of lemonade. Your cash increased by $500 and your business’s revenue increased by $500.

Bookkeeping Statements

These are the most commonly used financial statements in small business bookkeeping.

Income Statement

An Income Statement, also known as a “Profit and Loss Statement” provides a “bird’s-eye view” of your small business’s revenue and expenses over a set period of time.

This statement is often used to compare a business’s profitability between two set periods of time.

This statement totals revenue, cost of goods sold, and any operating expenses in order to get a net total profit or loss.

Balance Sheet

A balance sheet showcases your business’s equity by totaling all assets owned and subtracting money owed on any liabilities.

This provides a good snapshot of your business’s overall financial health, helping you identify how much value you’re totaling by factoring in all that’s owned and owed at any given point in time.

Chart of Accounts

A chart of accounts shows all accounts belonging to a business in the business’s general ledger.

The chart typically shows account name, account number, account type, and balance.

How To Do Your Own Bookkeeping

Sorting Transactions Across Accounts

Each transaction of money flowing in and out of your business should be sorted into an account (i.e., cash from a sale being sorted into “revenue”); a new small business loan being sorted into both “assets” and “liabilities”).

Record Journal Entries

Balance your debit and credit. Record transactions accordingly, ensuring your debit and credit balances are balanced.

Post Entries to Ledger Account

Once entries have been properly recorded and sorted, ensure they’re added to the general ledger for a holistic view of your business’s finances. This can be done manually, otherwise most accounting/bookkeeping software will do this step automatically.

Adjust Entries

After a determined period of time (whether you decide monthly, bi-monthly, etc.), go through all entries and adjust based on reality. If you estimated invoices or expenses at one value when they ended up being different, make those adjustments in the backlog.

How Can Bookkeeping Help Me Get Small…
Building Your Credit Score— Tools and Strategies

Building Your Credit Score— Tools and Strategies

Key Takeaways
  • Your personal credit plays a role in your business credit, so it’s best practice to focus on maintaining your finances in all areas
  • Credit building accounts are called “tradelines”, which can be either “revolving” or “installment”
  • Different types of tradlines should be used for different types of expenses
  • Implement strategies low utilization and becoming an authorized user in order to increase your credit score
  • Applying too frequently for tradelines can impact your credit score
  • Applying for a loan through NEWITY does not impact your credit score
How Credit Works
Improving your credit score sounds like a daunting feat, but when you’re knowledgeable and strategic, it doesn’t have to be nearly as painstaking as it seems.

Let’s break down the best credit building options and how you can use them strategically in order to boost your score and improve your overall financial profile.
Personal vs. Business Credit
Your personal and business credit are measured on separate scales, but your personal credit does play a role in your business’s credit.

Your personal FICO credit score is on a scale from 300 to 850. The higher your score, the less credit risk you pose. This score takes into account payment history, credit utilization, credit inquiries, and more.

Your business credit score is called an SBSS score. This score can range from 0-300 and is informed by your personal credit as well as credit factors filed under your business’s name.

Because your personal credit affects your business’s credit, it is important to maintain good credit in all areas of your life, especially if you’re considering applying for business financing in the future.

However, do not just rely on your personal credit score to represent your business. The stronger your business credit score is, the more robust your overall financial profile will be, and the more opportunities you’ll have to qualify for favorable financing terms, open credit cards, and grow your business.
Set Up Your Business Credit
If you have not already, you need to start establishing your business’s credit as a separate entity from your personal credit.

Get a DUNS number from Dun & Bradstreet. This is a unique 9-digit number used for credit reporting. This will allow all your credit-building activities to be directly associated with your business.

You should also apply for an EIN number with the IRS. This number identifies your business when you file your taxes, open business bank accounts, apply for business licenses, and more.

Finally, ensure that you have established business financial accounts that are entirely separate from your personal accounts. This means having a business checking account with a debit card only used for business transactions.

You should also apply for a business credit card. Use this card to make necessary purchases for your business, things like weekly inventory and regular necessities, and pay it off on time. This is an easy way to build your credit score while making the necessary purchases you would be making regardless.
Types of Credit
Credit building mechanisms are called “tradelines.” These are the accounts that appear on your credit report. There are two types of tradelines: installment and revolving.

Installment tradelines are accounts in which you reserve a fixed installment of money. This includes all types of loans in which you are given money that you pay back over an established period of time.

Revolving tradelines are variable borrowing accounts in which you are given a credit limit that you must adhere to. Credit cards and lines of credit are considered revolving tradelines.

All types of credit can improve your score as long as you use them accordingly and wisely.
What are the Best Uses for Different Types of Credit? Credit Cards
Credit cards are great credit building tools to use for typical daily or weekly expenses. Ensure that you are not spending money on your credit card that you do not have in your bank account, as late payments will not only decrease your credit score but also rack up large amounts of high-interest debt.

If your credit score is too low to qualify for a traditional credit card, consider a secured credit card. These cards are much easier to obtain, as they require an initial cash deposit upon opening. This cash deposit serves as your credit limit and also collateral on your card in the event that you do not pay it off on time.

Secured credit cards are reported on your credit report in the same way traditional “unsecured” credit cards are, so you can use them to build credit all the same.

The downfall of secured credit cards is that they do not offer the same benefits and rewards that unsecured credit cards do. Secured cards are a great option for initial credit building, and once your score is high enough to qualify for an unsecured credit card, you can switch to one that will give you points and rewards on categories that you often make purchases in for your business.

For example, if you run a restaurant, a credit card that offers 3x points on all grocery purchases would be an excellent option for your business.
Lines of Credit…
Can You Get an SBA 7(a) Loan If You Have Existing Debt?

Can You Get an SBA 7(a) Loan If...

Key Takeaways
  • When you apply for an SBA 7(a) loan, the debt you already hold factors into how much capital you qualify for.
  • You need to be able to prove that your revenue is sufficient enough to cover your current debt and the additional debt you’re applying for.
  • Lenders also take into account the type of debt you have, looking at interest rates and repayment terms to assess how your cash flow is affected.
Can You Qualify for an SBA 7(a) Loan With Existing Debt?
At its most basic level, qualifying for an SBA 7(a) loan is about proving to lenders that you can pay it back. Lenders and loan officers make this assessment by reviewing a variety of your financial statements; however, your existing debt and how it affects your cash flow is a significant factor in your qualification.

Even if your revenue is high and your credit is good, if your cash flow is being significantly hampered by existing debt, your ability to take on more debt could be limited.
What Amount of Debt is "Too Much"
Debt caps on SBA 7(a) loans can differ between lenders and facilitators.

At NEWITY, here is a calculation you can perform in order to assess your own debt-to-income ratio:

  1. Find your average annual revenue for the last 3 years
  2. Find 35%-50% of that number
  3. Subtract all existing business debt
The result is the loan size range you could qualify to receive.

This is not a guarantee that you will qualify for this loan size, as there are other metrics that determine your qualification, however, this is a good general metric to ensure that you are not applying for more debt than you’re financially equipped to handle.
Types of Debt

Lenders not only look at a borrowers’ existing debt balance, but also what type of debt vehicles are included within that total amount. Depending on the type of debt and its terms, different debt is factored into the borrower’s application accordingly.

Example: EIDL’s have a 30-year term and 3.75% interest rate, so those balances are treated differently than a non-SBA loan with a shorter term and higher interest rate.

These two types of debt impact a business’s cash flow very differently within the context of an SBA 7(a) loan with a 10-year repayment term.

Assessing Your Cash Flow
If you’re still unsure as to when is the right time to apply, or how much to apply for, consider performing a comprehensive cash flow assessment on your business.

Step 1: Calculate Monthly Net Cash Flow

Start by reviewing your monthly cash inflows and outflows:
  • Inflows: Revenue from sales, receivables, investments, etc.
  • Outflows: Operating expenses, payroll, rent, loan payments, taxes

Step 2: Determine Your Debt Service Coverage Ratio (DSCR)

This ratio shows whether your business generates enough income to cover loan payments.

Formula: DSCR = Net Operating Income / Total Debt Payments

  • A DSCR of 1.15 or higher is a good target for loans up to $350,000
  • If your DSCR is below 1.0, you’re not generating enough cash to cover debt

Step 3: Forecast Future Cash Flow

Use historical data to project cash flow for the next 12 months. Include:
  • Seasonal trends
  • Expected growth
  • New expenses or investments
This helps determine how much debt your business can handle without straining operations.


Step 4: Estimate Loan Amount Based on Cash Flow

Use your DSCR and forecast to back into a safe loan amount:
  • Calculate how much monthly loan payment your business can afford.
  • Use that amount to estimate the maximum loan size using amortization calculators or lender tools.

Step 5: Consider Use of Funds

Align the loan amount with your business goals:
  • Working capital needs
  • Material purchases
  • Debt refinancing
Avoid borrowing more than necessary— SBA loans are meant to help you grow, not cripple your cash flow.
Ultimately, how much capital you’re qualified to receive through an SBA 7(a) loan is dependent on several factors, many of which you cannot perfectly assess yourself.

At NEWITY, our team performs a “soft credit pull” when you submit an application, meaning the credit inquiry will not appear on your credit report, and your application submission will not affect your credit score.

If you’re interested in learning how much you could qualify for today, submit an application and find out in just 10 minutes!

Find out how much you could qualify for 

Apply Today
Government Shutdown: What it Means For SBA Borrowers

Government Shutdown: What it Means For SBA Borrowers

Key Takeaways
  • A government shutdown occurs when congress cannot pass legislation for federal agency funding
  • During this time, SBA loans cease being processed
  • Submit your loan application anyway and stay responsive with your loan service provider so you’re first in line once processing resumes
When the federal government shuts down, small business owners looking to secure SBA 7(a) loans are among the first to feel the impact.

Whether you’re planning to expand, purchase materials, or boost working capital, understanding how a shutdown affects SBA lending is essential to navigating this period of uncertainty.
What Is a Government Shutdown?
A government shutdown occurs when Congress fails to pass legislation to fund federal agencies.

Without an approved budget, nonessential government operations pause, and thousands of federal employees are furloughed.

While essential services like law enforcement and air traffic control continue, agencies like the Small Business Administration (SBA) are significantly affected.
How the Shutdown Affects the SBA

During a shutdown, the SBA loan application process pauses, and no loans can be approved during this time.

Lenders with delegate authority—meaning special permission to approve SBA loans independent of the SBA—must also cease loan approval.

What This Means for Borrowers
If you’re a small business owner planning to apply for an SBA 7(a) loan, here’s what you need to know:
  • No new applications will be processed: Whether you’re working with a standard lender or one with delegated authority (PLP status), new loans cannot be approved during the shutdown unless they already have an SBA loan number. If an SBA loan number has been assigned to a loan, then the lender can proceed with closing and disburse the funds.
  • Existing loans will be delayed: Even if your loan was in progress before the shutdown, final authorization or disbursement will be postponed.
  • Loan servicing continues: You must continue making payments on existing SBA loans.
  • Backlogs are likely: Once the shutdown ends, expect delays as the SBA works through a flood of pending applications.
How to Proceed During a Shutdown
While the SBA’s lending operations are paused, there are proactive steps you can take:

  1. Prepare Your Application Now

    2. Use this time to gather financial documents and work with your lender or service provider to ensure your application is SBA-ready. This will help you move quickly once operations resume.

  2. Communicate With Stakeholders

    3. Let sellers, landlords, and partners know that funding timelines may shift. Clear communication can help manage expectations and avoid complications.

  3. Stay Informed

    4. Monitor updates from your lender or service provider like NEWITY. They often provide real-time guidance on how to navigate shutdown-related disruptions.
By understanding how SBA operations are affected and taking proactive steps during the government shutdown, you’ll be better positioned to move quickly once government operations resume.

Interested in finding out how much you could qualify for? Apply now and find out in just 10 minutes!

Find out how much you could qualify for 

Apply Today
Small Business Tax Planning

Small Business Tax Planning

Key Takeaways
  • Understanding the tax implications of your business’s structure can help you file properly and identify your tax advantages
  • Consider opening an account on the IRS website in order to easily access and view your tax filings and payments
  • Your tax filings and IRS payments play a role in your loan application process, so it’s important to ensure you stay organized and up to date
Taxes aren’t fun, we get it.

However, filing your taxes properly and being aware of any tax advantages available to you can be the difference between your business’s success and prolonged stagnancy.

Not only will you be susceptible to costly fees and penalties, but improperly filed taxes can reduce your potential for savings and how you qualify for small business loans.

Many small business owners are often unaware of outstanding tax payments, delinquent filings, or even how their business’s structure is affecting the way their taxes are filed.

In the same vein, these entrepreneurs may also be missing potential tax strategies they should be taking advantage of and expenses that could be written off.
Entity Structure & Tax Filing
The first common mistake many small business owners make is failing to properly understand the tax implications of their business’s structure.

Your business’s legal structure determines how income is taxed, who reports the income, what tax forms are required, and more.

Choosing the right structure can reduce your tax burden, simplify compliance, and potentially protect your personal finances from your business’s liabilities.

Let’s break it down:
Sole Proprietorship
  • Flow-through taxation: Business income is reported on the owner’s personal tax return (Form 1040 + Schedule C).
  • Self-employment tax: Owners pay tax on net earnings (Social Security + Medicare) via Schedule SE.
  • No separate legal entity: The owner and business are legally the same.
  • Quarterly estimated payments: Required if you expect to owe more than $1,000 annually.
  • Deductible expenses: Home office, mileage, startup costs, etc.
Limited Liability Company (LLC)
  • Choice in taxation: LLCs can determine how they wish to be taxed, offering flexibility based on the number of members and the business’s goals.
  • Flow-through taxation default: LLCs can be taxed as a flow-through entity, or elect to be taxed as an S-Corp or C-Corp.
  • Self-employment tax: Applies unless taxed as an S Corp.
  • Tax flexibility: LLCs can elect to be taxed as an S Corp or C Corp using IRS Form 8832.
  • No double taxation (unless electing C Corp status).
S Corporation (S Corp)
  • Flow-through entity: Income, losses, deductions, and credits flow to shareholders’ personal tax returns.
  • Avoids double taxation: No corporate-level tax.
  • Owners as employees: Must pay themselves a “reasonable salary” subject to payroll taxes.
  • Tax filings: IRS Form 1120-S and Schedule K-1 for shareholders.
C Corporation (C Corp)
  • Separate tax entity: Pays corporate income tax (currently 21% federal rate).
  • Double taxation: Profits taxed at corporate level and again when distributed as dividends to shareholders.
  • Tax filings: IRS Form 1120.
  • Deductible expenses: Salaries, benefits, depreciation, etc.
  • Can carry forward net operating losses and claim various tax credits.
Outstanding Tax Balances or Missed Filings
  • Your SBSS score is your business’s credit score that accounts for several factors, spanning both business and personal finances
  • SBSS scores range from 0-300, with “good” SBSS scores starting around 165
  • Your SBSS score is used in determining if you could qualify for a small business loan
What Is An SBSS Score?
SBSS stands for Small Business Scoring Service. This is a credit scoring service developed by FICO specifically for evaluating business credit. Unlike personal FICO scores, an SBSS score takes into account multiple factors, including business age, revenue, and the personal credit of all business owners.

SBSS scores range from 0-300 and are used by lenders to evaluate the financial standing and trustworthiness of small business loan applicants.
Why Does Your SBSS Score Matter?
When you’re interested in receiving small business funding, your SBSS score can impact whether or not you qualify and how much financing you’re eligible to receive.

That’s why it’s so important to manage your personal and business finances responsibly and monitor your credit regularly, ultimately ensuring that you’re prepared when it comes time to apply.
How Is An SBSS Score Calculated?
Unfortunately, you cannot calculate your own SBSS score. This score is calculated by FICO when you’re applying for business loans.

Here’s how it works:

Let’s say you’re a small business owner looking to apply for funding. When you submit a loan application with your business’s financial data and information about the owners, the lender or loan facilitator performs a credit pull. When you apply through NEWITY, we perform a soft credit pull, which does not affect your credit score. This credit pull gathers your personal credit data as well as your business’s credit data from business credit bureaus.

Your SBSS score is then generated. This is done by combining the following pieces of information:
  • Personal credit history of all owners
  • Business credit history
  • Time in business
  • Annual revenue
  • Cash flow and bank balances
  • Public records (e.g., liens, bankruptcies)
  • Industry risk profile (NAICS code)
  • Trade Lines
  • Payment History
How Your SBSS Score Can Vary
Just like personal FICO scores have different versions, your business might have multiple SBSS scores, depending on how a lender chooses to configure the scoring model.

Lenders can customize how the SBSS model weighs different types of data. For example, one lender might prioritize your business credit profile, while another might place more emphasis on your personal credit history or financials. This flexibility allows lenders to tailor the score to their specific risk tolerance and lending criteria.

The model is also designed to be adaptive. If a lender prefers to pull business credit data from Experian but there isn’t enough information available, the system can automatically check Dun & Bradstreet or Equifax instead. If business credit data is still too limited, the score may be calculated using personal credit data alone, possibly supplemented by financial information from your application.

Because of this dynamic setup, your SBSS score can vary from lender to lender—and it can change over time as your credit reports and financials are updated. That’s why it’s important to maintain strong credit habits across both your personal and business profiles.

All loans facilitated by NEWITY use the SBA’s model for calculating SBSS scores.
What Is Considered A Good SBSS Score?
At NEWITY, SBA 7(a) loan applicants must have an SBSS score of 170 or higher to qualify for funding.

If you’re using your business’s SBSS score to set benchmarks for your financial growth, here is a chart to help you understand the context of your score:
…
What You Can (And Cannot) Use an SBA 7(a) Loan For

What You Can (And Cannot) Use an SBA...

Key Takeaways
  • SBA 7(a) loans offer flexible funding for operational and growth needs.
  • There are clear restrictions on how funds can be used, such as prohibitions on real estate purchases, large equipment, personal expenses, passive investments, delinquent taxes (without a payment plan), and refinancing other SBA loans.
  • Strategic use of SBA 7(a) loans can unlock growth and stability, especially when cash flow gaps, expansion opportunities, or high-interest debt are limiting your business’s potential.
SBA 7(a) loans are among the most versatile forms of small business financing. For entrepreneurs navigating growth, slow seasons or operational transitions, these loans may provide a safety net and a launchpad. SBA 7(a) loans facilitated by NEWITY function as working capital loans, giving small business owners the flexibility to fund everyday needs and long-term initiatives.

But what does this mean for you and your small business?

Here’s a breakdown of ways you can and cannot use an SBA 7(a) loan facilitated by NEWITY:
Permitted Uses Working CapitalCover day-to-day operating expenses, manage cash flow, and support growth initiativesInventory and MaterialsPurchase inventory or raw materials, upgrade technology systems, invest in supplies, and cover work-in-progress costsDebt Refinancing Refinance existing non-SBA business debtTenant ImprovementsMake upgrades to leased spaces for…
Separating Personal and Business Finances

Separating Personal and Business Finances

Key Takeaways
  • Separating your business from your personal finances as much as possible will help you to stay organized, ensure your taxes are accurately filed, and manage cash flow
  • Consider registering as an LLC to protect yourself from personal liability for your business
  • Apply for EIN and DUNS numbers for tax & credit purposes
You’re wanting to start a small business— what are the first steps?

Setting your small business up for success in the long run means establishing a good foundation. Being proactive with your small business structure and finances now will save you time, money, and energy in the future.

Dane Colvin is a registered CPA and AVP of Finance and Operations at NEWITY and has worked with thousands of small business owners throughout their funding journey. Here is some advice he offers to new entrepreneurs who are feeling overwhelmed with the world of small business finances:
“I think the biggest thing, and something we see on the NEWITY side, is when you are starting a business, you want to make sure you’re completely separating it from your personal [finances].” -Dane Colvin

It’s best to establish this separation immediately. Many times, entrepreneurs will put off this type of clerical work for a later date. As their business grows and their task list expands, financial structure takes a backseat to more pressing matters.

If you plan to apply for small business financing in the future, the application process will go much more smoothly when you are able to easily distinguish between personal and business finances.

Additionally, when you file taxes, you’ll need to accurately report the income and deductible expenses of both your business and your personal finances, independent of one another.

Here are 5 steps to get you started with establishing separate accounts for your personal and business finances.

1. Register your business as an LLC

LLC stands for “limited liability company”. This means that you cannot be held personally liable for your business’s debts. This is a great business structure if you’re looking to protect your personal assets while avoiding the more complicated structure of a corporation.

You can register as an LLC by selecting a unique business name and filing Articles of Organization with your state’s Secretary of State office. Most states allow you to file by mail.

2. Apply for an Employer Identification Number

An Employer Identification Number (EIN) is a nine-digit number assigned to your business by the IRS for tax purposes. This number identifies your business when you file your taxes, open business bank accounts, apply for business licenses, and more.

You can apply for an EIN for free through the IRS website using their EIN Assistant or by downloading form SS-4 and sending it to the IRS by mail or by fax.

3. Apply for a DUNS number

A DUNS number is a 9-digit number your business receives through Dun & Bradstreet used for credit reporting. The sooner you do this, the sooner you can start building your business credit.

This number is free to request from Dun & Bradstreet via their website and typically only takes 1-2 business days to receive.

4. Open a business checking account

Using your personal checking account for your small business can complicate your finances on several levels. By opening a business checking account, you can keep your personal and business expenses separate, stay organized, and manage your cash flow efficiently.

5. Apply for a business credit card

This is a great way to start building your business credit as soon as possible. If you’re stuck deciding on which credit card to go with, Colvin recommends applying for a card that offers extra points in categories that your business often makes purchases in.

“I think…
Unsecured vs. Secured Credit Cards

Unsecured vs. Secured Credit Cards

Key Takeaways
  • Secured credit cards require a cash deposit that acts as “collateral” on your card balance, and are easier to obtain for people with lower credit scores
  • Unsecured credit cards do not require that initial cash deposit, but are more difficult to obtain, have higher credit limits, and offer better rewards programs on money spent
  • If you have a limited or poor credit history and do not qualify for an unsecured credit card, a secured credit card is a good starting point to build credit
  • Credit cards are strategic credit-building tools that can play a large role in your business’s overall growth
What is the difference between secured and unsecured credit cards?
An unsecured credit card is what most people commonly think of when discussing “credit cards.”

This is a credit card that has a credit limit set by the issuing bank based on your credit history. You use this card to make payments, then pay off the balance at the end of the month.

A secured credit card is only slightly different in that it requires an initial cash deposit to act as collateral in the event that you do not pay off your credit card balance.

Let’s say you open a secured credit card and make a cash deposit of $3,000. That deposit acts as the credit limit on that card, meaning you can only spend up to $3,000 on that card before paying off the balance.

Every time you pay off the balance on that card, you pay it from the cash in your checking account, as you would with an unsecured credit card.

However, if you were to neglect to pay off your secured credit card by the time the balance is due, your bank would seize that initial $3,000 cash deposit in order to cover the amount you owe.
What are the pros and cons of secured and unsecured credit cards? Unsecured Credit CardsSecured Credit Cards ProsHigher credit limit, better rewards systems Easier to obtain, prevent overspending ConsMore difficult to obtain,…
Do You Need Collateral For An SBA 7(a) Loan?

Do You Need Collateral For An SBA 7(a)...

Pledging collateral for a business loan can seem complicated, but it doesn’t have to be.

In this article, we’ll break down the definition of collateral, why it’s necessary, and how you can get a loan without needing to pledge collateral at all.
Key Takeaways
  • Collateral is a set of assets pledged by a borrower to a lender, should the borrower default on their loan
  • Collateral could be almost anything, from physical assets to retirement accounts to trading assets
  • NEWITY facilitates non-collateral loans up to $50,000
What is Collateral?
When you apply for a loan, your lender needs to know that they’re protected. Even if your finances show that you are trustworthy, lenders often want extra protection against potential loss of value.

Collateral is that extra protection. If you as the borrower were to default on your loan, the lender would seize the collateral that was listed with the loan in order to get some or all of their money back.
How is Collateral Identified?
Items used as collateral could be nearly any store of value, including:
  • Equipment
  • Inventory
  • Furniture
  • Real Estate
  • Business Vehicles
  • Cash or Savings
  • Retirement Accounts
  • Patents, Trademarks, or Other Intellectual Property
  • Trading Assets
When evaluating collateral, lenders will consider the Adjusted Net Book Value (ANBV) of assets. This is a calculation that takes the original value of an asset, then subtracts depreciation, market conditions, wear and tear, forced liquidation value, and more.
How Much Collateral is Needed For a Loan
For some loans to be considered “fully secured”, the borrower must be able to offer enough value through their business assets to cover the loan amount.

If a borrower’s business assets do not total or surpass the loan amount, lenders may file liens on personal assets. This also may be required for owners with 20% ownership or more in the business, or any personal guarantors on the loan.

While this sounds daunting, pledging collateral will not impact your business long as you pay back your loan in accordance with the loan term.
Can You Get an SBA 7(a) Loan Without Collateral?
If you’re in need of fast cash, pledging collateral means extra paperwork and, consequently, extra time.

Further, you may be wanting to avoid tying up your assets in case they are needed for other financing or operational flexibility.

So, if you’re looking for quick capital, do not have sufficient collateral to secure a loan, or just simply do not want to tie up your assets, we can get you the funds you need without overcomplicating things.

While most SBA 7(a) lenders and facilitators will require collateral on loans over $25,000, NEWITY facilitates SBA 7(a) loans up to $50,000 without any collateral requirements.

After all, pledging collateral isn’t always the most convenient way to get the funds you need.

If you’re a start-up, you may not yet have sufficient assets to pledge. Service-based industries or digital businesses may not have much to offer, either.
How Do SBA 7(a) Loans Through…
Your Business Loan Was Denied... What's Next?

Your Business Loan Was Denied... What's Next?

Key Takeaways
  • SBA loan denial could be chalked up to poor credit, industry, or even business age
  • You can reapply for an SBA 7(a) Loan through NEWITY after 90 days
  • Organize your finances to track your own eligibility and prepare for the next time you apply
  • Improve your business’s credit by using a credit building card like NAV Prime
  • Assess and improve your cash flow by paying down debt or increasing revenues
Does getting denied a loan hurt your credit?
Being denied a loan does not affect your credit score. However, when you apply for a loan, lenders often conduct a “hard inquiry” into your credit report. Multiple hard inquiries within a short period can signal to lenders that you may be a high-risk borrower. At NEWITY, we do not perform hard inquiries when facilitating your loan application.
Why was my SBA loan application denied?
To improve your chances of being approved in the future, it can be helpful to understand why your loan application was denied.

Your SBA loan application could be denied for several reasons:
1. Poor Credit
Your personal credit is taken into account alongside your business credit. Any large personal loans, high credit card utilization rates, or late payments in either your personal or business portfolio could decrease your chances of being approved for an SBA loan. However, if your business has a minimal credit history, this can also affect your chances of being approved for a loan.
2. Industry Risk
Certain industries and specifically where your business sits within that industry are considered higher risk for loan default than others. In addition to industry risk, the SBA also has industry size standards that constitute whether your business is a “small business”.
3. Business Age
The younger your business, the tougher it is to be approved for an SBA loan. You are able to apply as early as 3 months into your business. However, the youngest businesses have the strictest eligibility requirements.
Can I Reapply for an SBA…
What is a NAICS code and why do they matter to my business?

What is a NAICS code and why do...

Key Takeaways
  • Your NAICS code helps you and others categorize your business at its most specific level
  • NAICS codes are used for a variety of purposes, including taxes, identifying industry benchmarks, insurance, and more
  • NAICS codes have a large effect on how your business qualifies for an SBA loan
  • NAICS codes are self-assigned using the NAICS code look-up tool
What is a NAICS code?
NAICS stands for North American Industry Classification System. Your NAICS code is a 6-digit code used to identify your business’s industry and its most specific level.
Structure of a NAICS code
The first two digits of your NAICS code represent your business’s sector- such as retail or hospitality. The remaining digits signify your business’s subsector, industry group, NAICS industry, and national industry, respectively.

Ultimately, this hierarchical structure allows NAICS codes to communicate your business’s industry and purpose down to a specific level.
Why do NAICS codes matter?
NAICS codes prevent oversimplification of the broader business playing field. NAICS codes take into account your business’s economic activity and compare you to the standards of others in your specific industry.

NAICS codes are used in a variety of contexts, such as:
Government Business
Government agencies use NAICS to collect, analyze, and publish economic data. NAICS codes are also used when determining your eligibility for certain government programs, grants, and contracts.
Market Research
Businesses use NAICS codes to analyze competitors, identify market trends, and research industry benchmarks to help you track growth and competition.
Taxation
The IRS uses NAICS codes to monitor deductions and income, flagging anything unusual for that industry.
Insurance
Insurers use NAICS codes to determine premium rates and coverage based on industry-specific risks.
How does my…
How Business Owners Can Navigate Seasonal Slowdowns

How Business Owners Can Navigate Seasonal Slowdowns

Seasonal slowdowns are a reality for many businesses, whether you’re in retail, hospitality, or any industry affected by fluctuating consumer demand. While these quieter periods can be challenging, they also offer opportunities to reassess, regroup, and prepare for the busy seasons ahead. Here’s how business owners can navigate seasonal slowdowns effectively and come out stronger on the other side. 

1. Plan for Slow Periods

The key to surviving seasonal slowdowns is preparation. Analyze your business data to identify patterns in customer activity and revenue. Understanding when and why slowdowns occur allows you to build a strategic plan that includes: 

  • Cash Flow Management: Set aside a portion of your revenue during peak seasons to cover expenses during slower months. 
  • Inventory Adjustments: Reduce stock of slow-moving items and focus on staples that sell year-round. 
  • Staffing Needs: Schedule fewer hours for part-time staff or cross-train employees to maximize efficiency during the downturn. 
2. Strengthen Customer Relationships

During slow seasons, focus on nurturing your existing customer base. Loyal customers are more likely to support your business year-round if you engage with them consistently. 

  • Exclusive Promotions: Offer discounts, loyalty rewards, or exclusive deals to encourage repeat business. 
  • Personalized Outreach: Use email campaigns, social media, or direct mail to stay top-of-mind. Share updates about your business or send a heartfelt thank-you note for their support. 
  • Host Events: Consider hosting workshops, webinars, or special events that align with your brand. These can create interest and keep customers engaged. 
3. Diversify Revenue Streams

Seasonal slowdowns can expose vulnerabilities in a business that relies on one primary revenue source. Diversification can help you weather these fluctuations. 

  • Offer Complementary Products or Services: Identify new ways to serve your customers. For example, a landscaping company might offer snow removal in the winter. 
  • Leverage E-Commerce: If you’re a brick-and-mortar store, consider selling products online to reach customers who may not be impacted by your local seasonality. 
  • Collaborate with Other Businesses: Partner with complementary businesses to cross-promote products or services, expanding your audience. 
4. Focus on Marketing

Slow periods are the perfect time to ramp up your marketing efforts and attract new customers. 

  • Seasonal Campaigns: Create marketing campaigns tailored to the current season, highlighting relevant products or services. 
  • Content Creation: Write blog posts, produce videos, or share tips on social media that align with your business and the time of year. 
  • Engage Locally: Participate in community events, sponsor local causes, or collaborate with nearby businesses to increase visibility. 
5. Review and Adjust Your Financial Strategy

Seasonal slowdowns can strain cash flow, so it’s essential to review your financial strategy during this time. 

  • Refinance Existing Debt: If your current loans or credit lines have high interest rates, refinancing during the off-season can help lower monthly payments. 
  • Access Business Financing: Consider a working capital loan, such as an SBA 7(a) loan, to cover operating expenses or invest in growth opportunities. 
  • Negotiate with Vendors: Work with suppliers to extend payment terms or reduce costs during slower months. 
6. Prepare for the Next Peak Season

When small business owners look to borrow money, they often encounter two primary types of loans: secured and unsecured. Understanding the differences between these two loan categories is crucial for choosing the best financing option for your business. For many entrepreneurs, SBA 7(a) loans strike the perfect balance, offering flexibility and accessibility while incorporating elements of secured lending. 

What Are Secured Loans?

Secured loans are backed by collateral—assets the lender can seize if the borrower fails to repay the loan. Common types of collateral include real estate, equipment, inventory, or other valuable business or personal assets. 

Benefits of Secured Loans 
  • Lower Interest Rates: Because lenders face reduced risk due to the collateral, secured loans typically come with lower interest rates. 
  • Higher Loan Amounts: Lenders may be more willing to approve larger loan amounts since the collateral provides additional security. 
  • Easier Approval for Startups or Less-Established Businesses: If your business has limited credit history or financial performance, offering collateral can make loan approval more likely. 
Drawbacks of Secured Loans 
  • Risk of Losing Assets: If you default on the loan, the lender can seize your pledged assets, which may be critical to your business operations. 
What Are Unsecured Loans?

Unsecured loans do not require collateral. Instead, lenders assess the borrower’s creditworthiness and financial history to decide whether to approve the loan. Examples include credit cards, personal loans, and some types of small business loans. 

Benefits of Unsecured Loans 
  • No Collateral Required: This eliminates the risk of losing business or personal assets in the event of default. 
  • Faster Processing: Without the need to assess collateral, unsecured loans are often approved more quickly. 
Drawbacks of Unsecured Loans 
  • Higher Interest Rates: Because unsecured loans pose a greater risk to lenders, they usually come with higher interest rates. 
  • Lower Loan Limits: Lenders tend to approve smaller loan amounts for unsecured loans. 
  • Strict Qualification Requirements: Borrowers need strong credit and financials to qualify. 
Are SBA 7(a) Loans Secured or Unsecured?

The SBA 7(a) loan program combines elements of secured and unsecured lending to create a middle ground that works for many small business owners. 

Collateral Requirements 

At NEWITY you can access an SBA 7(a) small business loan up to $50,000 without any collateral. Loan ranging from $50,001 to $500,000 secure collateral in the form of a  blanket lien.  

A blanket lien is a legal claim that gives a lender the right to property or assets in the event of non-payment. 

Why Choose an SBA 7(a) Loan? 

SBA 7(a) loans are designed for small business owners. They provide the security of government backing while allowing lenders to consider the broader financial picture of the borrower. 

Additionally, SBA 7(a) loans provide long-term benefits, such as: 

  • Improved cash flow due to lower monthly payments 
  • The ability to build credit for future financing needs 
  • Options to consolidate or refinance existing debt 
Conclusion

Understanding the differences between secured and unsecured loans is vital when deciding on a financing solution for your business. Secured loans often offer lower interest rates and higher limits but come with the risk of losing assets. Unsecured loans provide fast access to funds without collateral but often feature stricter requirements and higher costs. 

SBA 7(a) loans provide a unique hybrid approach, offering the flexibility and support many small business owners need to thrive. An SBA 7(a) loan could be the key to achieving your goals while balancing risk and reward. 

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How To Effectively Repay Your Business Loan

How To Effectively Repay Your Business Loan

Taking out a business loan can be a powerful tool for growth, whether you’re purchasing new equipment, expanding operations, or managing cash flow. However, repaying that loan responsibly is just as important as securing it. A well-planned repayment strategy not only ensures you maintain a healthy financial position but also builds your creditworthiness for future financing needs. 

Here’s how small business owners can effectively repay their business loans while keeping their finances on track. 

Understand Your Loan Terms

Before you make your first payment, thoroughly review the terms of your loan agreement. Key details to focus on include:

  • Repayment schedule: Monthly, bi-weekly, or other intervals. 
  • Interest rate: Fixed or variable, and how it affects your total repayment amount. 
  • Prepayment penalties: Check if there are fees for paying off the loan early. 
  • Grace periods: Some loans may have a window before repayment starts.

Understanding these terms helps you plan your payments and avoid surprises. 

Create a Repayment Plan

Treat your loan repayment as a non-negotiable expense in your budget. To do this: 

  • Allocate funds: Dedicate a portion of your revenue specifically for loan repayment. 
  • Automate payments: Set up automatic payments to avoid missing due dates. 
  • Build a buffer: Keep an emergency fund to cover payments during slow periods. 
Prioritize Payments Strategically

If you have multiple loans or debts, prioritize repayment based on: 

  • Interest rates: Pay off high-interest loans first to reduce your overall costs. 
  • Loan terms: Focus on loans with shorter repayment periods to free up cash flow sooner. 
Monitor Your Cash Flow

Regularly track your business’s cash flow to ensure you can cover loan payments without straining your operations. Tools like QuickBooks or Xero can help you: 

  • Forecast future cash flow trends. 
  • Identify potential shortfalls early. 
  • Adjust spending to maintain payment capacity. 
Consider Refinancing

If your loan payments are becoming unmanageable, refinancing might be a solution. This involves taking out a new loan with better terms to replace your existing one. Refinancing can: 

  • Lower your interest rate. 
  • Extend your repayment term, reducing monthly payments. 
  • Simplify your finances by consolidating multiple loans. 

SBA 7(a) loans are a particularly attractive option for refinancing because they offer competitive rates and flexible terms, helping small business owners regain control of their finances. 

Increase Revenue to Accelerate Repayment

Boosting your income can make it easier to meet or even exceed your loan payments. Strategies include: 

  • Upselling to existing customers. 
  • Expanding your product or service offerings. 
  • Running targeted marketing campaigns to drive sales. 

Use a portion of any increased revenue to pay down your loan faster, reducing overall interest costs. 

Communicate with Your Lender

If you’re struggling to make payments, don’t wait until it’s too late. Reach out to your lender to discuss: 

  • Loan modifications: Adjustments to your terms that make payments more manageable. 
  • Deferment options: Temporary payment relief during financial hardship. 
  • Alternate solutions: Some lenders may offer restructuring options tailored to your situation. 

Lenders often appreciate proactive communication and are more likely to work with you when you’re transparent about your challenges. 

…
How to Improve Cash Flow for Small Business Owners

How to Improve Cash Flow for Small Business...

Healthy cash flow is the difference between a business that can move fast on new opportunities and one that’s forced into stagnancy.

This guide breaks down the essentials of cash flow, how lenders look at it, and practical steps you can take to strengthen it today.
What Cash Flow Really Is
Cash flow is the movement of money into and out of your business over a period of time, usually tracked monthly or weekly.

Unlike profit, which can include non‑cash items, cash flow shows what’s actually in your account to make payroll, pay vendors, and service debt.

For small businesses, strong cash flow helps you:
  • Stay current on payroll, rent, taxes, and suppliers.
  • Absorb seasonal swings and unexpected expenses.
  • Qualify for better loan terms and more flexible financing.
Don’t wait until your bank balance is scary to pay attention. Instead, get in the habit of checking your cash regularly, even if it’s a quick weekly review of what came in, what went out, and what’s coming next.

Use a simple forecast to look a few weeks or months ahead so you can see potential gaps early, while you still have options. When you spot a squeeze coming, you can speed up collections, slow or shift certain expenses, or line up financing before it turns into a true cash crunch.
Cash Flow Statements
A cash flow statement tracks actual cash in and out, usually in three sections: operating, investing, and financing activities.

Use at least a 12‑month view so you can see patterns and seasonality clearly.

Typical structure of a small business cash flow statement:
  • Operating activities: customer receipts, cost of goods sold payments, payroll, rent, marketing, utilities, taxes.
  • Investing activities: equipment purchases, vehicle or machinery buys, asset sales.
  • Financing activities: loan draws, principal repayments, owner contributions or distributions.
The basic math most templates follow is:

Opening cash + Net cash from operating + Net cash from investing + Net cash from financing = Ending cash for the period.
Cash Flow Analysis Template
Line up your expected inflows and outflows by period, then calculate net cash and running balance. You can recreate this in a spreadsheet with just a few sections.

At a minimum, structure your template as follows:
CategoryLine ItemMonth 1Month 2 Cash InflowsSales/Revenue$$ Loans/Financing Received$$ Other Income$$Total Cash Inflows$$Cash OutflowsCost of Goods Sold (COGS)$$Payroll & Benefits$$Rent & Utilities$$Loan/Debt Payments$$Taxes$$Other Operating Expenses$$Total Cash Outflows$$Net…
How to Set SMART Goals for Your Small Business

How to Set SMART Goals for Your Small...

Setting goals is essential for driving growth and success in your small business. But not all goals are created equal. To ensure your goals are actionable and effective, consider the SMART framework—Specific, Measurable, Achievable, Relevant, and Time-bound. Here’s a step-by-step guide to help you create SMART goals that will set your business on the path to success. 

1. Be Specific

Vague goals can lead to confusion and lack of direction. Instead, focus on setting clear, well-defined objectives. Specific goals outline exactly what you want to achieve and help you stay on track. 

Example:
  • Instead of saying, “Increase sales,” try: “Increase monthly online sales revenue by 20% by improving our e-commerce website.” 
2. Make It Measurable

Measurable goals allow you to track progress and determine success. By including numbers, percentages, or other measurable criteria, you create benchmarks to monitor your progress. 

Example: 
  • “Gain 50 new email subscribers per month” is a measurable goal. You can easily track your progress through email marketing analytics. 
3. Ensure It’s Achievable

Your goals should challenge your business but still remain realistic. Setting overly ambitious goals can lead to frustration, while achievable goals build momentum and motivation. 

Example: 
  • If your business currently gains 10 new customers per month, aiming for 20 new customers is challenging yet attainable. Setting a goal of 100 new customers might be unrealistic. 
4. Keep It Relevant

Every goal should align with your business’s mission, vision, and long-term objectives. Relevant goals ensure that your efforts contribute to your overall business growth. 

Example: 
  • If your goal is to expand your product line, ensure it aligns with your target audience’s needs and your brand’s core offerings. 
5. Set a Time Frame

Goals without deadlines often get forgotten our pushed aside. Adding a time frame creates urgency and helps you stay focused on achieving your objectives within a set period. 

Example: 
  • “Launch a new product line by the end of Q2” gives a clear timeline to work toward. 
Putting It All Together

When crafting SMART goals, ensure each component works together cohesively. Here’s an example of a fully SMART goal: 

SMART Goal: 
“Increase social media engagement by 15% over the next three months by posting three times a week and running two ad campaigns targeting our ideal audience.” 

Benefits of SMART Goals for Small Businesses
  1. Clarity and Focus: You know exactly what you’re working toward and why. 
  2. Improved Decision-Making: SMART goals guide your resource allocation and strategy. 
  3. Enhanced Team Collaboration: Well-defined goals help your team understand their roles and responsibilities. 
  4. Trackable Progress: Measuring your goals keeps you accountable and allows for course corrections if needed. 
Tips for Staying on Track
  • Break Goals Into Smaller Tasks: Divide larger goals into manageable action steps. 
  • Use Tools and Technology: Use project management software or goal-tracking apps to stay organized. 
  • Regularly Review Progress: Check in on your goals monthly or quarterly to ensure you’re on track. 
  • Celebrate Milestones: Acknowledge and celebrate when you hit key milestones to keep motivation high. 
Start Setting SMART Goals Today…
How to Plan for the Year Ahead: Start with a Strong Business Plan

How to Plan for the Year Ahead: Start...

As a small business owner, planning for the upcoming year is essential for sustained growth and success. A strong business plan serves as your roadmap. It helps you define your goals, identify potential challenges, and outline the steps needed to achieve your vision. Whether you’re revising an existing plan or starting fresh, this guide will help you create a business plan that sets your business up for a successful year ahead. 

Reflect on the Past Year

Before planning ahead, take a moment to review your business’s performance over the last year. Analyze financial statements, assess customer feedback, and evaluate the success of key initiatives. Reflecting on what worked (and what didn’t) will give you valuable insights to guide your next steps. 

Questions to Ask:
  • Did you meet your revenue and profit goals?
  • Which marketing strategies delivered the best ROI?
  • What operational challenges needs addressing?
  • Did you have sufficient cash flow to achieve your goals? 
Set Clear and Measurable Goals

A strong business plan begins with well-defined objectives. Your goals should be SMART: Specific, Measurable, Achievable, Relevant, and Time-bound. Whether it’s increasing revenue, launching a new product, or expanding your team, having clear goals provides direction and focus. 

Example Goals: 
  • Increase revenue by 20% by Q4. 
  • Launch two new products by the end of Q2. 
  • Reduce operational costs by 15% by year-end. 
Create a Financial Plan

Budgeting is a critical component of both your business plan and your year-long strategy. Outline your expected income, fixed expenses, and variable costs. Factor in opportunities for investment, such as marketing, hiring, or purchasing new equipment. 

Pro Tip: Consider applying for an SBA 7(a) loan to secure affordable funding for growth initiatives like hiring, marketing, or expanding operations.

Revamp Your Marketing and Sales Strategies

To stay competitive, your marketing and sales plans need to evolve with market trends and customer preferences. Leverage data from the past year to refine your approach. Consider new channels, tools, or campaigns that align with your business goals.

  • Boost social media engagement with targeted ads. 
  • Start a content marketing plan to drive organic traffic. 
  • Invest in email marketing to nurture leads and retain customers. 
Plan for Risks 

Scaling a business requires anticipating potential obstacles. Identify risks—such as economic changes, supply chain disruptions, or regulatory updates—that could impact your operations. Develop contingency plans and consider insurance or financial reserves to protect your business. 

Update or Create Your Business Plan

Once you’ve gathered your insights, set goals, and identified strategies, compile everything into a refreshed business plan. Your plan should include: 

  • Executive Summary: Brief overview of your goals and strategies. 
  • Market Analysis: Insights into industry trends and your target audience. 
  • Operational Plan: Overview of your team, processes, and resources. 
  • Financial Plan: Budget, projections, and funding needs. 
Start the Year Strong 

The start of a new year is the perfect opportunity to re-align your business goals and strategies. With a well-thought-out business plan, you can turn your vision into actionable steps that drive growth and success. 

If you’re considering funding options to achieve your 2025 goals, NEWITY can help you access an SBA 7(a) loan quickly and efficiently.  

Fuel your growth with a business loan.
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To qualify for an SBA 7(a) small business loan, your business must be:

  1. U.S.-based and operated
  2. Owner supported / owner funded
  3. Eligible per the SBA’s requirements

Your loan amount will determined by the business’ average annual revenue, FICO score, and years in business