Employers eligible for the Employee Retention Credit (ERC) program can advance a portion of their payroll tax refund by taking out a loan or selling their claim for a nominal fee. Businesses can then use these funds to pay for a wide variety of business expenses.
With the IRS imposing an enhanced compliance review policy on existing ERC refund requests and a moratorium on processing new ERC claims until at least January 1, 2024, employers must wait considerably longer to receive their funds.
For this reason, businesses that have already filed and are waiting for the IRS to process their claim or employers that plan to file should look into the advantages of an ERC bridge loan or ERC claim buyout.
Here are ten ways your business can use ERC funding to continue moving forward.
1. Invest in Content Marketing
People start businesses because they’re good at what they do. Whether that’s construction, legal services, serving up gourmet fare, or something else, they need to showcase their expertise to potential customers to prove they’re someone they want to do business with.
Content marketing can position you as a thought leader in your industry and a helpful source of information. That double-pronged approach can go a long way toward building trust in your target customers.
How-to or how-it-works videos, informative blog posts that provide insights into why people need the services your business offers, and before-and-after images all fall under the category of content marketing. Linking to your content on social media can extend its reach even further.
As a Demand Metric study shows, content marketing costs 62% less than traditional marketing methods but yields three times as many leads. With that kind of result, investing in content marketing could prove a wise application of ERC funding.
Don’t stress if you can’t write, take photographs, or produce videos. Freelance content creators or content marketing agencies can handle the legwork for you while you do what you do best.
2. Optimize Your Business’s Website
Once you have a blog on your website, you must ensure your target customers can find you online. Spending at least some of your ERC funds on a search engine optimization (SEO) professional can help your website become more visible when people search for your products and services.
When prospects arrive at your site, they’ll want an attractive, easy-to-navigate menu and content. Hiring a web designer or user experience (UX) professional to make your site more user-friendly and engaging will help visitors stay longer. The longer they explore your content, the more likely they’ll be to return — and eventually, become customers themselves.
3. Reward Your Employees
Employees who stuck with your company during the pandemic had other choices — like gig jobs, remote work with another company, or other options. Ensure they know you appreciate their loyalty with perks that will turn them into your most effective brand advocates.
Provide Them with 401(k) Contributions or Cash Bonuses
Nothing says “thank you” more than a tangible expression of your appreciation. Corporate generosity can go a long way toward boosting employee morale and building a sense of ownership in the company.
Increase Employee Benefits
Providing your workforce with desirable benefits can make them more passionate about working for your company. Assessing their needs beforehand with a survey can give you an idea about which benefits would help them the most. Benefits could include:
- Childcare reimbursement or on-site care
- Longer paid vacation
- Disability, long-term care, or life insurance policies
- Better healthcare policies
- On-site fitness equipment or memberships at local fitness centers
Relieve Overworked Employees by Hiring New Staff
If your company is short-staffed and your current employees’ tempers are beginning to fray, you may want to use your ERC funds to lessen their workload by hiring new staff. After all, when your workforce maintains a healthy work-life balance, they produce more, take fewer days off, and are more likely to be content with their jobs.
4. Fix or Replace Equipment
If your equipment is a bit behind the times, you can lower your maintenance costs, boost efficiency, and make your employees happier by upgrading to a newer model with the funds you receive from your ERC loan or buyout. Even if your ERC funding doesn’t cover the entire purchase, you can usually deduct the rest as a business expense when tax season comes.
5. Update Your Tech Stack
Small- to mid-sized businesses often operate on a shoestring budget when it comes to their tech. Updating your tech stack to include tools that automate routine processes, provide greater security, or manage inventory more efficiently can pay off in spades for years to come.
In addition, you could use your ERC funding for small businesses to upgrade your existing technology. Dated software programs or decades-old desktops are clunky, slow, and crash-prone, eating up your valuable time. Upgrade them to today’s standard to save your business time and money.
6. Launch a New Product or Service
If you’ve had some ideas for new products or services on the back burner but haven’t had the time or money to pursue them further, now may be the time to put those dreams into motion.
There are plenty of reasons for expanding your offerings. Diversifying your product or service lines can be one of the quickest ways to generate more revenue, particularly if you already have a plan in place.
7. Pay Off Debt
Many businesses needed to borrow money to continue their operations during the pandemic. Others had incurred debt by investing in equipment, property, or tech upgrades and couldn’t pay it off before the pandemic started.
Left unpaid, that debt can accrue interest over time. And, as long as the debt remains on the books, it may affect a business’s credit score.
If your business has debt, consider using ERC advance funding to pay it off. We’ve found that our clients who use their ERC funds to pay off debt feel more empowered when they’re not worried about their company’s financial future.
8. Create an Emergency Fund
If the pandemic has taught us anything, it’s to prepare for every possibility. That is two-fold in the business world. Consider setting aside ERC advance funding for any financial storms that could arise in the future.
As Bank of America’s Steve Strauss advises, small businesses should aim for an emergency fund of about 10 percent of their annual revenue or three months’ expenses. Putting more than those amounts into an emergency fund is even better if you can afford it. The interest it earns can create an additional income stream for your business.
9. Set Aside Funds for the Future
Some business owners have long-term plans for their companies that cost well over what they may get back from their ERC refund. Putting aside some funds to help cover those plans when they come to fruition makes sense when they’re in good financial shape but cannot quite stretch their budget to put those plans into motion yet.
If there are no other pressing needs, investing your ERC windfall in a money market or high-yield business savings account where you can still withdraw funds if needed may be the way to go. With the option to withdraw, these investment accounts allow you to liquidate the funds if an emergency arises, yet grow your money as you look toward the future.
10. Expand Your Business into New Territory
If your company has a large customer base in a nearby city, it might be time to look at expanding your footprint by opening a branch in that location. Using ERC bridge funding to broaden your reach into new territories could help you attract more customers. Depending on your situation, several options could work:
- Acquire an existing business. Often, when small- to medium-sized business owners retire, their families have little interest in continuing their parents’ legacy. Should you hear of a business similar to yours in that position, you could make an offer to buy their business, keeping their customers happy and giving your customers in that location a more convenient option.
- Buy land. If your budget can foot the costs, you might consider purchasing a parcel of land and hiring a contractor to build on it. Although building costs can be high these days, it’s a way to have a custom-designed building for your specific needs.
- Purchase a vacant building. If you find an empty facility that can accommodate your business’s needs, you’re doing yourself and the community a huge favor. Existing buildings usually have sewer, water, electricity, and gas infrastructure already in place, saving your company the added expense of installing them on vacant land.
Put Your Plans in Motion with ERC Funding Today
It’s time to put the ideas we’ve laid out into motion. 1st Capital Financial and its affiliates have helped recover over $10 billion in ERC refunds. With years of experience and knowledge that can help you cut through the ERC’s often-confusing requirements, we will guide you through every step of the process from filing to funding. Request more information using the link provided below or skip right to the application for our ERC Filing Service or ERC Bridge Financing.